The Bulgarian government just adopted a new law that amends and supplements the Anti-Money Laundering Measures Act (“AMLMA”) to include new provisions contained in the EU's Fifth Anti-Money Laundering Directive (2018/843). The Fifth Directive was passed by the European Parliament and Council on 9 July 2018.
Amendments to the AMLMA
The law introduces several key changes to the AMLMA, including:
- An expanded list of entities affected by the directive's regulations, including virtual currency exchanges, wallet providers (offering trust services) and intermediaries in the trade of works of art (for transactions of EUR 10,000 or more), which must be registered with the National Revenue Agency;
- A ban on opening and maintaining safe deposit boxes under a fictitious name, which expands on the previous ban of opening and maintaining anonymous bank accounts;
- The need for the State Agency for National Security (“SANS”) to produce a list of public functions that would form the basis of the Politically Exposed Person (“PEP”) list that will be presented to the European Commission;
- The requirement that obliged entities perform enhanced customer due diligence (“CDD”) for persons from third countries that do not apply established AML standards in the EU;
- Updates to CDD provisions to reflect the increasing use of electronic due diligence, in terms of the adoption of electronic identification;
- The adoption of a lower threshold for performance of CDD by e-money issuers and their representatives;
- The obligation that beneficial owners provide legal entities and their point of contact in Bulgaria with all necessary information for fulfilment of their obligations to apply for registration with the Bulgarian Commercial Register.
Practical implications and next steps
Passage of the law raises questions about the actual application and impact of entities using electronic identification for customers in the course of a CDD. Obliged entities may consider a way to facilitate the collection of the required customer data by adopting internal checklists to keep track of the various documents and questionnaire(s) containing all the information that needs to be gathered from customers for ID purposes during the CDD.
In addition, if the ultimate beneficial owner of a specific entity is determined to be a senior managing official, the law requires that a record of all steps taken for determining ultimate beneficial ownership be kept alongside information on any difficulties encountered. These provisions are expected to increase the administrative burden on obliged entities since no transitional period provisions are foreseen in respect of entities that have already performed the checks prior to the law entering into force.
Last but not least, obliged entities in Bulgaria still need to adopt their internal AML guidelines based on the national risk assessment issued by SANS. It is expected SANS to publish the national risk assessment by the end of 2019. Within six months of the publication of the national risk assessment on the SANS website, obliged entities must adopt internal AML guidelines, which will be subject to random SANS checks to ensure AML compliance.
The article is co-authored by Kalina Krastanova.