Bulgaria publishes first assessment on risks of money laundering and terrorist financing

Bulgaria

On 9 January 2020, the Bulgarian State Agency for National Security (SANS) issued the National Risk Assessment of Money Laundering and Terrorist Financing, which analyses the internal and external risks of money laundering and terrorist financing facing in the country.

Heavily involved in the prevention, establishment and prosecution of money laundering, Bulgaria views the fight against money laundering and the financing of terrorism as a crucial factor in its security and economic development.

Two years in the making, the National Risk Assessment is a result of consultations and cooperation between national security anti-corruption specialists, prosecutors, bank and financial supervisory bodies, tax and custom authorities, NGOs and private experts. These stakeholders are calling this assessment a valuable tool for government, national authorities, the private sector and partner countries to better understand the risks of money laundering and terrorist financing in Bulgaria. It is also being touted as a necessary precondition for effective detection and prevention of money laundering and terrorist financing.

Purposes

The National Risk Assessment provides a strategy and useful measures for limiting and monitoring the risks for money laundering and terrorist financing in Bulgaria from the following potential sources:

  • Organised crime – which conducts money laundering through a wide range of offenses committed abroad or on Bulgarian territory or through the use of formal financial systems and the extensive use of cash;
  • "Professional money launderers" – who conduct money laundering through complex schemes inside or outside the country;
  • Tax crimes – which can hide profits through money laundering and the use of counterfeiters, local and foreign legal entities and professional money launderers in complex layering schemes;
  • Real estate and construction – which can be used to launder assets by local and foreign entities posing as investors;
  • Financial markets – which can launder money through predicate offenses committed abroad by non-banking investment intermediaries in Bulgaria or through unregulated trading of financial instruments;
  • Food and fuel trade – which can launder the proceeds of tax crimes through hollow companies and nominal owners;
  • Computer fraud and "social engineering" – which creates proceeds for small or medium-sized organised crime groups that can be laundered within the country;
  • Professionals – professionals, their employees and obliged entities under the Anti-Money Laundering Act (AML Act) represent a major risk contributing to organised crime;
  • Cash services - cash transfer services and unregulated informal transfers of funds through the cash and 'grey economy' can potentially assist terrorist financing;
  • Non-profit legal entities (NGOs) – represent a potential risk for rerouting funds; and funding earmarked for religious activities in Bulgaria can be sued for terrorist financing.

The assessment also notes that Bulgaria's geographical position makes it a transit territory for various predicate crimes. It is an established trade and transport corridor between the Middle East and Europe, known as the "Balkan Route", which is used for the trafficking of goods, drugs, weapons and people. There is also evidence that the 'hawala' money-transfer system, common in the Middle East and conducted in Europe through migrants, has been exploited for terrorist financing purposes in the recent years.

Important deadlines

People and organisations applying anti-money laundering and terrorist financing measures must adopt new or adapt their internal rules in accordance to Article 101 of the AML Act within six months of the National Risk Assessment's publication, i.e. no later than 9 July 2020. These rules must comply with more than a dozen requirements, including the establishment of an internal system for determining the risk profile of clients based on the results of National Risk Assessment and on information obtained from extended complex verification processes and internal and external databases. This shows the practical importance of the National Risk Assessment's publication.

The results of the evaluation were also published on this website.

The obliged entities under the AML Act are not obliged to submit their internal rules to the SANS for approval, however the obligation to update and apply them remains.

For further information on this eAlert, contact your regular CMS advisor or local CMS experts: Dimitar Zwiatkow or Atanas Bangatchev