Bulgaria’s Efforts to Combat Money Laundering and Terrorist Financing Face Hurdles
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A recent assessment by the National Revenue Agency (NRA) has highlighted significant shortcomings in Bulgaria’s efforts to combat money laundering (ML) and terrorist financing (TF). The report suggests that the country’s financial system is vulnerable to ML/TF risks, particularly due to the lack of detailed risk understanding and inadequate coordination among authorities.
Limited Risk Understanding
The NRA’s analysis found that Bulgarian authorities have a reasonable level of understanding of ML risks, but this understanding varies significantly across different authorities. Moreover, the country lacks a comprehensive risk assessment of certain sectors, including:
- Non-profit organizations (NPOs) sector
Regarding TF risks, Bulgaria’s understanding is limited to basic knowledge of the cash economy and the potential for misuse of legal persons for TF purposes. The report highlights that the country has not conducted a thorough TF risk assessment of its NPO sector.
Inadequate Coordination and Cooperation
The assessment also notes significant issues regarding cooperation and coordination among authorities at both strategic and operational levels, including:
- Lack of suitable technology systems
- Limited meaningful statistics in certain areas
This hinders the effectiveness of efforts to combat ML/TF risks.
Lack of Effective Policies
Bulgaria’s authorities have been criticized for failing to develop effective policies to prevent ML/TF risks. The report highlights that while some competent authorities have focused on higher-risk areas, overall objectives and activities are not yet consistent with the identified ML/TF risks.
Private Sector Engagement Limited
The private sector has a general awareness of Bulgaria’s National Risk Assessment (NRA), but engagement with the private sector has been limited, limiting their understanding of ML/TF risks. There has also been:
- Limited outreach to NPOs, financial institutions, and designated non-financial businesses and professions regarding NPO TF risks
Financial Intelligence and Investigations
The report notes that financial intelligence is accessed, but its use in investigations and developing evidence for ML/TF cases is limited due to technical and procedural limitations. The timeliness and effectiveness of financial intelligence exchange are also hindered by these issues.
Recommendations
To address these shortcomings, the NRA recommends that Bulgaria’s authorities:
- Develop a comprehensive risk assessment of the NPO sector
- Improve coordination and cooperation among authorities at both strategic and operational levels
- Enhance the use of financial intelligence in investigations and evidence development
- Strengthen private sector engagement and outreach to ensure awareness of ML/TF risks
- Develop effective policies to prevent ML/TF risks, including measures to address vulnerabilities in the IRRC program
The report’s findings highlight the need for Bulgaria to strengthen its efforts to combat ML/TF and improve coordination among authorities to effectively mitigate these risks.