Financial Crime World

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Bulgaria Cracks Down on Unlicensed Payment Service Providers

In an effort to ensure financial stability and prevent illegal activities, Bulgaria has strengthened its regulations against unlicensed payment service providers.

Background

The Bulgarian National Bank (BNB) is working closely with other authorities to identify and penalize entities that operate without proper licenses. Under Article 4(2) of the Law on Measures for Prevention of Money Laundering and Financing of Terrorism (LMML), payment service providers that are not licensed by the BNB or the Communications Regulation Commission (CRC) are considered “other payment service providers” (OEs).

Regulations

These OEs must comply with strict regulations to prevent money laundering, terrorist financing, and other financial crimes. The BNB has the authority to investigate entities suspected of carrying out payment services without a license, including powers to access premises and compel the production of information and records.

Penalties

Failure to obtain a license can result in severe penalties, including administrative fines ranging from BGN 5,000 (approximately EUR 2,500) for natural persons to BGN 80,000 (approximately EUR 40,000) for legal entities. The Criminal Code also provides two tiers of criminal penalties for unauthorized payment services:

  • Lower tier penalty: a custodial sentence of three to five years and confiscation of up to half of the property of the perpetrator
  • Higher tier penalty: a custodial sentence of five to ten years, a fine, and court-ordered property confiscation

Identification and Enforcement

The BNB identifies unlicensed payment service providers through complaints received at the bank, warnings from competent authorities, and publicly available information. The CRC also investigates unlicensed postal money order (PMO) service providers, which are licensed by the CRC under Article 39 of the Postal Services Act.

Recent Cases

In recent cases, the BNB has imposed significant fines on entities that operated without proper licenses. For example:

  • A legal entity was fined BGN 80,000 (approximately EUR 40,000) for providing payment services without a license
  • A natural person was fined BGN 5,000 (approximately EUR 2,500)

Conclusion

The Bulgarian authorities are committed to ensuring the integrity of the financial system and protecting consumers from illegal activities. By cracking down on unlicensed payment service providers, the country is demonstrating its commitment to compliance with international standards and best practices in anti-money laundering and combating the financing of terrorism.