Bulgaria Fails to Meet International Standards on Correspondent Banking and Money Transfer Services

Assessment Finds Bulgaria Only Partially Compliant with International Standards

A recent assessment by a global financial watchdog has revealed that Bulgaria is only partially compliant with international standards on correspondent banking and money transfer services. The assessment highlights several concerns, including inadequate regulations for institutions establishing correspondent relationships and technical deficiencies in the country’s laws and regulations.

Inadequate Regulation of Correspondent Banking Relationships

According to the assessment, Bulgaria’s laws and regulations do not adequately ensure that institutions establishing correspondent relationships with other countries collect sufficient information about the respondent institution’s reputation and anti-money laundering (AML) controls. This is a major concern as correspondent banking relationships can be used to facilitate illegal activities such as money laundering and terrorist financing.

Deficiencies in Money Transfer Services Regulation

The assessment also found that while Bulgaria has taken some steps to regulate money transfer services, there are still technical deficiencies in its laws and regulations. Specifically:

• The country’s laws do not adequately define what constitutes a “money or value transfer service”.
• There is insufficient information on how to register and license these types of businesses.

Positive Steps Taken by Bulgarian Authorities

Despite the shortcomings, the assessment noted that Bulgaria has taken some positive steps, including:

• Empowering the Bulgarian National Bank (BNB) to identify and sanction unlicensed money transfer providers.
• Enabling the BNB to impose administrative penalties, including fines and confiscation of property, on entities that violate the country’s laws and regulations.

Inadequate Criminal Penalties

However, the assessment found that the criminal penalties for violating Bulgaria’s laws and regulations are not always proportionate and dissuasive. For example:

• The maximum fine for a natural person is only BGN 80,000 (approximately EUR 40,000), which may not be sufficient to deter illegal activity.

Conclusion

Overall, the assessment concluded that while Bulgaria has made some progress in regulating its financial sector, it still has work to do to meet international standards on correspondent banking and money transfer services. The country’s authorities must take further action to address these deficiencies and ensure that its financial system is transparent, stable, and secure.

Recommendations

To achieve full compliance with international standards, Bulgaria should:

• Strengthen regulations for institutions establishing correspondent relationships.
• Improve the definition of “money or value transfer service” and provide clear guidelines on registration and licensing.
• Increase criminal penalties to make them more proportionate and dissuasive.