Bulgaria’s NGOs under Increased Scrutiny: New Obligations for Identifying Beneficial Owners
FATF Places Bulgaria Under Enhanced Surveillance
In a recent development, the Financial Action Task Force (FATF) has placed Bulgaria under enhanced surveillance due to strategic deficiencies in its anti-money laundering and counter-terrorist financing (AML/CFT) regime. This move has significant implications for non-profit legal entities (NPOs) registered under the Non-Profit Legal Entities Act (NPOA).
New Obligations for NPOs
According to Article 61, Paragraph 1 of the Law on Legal Entities of the Republic of Bulgaria, NPOs are required to maintain accurate and up-to-date information on their beneficial owners. This includes detailed data on the rights they hold. The recent amendments to the Money Laundering and Financing of Terrorism Act (MLIPA) have introduced a new obligation for NPOs to keep this information for five years after their dissolution.
Identifying Beneficial Owners
The FATF’s plan for addressing Bulgaria’s AML/CFT deficiencies includes a measure aimed at identifying the subset of NGOs most vulnerable to terrorist financing abuse and implementing risk-based monitoring to prevent such abuses. This is a significant development, as it highlights the need for NPOs to be more transparent about their beneficial ownership structures.
Criticism and Advocacy
However, critics argue that the current approach does not follow a risk-based approach, as all NPOs are required to comply with AML/CFT regulations, regardless of their level of risk. The Bulgarian Centre for Non-Profit Law (BCNL) is advocating for a more targeted approach, where only those NPOs identified as most vulnerable to risks of abuse for terrorist financing purposes are subject to the same obligations.
Definition of Beneficial Ownership
The definition of beneficial ownership in Bulgaria is formulated in the Model Internal Rules published by the State Agency for National Security (SANS). Hypotheses about exceptions are listed in these rules, which may lead to confusion and inconsistent application of the law.
Conclusion
In conclusion, the increased scrutiny on Bulgaria’s NGOs is a significant development, highlighting the need for greater transparency and accountability. The implementation of risk-based monitoring and targeted regulations will be crucial in preventing terrorist financing abuse and ensuring that NPOs are able to operate effectively while maintaining public trust.
- Key takeaways:
- FATF places Bulgaria under enhanced surveillance due to AML/CFT deficiencies
- New obligations for NPOs to identify and maintain information on beneficial owners
- Risk-based monitoring and targeted regulations needed to prevent terrorist financing abuse
- Definition of beneficial ownership in Bulgaria is formulated in Model Internal Rules, which may lead to confusion and inconsistent application of the law