Financial Crime World

Bulgaria’s Battle Against Financial Fraud: AML Regulations and Compliance in the EU Member State

As part of its commitment to the European Union’s (EU) efforts to combat money laundering and terrorist financing, Bulgaria has established a comprehensive Anti-Money Laundering (AML) framework. This article explores Bulgaria’s key AML regulations, regulatory authorities, and compliance requirements.

Key Bulgarian AML Legislation

Since joining the EU, Bulgaria has adopted primary and supplementary legislation to outline its legal framework against financial crimes. Notable pieces of legislation include:

  • Money Laundering Act (MLA): The MLA, Bulgaria’s primary AML law, aligns with EU directives and international standards. It outlines the legal foundation for combating money laundering and terrorist financing and ensures that the country’s financial system remains sound.
  • Anti-Money Laundering Measures Act (AMLA): The AMLA complements the MLA with detailed measures and procedures for financial institutions to prevent and detect illegal activities.
  • Criminal Code: Money laundering is a criminal offense in Bulgaria as per the Criminal Code. Penalties for offenders include significant fines and imprisonment, making it a powerful deterrent.

Regulatory Bodies

Several authorities play a significant role in overseeing AML compliance in Bulgaria:

  1. Financial Supervision Commission (FSC): The FSC oversees financial institutions such as banks, insurance companies, and investment firms, ensuring they follow AML regulations and have effective policies and procedures.
  2. Bulgarian National Bank (BNB): BNB supervises credit institutions and non-bank payment service providers, monitoring compliance with AML regulations and conducting inspections on their controls.
  3. Financial Intelligence Directorate (FID): FID is Bulgaria’s financial intelligence unit responsible for receiving, analyzing, and disseminating Suspicious Transaction Reports (STRs) and other financial intelligence to law enforcement agencies.
  4. Ministry of Finance: The Ministry of Finance coordinates Bulgaria’s AML efforts at the national level, including policy development and international cooperation.

Compliance Requirements

Companies operating in Bulgaria must adhere to several compliance requirements:

  • UBO Disclosure: Companies must disclose the identity of their Ultimate Beneficial Owners (UBOs) and appoint a Bulgarian contact person to comply with AML regulations.
  • AML Programs: Companies must develop and maintain comprehensive AML programs, including risk assessments, policies, and procedures.
  • KYC and CDD: Conduct thorough Know Your Customer (KYC) and Customer Due Diligence (CDD) checks to verify identities and risk profiles.
  • Enhanced Due Diligence (EDD): Apply EDD for high-risk customers to minimize potential illicit financial activities.
  • Record Keeping: Companies must maintain records of customer transactions and due diligence documentation for at least five years.
  • Transaction Monitoring: Continuously monitor transactions for suspicious activities.
  • Reporting: Swiftly report suspicious transactions to the Financial Intelligence Directorate (FID).
  • Training: Provide AML training to employees to ensure they understand their roles and responsibilities.

Penalties and International Cooperation

Bulgaria imposes strict penalties for non-compliance with AML regulations, including fines and imprisonment. Financial institutions that fail to comply or enable money laundering face these penalties. The country also actively cooperates with international organizations and countries to share financial intelligence and assess the effectiveness of their AML regimes.

Current FATF Status

Bulgaria is not currently on the Financial Action Task Force’s (FATF) list of countries with strategic AML deficiencies, demonstrating its commitment to preventing money laundering and terrorist financing effectively.

Conclusion

Bulgaria has established a robust AML legal framework and relies on effective regulatory authorities to deter and combat financial fraud. Companies operating in Bulgaria must follow compliance requirements to maintain the integrity of the global financial system and contribute to the EU’s efforts against money laundering and terrorist financing.