The Bulgarian Parliament is about to pass the Measures Against Money Laundering Act (the “Bill”) mandated by the EU’s 4th Anti-Money Laundering Directive, No. 2015/849 (4th AMLD) of 26 June 2015. Approved on its first hearing on 6 October 2017, the Bill will repeal and replace existing anti-money laundering legislation.
Currently going through its second hearing, this Bill’s passage is considered a priority by the Bulgarian government since the deadline for Member States to implement the 4th AMLD was 26 June 2017.
Categories for obliged entities in the Bill are broader than in the 4th AMLD, and include, among others, general and life insurers and intermediaries (with the exception of tied insurance intermediaries), political parties, non-profit organisations, payment services providers and their representatives, etc. Furthermore, the Bill offers no exemptions for certain obliged entities based on the 4th AMLD’s risk-assessment approach. Such exemptions, however, may be agreed upon following a national risk assessment carried under Article 7 of the EU directive, which is in progress.
Measures for Preventing Money Laundering
Based on the provisions of the 4th AMLD, the Bill lays down a number of new and amended measures for preventing money laundering, which include:
- rules for risk assessment.
- enhanced customer due diligence, including comprehensive identification of the beneficial owner and the origin of funds, as well as simplified customer due diligence, based on a risk assessment.
- advance reporting obligations to the Bulgarian State Agency for National Security regarding any measures undertaken. Reporting is to be made not only in the case of suspicion, but also when an obliged entity knows that funds are the proceeds of criminal activity or related to terrorist financing.
- extended definition of a “politically exposed person” and a “beneficial owner,” and a new definition of a “shell bank,” all in accordance with the EU directive.
- non-disclosure and disclosure obligations.
- recordkeeping, establishing internal policies, and training.
- supervision, and coordination between authorities.
Central Ultimate Beneficial Owner Register
In line with the 4th AMLD, the Bill establishes the Central Ultimate Beneficial Owner register, which provides information about beneficial ownership of companies, foundations, political parties and other organisations.
The ultimate beneficial owner of a company is defined as the person or persons who have direct or indirect ownership of a sufficient percentage of shares or voting rights. A shareholding of at least 25% is an indication of direct ownership. To gain information about a company’s beneficial owners, a declaration will need to be submitted to the Bulgarian Commercial Register. Third parties will have access to this information, but the means of access still need to be specified.
The Bill levels sanctions for non-compliance in key areas, such as customer checks, recordkeeping, and reporting suspicious transactions. Fines and penalties will be increased from approximately EUR 500 to EUR 25,000 with fines for systematic breaches reaching as high as EUR 5,000,000.