The Bulgarian parliament voted into law on 14 March 2018 a bill that will repeal and replace the existing Act on the Measures against Money Laundering (the “New AMML” or the “Act”). The New AMML is meant to transpose Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing (the “AML Directive”), the deadline for which lapsed in the second half of June 2017.
The local legislator’s approach has gone beyond a simple word-for-word copying of the AML Directive. For instance, the Act introduces a broader list of entities obliged to apply anti-money laundering measures and employs a reverse technique in regulating customer due diligence requirements imposed on electronic money issuers.
The New AMML also lays down specific rules on the registration of the ultimate beneficial owners (“UBOs”) of corporate and other legal entities established in Bulgaria. While the adopted text is yet to be promulgated in the State Gazette, we set out below the key aspects that businesses need to take into account in order to comply with the new requirements.
Ultimate beneficial owners
Ultimate beneficial owners are considered to be natural persons ultimately owning or controlling, directly or indirectly, a corporate or another legal entity. The definition applies also to natural persons on whose behalf the entity carries out a particular operation, transaction or activity.
Particularly with respect to corporate legal entities, a natural person directly or indirectly owning at least 25% of the shareholding in that entity would qualify as its UBO for the purposes of the New AMML.
The test for determining whether a natural person exerts control over a legal entity is rather broad. Under the New AMML, any indication of the ability to decisively influence the entity (e.g., in decision-making on issues essential to its activity, such as the composition of its management and supervisory bodies or the termination of its business activity) shall be deemed to constitute control.
Obligation to register
All corporate and other legal entities established in Bulgaria must disclose their UBOs in the relevant company registries/registries of legal entities listed below. This obligation applies not only to companies, but also to economic enterprises (such as trusts etc.) and non-profit organisations (such as foundations, associations, etc.). However, the obligation does not apply to publically listed companies (i.e. those the shares of which are traded on regulated markets).
Information about UBOs to be disclosed
The information to be disclosed includes:
I. Full names of the ultimate beneficial owners;
II. His/her citizenship;
III. Personal identification number if the ultimate beneficial owner is (a) a Bulgarian citizen, (b) a foreign citizen who has been granted permanent residency, or (c) a foreign citizen who has been granted refugee status;
IV. Data of birth for persons outside the scope of (iii) above;
V. Country of residence, if different from the Republic of Bulgaria or from the country of citizenship.
If an individual exercises control over a legal entity through other legal entities, information about the latter should also be disclosed.
Absent a lawful representative permanently residing in the territory of the Republic of Bulgaria, UBOs must appoint such an individual to serve as a point of contact and disclose also information under points (i) to (iv) above about that person.
Registries containing information on UBOs
The requisite information on UBOs (as defined above) must be entered into the Commercial Register, the BULSTAT Register or the Register of Non-Profit Legal Entities, depending on the type of legal entity.
Direct access to these registers will be available only to law enforcement agencies (such as the Financial Supervision Commission, the Bulgarian National Bank and Financial Investigations Department of the State Agency for National Security), as well to entities required to apply anti-money laundering measures (banks, insurers, payment services providers, wholesalers etc.).
Transitional period for disclosing information about UBOs
Under the New AMML, the Registry Agency must guarantee the technical capabilities for disclosing the requisite information about UBOs (as defined above) by 1 October 2018. Corporate and other legal entities must register their UBOs in the respective register within four months after this period has lapsed, i.e. by 1 February 2019.
Failure to abide by the disclosure obligation may result in a fine in the range between BGN 500 to BGN 5,000 for individuals or a sanction ranging from BGN 1,000 to BGN 20,000 in the case of legal entities and depending on the type of legal entity. Systematic violations would render individuals liable to a fine of up to BGN 20,000 and legal entities may face sanctions of up to BGN 100,000, depending on the type of legal entity.