Significant regulatory developments marked the year 2018 in Bulgaria. A new Act on the Measures against Money Laundering (the “AML Act” or the “Act”) was also adopted with view to transposing Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing. Further rules detailing the mechanics for disclosure of ultimate beneficial owners (“UBOs”) of Bulgaria-based entities are expected to become effective in the next few weeks.
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 AML Act.
The test for determining whether a natural person exerts control over a legal entity is rather broad. Under the AML Act, 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. With the exception of publicly listed companies (i.e. those the shares of which are traded on regulated markets), the requirement to disclose the UBOs applies not only to companies, but also to economic enterprises (such as trusts etc.) and non-profit organisations (such as foundations, associations, etc.).
Information about UBOs to be disclosed
Entities subject to the disclosure obligation must file an application with a detailed set of information about the UBOs in accordance with an approved template. This 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. Date 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 the UBOs exercise control over a legal entity through other legal entities, information about the latter must also be disclosed in a bespoke application to the Bulgarian Commercial Register. The application would need to be supported by a declaration of the UBOs listing all the corporate and other legal entities through which they exercise control, either directly or indirectly, over the legal entity.
Absent an authorised 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. In such cases, the application disclosing the UBOs would have to also be supported by a notary certified consent of the individual.
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
The Registry Agency must guarantee the technical capabilities for disclosing the requisite information about UBOs (as defined above) by 31 January 2019. 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 June 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.