Financial Crime World

Bulgaria’s Financial Crimes: High Risk Country and Policy Implications

Bulgaria, situated in southeastern Europe, continues to pose a high-risk destination for financial crimes, primarily money laundering. This article explores the reasons behind Bulgaria’s vulnerability to money laundering and the policy implications of addressing this issue.

Background

  • Bulgaria’s financial system is highly susceptible to money laundering due to a large informal economy and low level of enforcement against corruption and organized crime.
  • The European Union (EU) neighbor’s geographical proximity makes it an attractive transit point for non-EU investors looking to real estate markets and launder assets before integrating them into the EU financial system.

Bulgarian Financial System: A Primer

According to a Policy Brief published by the Center for Democracy and Reconciliation in Southeast Europe in May 2017:

  • The National Risk Assessment indicates that Bulgarian financial system is primarily used for placement and layering of criminal assets acquired abroad.
  • The integration of these ill-gotten funds back into the regulated financial or non-financial system often occurs abroad, leaving minimal traces in Bulgaria’s financial system.

Evolution and Enforcement of Bulgarian Anti-Money Laundering Legislation

Historical Background

  • Bulgaria initially adopted the Law on Measures against Money Laundering in 1999.
  • The Bulgarian legal system has made subsequent revisions and now has laws on financing terrorism, customer due diligence, and ultimate beneficial ownership.

Institutional Setup

  • Bulgaria’s primary institution combating money laundering and terrorism financing is the Financial Intelligence Unit (FIU) within the State Agency for National Security (SANS).

Challenges and Policy Recommendations

Institutional Challenges

  • Lack of central coordination mechanism and understaffing and underfunding of financial intelligence and organized crime investigations.
  • Improving the quality of risk assessments and specific Suspicious Transaction Reports issued by the FIU.
  • Clear leadership from prosecution to prioritize and lead AML cases.
  • Adopting procedural amendments to address existing procedural deadlocks and formalism in the criminal proceedings process.

International Assessments

International organizations, such as MONEYVAL, acknowledge Bulgaria’s compliance with international standards regarding institutional and legislative development for its anti-money laundering framework. However, challenges persist, including:

  • Fragmented responsibilities for cases related to financial crime and money laundering.
  • Inefficient use of resources among the involved agencies.
  • A lack of a national coordination mechanism.

Conclusion

Combating money laundering and related criminal activities is essential for Bulgaria to provide greater safety and security for its citizens and foster trust in its financial system. Addressing key challenges, such as institutional fragmentation and a lack of coordination, can lead to the creation of a more robust and effective anti-money laundering framework.