Financial Crime World

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TF Risks Loom Large in Bulgarian Financial Sector

Bulgaria’s financial sector faces significant threats from Terrorist Financing (TF) and Money Laundering (ML), according to a recent review by [insert name of reviewing agency]. The report highlights the need for improved preventive measures, supervision, and regulation to combat these risks.

Preventive Measures Fall Short

The review found that while many Obligated Entities (OEs) demonstrate a good understanding of Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) obligations, there are significant gaps in their knowledge of individual risk mitigation measures. For example:

  • Payment institutions and e-money institutions lack an understanding of risks relevant to their business nature.
  • OEs have measures in place to identify Politically Exposed Persons (PEPs), but verification mechanisms vary widely.

Supervision Lags Behind

Financial supervisors, including the Financial Supervision Commission (FSC) and the Bulgarian National Bank (BNB), have controls in place to prevent criminals from owning or controlling supervised entities. However:

  • These controls are not consistently applied across all sectors.
  • There is a lack of understanding of ML risks in some areas.

The review found that financial supervisors need to enhance their risk-based supervisory models, particularly with regard to institutional risk assessment.

Regulatory Shortcomings

The AML/CFT sanctioning regime is not proportionate, dissuasive, or effective. Fines are often imposed but not settled, and the objectivity of judgment by supervisory authorities on the level of severity and systemic nature of breaches is sometimes questionable.

Recommendations

To address these shortcomings, the reviewing agency recommends:

  • Improved risk-based supervisory models
  • Enhanced institutional risk assessment
  • Increased resources for supervisory authorities
  • Strengthened AML/CFT sanctions and enforcement mechanisms
  • Improved guidance and outreach measures

The report emphasizes the need for a comprehensive approach to combating TF and ML risks in Bulgaria’s financial sector. Without swift action, these risks may continue to threaten the stability of the financial system and undermine trust in the economy.