Financial Crime World

Bulgaria’s Struggle with Money Laundering and Terrorism Financing Risks

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A recent report has revealed that Bulgaria is facing significant challenges in combating money laundering (ML) and terrorism financing (TF) risks. Despite efforts to improve its anti-money laundering and counter-terrorist financing (AML/CFT) framework, there are still numerous deficiencies that hinder its effectiveness.

Domestic Cooperation

Bulgaria’s domestic cooperation procedures are overly formal, leading to delays in international cooperation requests. Additionally, there is duplication of requesting international cooperation, which can lead to inefficiencies. The country also lacks guidelines or clear procedures for executing requests.

Challenges with International Cooperation

  • Overly formal procedures causing delays in international cooperation requests
  • Duplication of requesting international cooperation leading to inefficiencies
  • Lack of guidelines or clear procedures for executing requests

Risk Assessment

The country’s risk assessment of ML and TF risks is mainly based on its national risk assessment report, which identifies various risk events, including the laundering of funds from organized crime, corruption, tax evasion, and other predicate offenses. However, the analysis of vulnerabilities is not yet sufficiently developed, limiting the ability to understand residual risks.

Limitations of Risk Assessment

  • Mainly based on national risk assessment report
  • Lack of analysis of vulnerabilities limiting understanding of residual risks

Effectiveness

Bulgaria’s AML/CFT framework has undergone several amendments since the previous Mutual Evaluation Report in 2019. While there have been improvements, there are still gaps related to domestic cooperation, preventative measures, supervisory mechanisms, and dissuasiveness of sanctions.

Gaps in AML/CFT Framework

  • Domestic cooperation
  • Preventative measures
  • Supervisory mechanisms
  • Dissuasiveness of sanctions

Cooperation and Coordination

The country faces significant issues regarding cooperation and coordination among authorities, as well as with the private sector. There is a lack of suitable technology systems for multi-agency work and meaningful statistics in certain areas. This has hindered the development of national AML/CFT policies consistent with identified risks.

Challenges with Cooperation and Coordination

  • Lack of suitable technology systems for multi-agency work
  • Meaningful statistics lacking in certain areas
  • Hinderance to national AML/CFT policy development

Private Sector Engagement

The private sector has limited understanding of ML/TF risk due to minimal engagement by the country with the sector. There has been limited outreach to non-profit organizations, financial institutions, and designated non-financial businesses or professions (DNFBPs) regarding NPO TF risks.

Limited Private Sector Engagement

  • Minimal engagement with private sector
  • Limited outreach to non-profit organizations, financial institutions, and DNFBPs
  • Limited understanding of ML/TF risk among private sector

Financial Intelligence and Investigations

Bulgaria’s financial intelligence agency faces technical and procedural limitations, including a lack of suitable IT systems and human resources. The use of financial intelligence in investigations is limited by these constraints.

Challenges with Financial Intelligence and Investigations

  • Lack of suitable IT systems and human resources
  • Limited use of financial intelligence in investigations

The report highlights the need for Bulgaria to address these deficiencies and improve its AML/CFT framework to effectively combat ML and TF risks.