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Combating Money Laundering: Next episode

06 December 2019

The constant combat of the EU against money-laundering has resulted in the Fifth Anti-Money Laundering Directive (EU) 2018/843 (the Directive). All Member states are obliged to implement it no later than 10 January 2020.

Among the main achievements of the Directive are: broadening the list of obliged entities; covering more activities exposed to money-laundering risks; introducing measures allowing transparency and access to information needed for customer due diligence; facilitating cooperation and coordination between the Member States and competent authorities.

Most of the rules found in the new Directive are implemented in the Bulgarian Anti-money Laundering Measures Act (AMLMA). In addition, the Bulgarian legislation poses some regulations even stricter than their analogies in the EU Directive – the same approach was followed through the adoption of AMLMA in 2018.

The following more significant amendments of AMLMA are in force as of the beginning of December 2019:

  • 35 categories of obliged entities are not enough

In addition to the already existing 35 categories of obliged entities, Bulgarian legislator has now encompassed also:

– Persons who provide, either directly or by means of other persons, material aid, assistance or advice on tax matters as principal business or professional activity;

– Estate agents acting as intermediaries in the letting of immovable property, including in relation to transactions for which the monthly rent amounts to EUR 10 000 or more. It is worth noting that the Directive provides for estate agents to be obliged entities only in case the monthly rent amounts to EUR 10 000 or more. It appears, however, that the Bulgarian legislator has not translated the rule at issue precisely enough. This could raise some serious disputes as to the application of the rule;

– Providers engaged in exchange services between virtual currencies and fiat currencies must also apply customer due diligence to the customers using their services. Custodian wallet providers are now covered by AMLMA, as well. The term refers to entities providing services to safeguard private cryptographic keys on behalf of their customers, to hold, store and transfer virtual currencies. Both providers are obliged to register in a special registry with the National Revenue Agency. The Ministry of Finance shall issue an ordinance for this purpose;

– Persons trading or acting as intermediaries in the trade of works of art, including when this is carried out by free ports, in case the value of the transaction or a series of linked transactions amounts to EUR 10 000 or more. The reason for inclusion of these persons is most probably the huge amount of crimes involving works of art worldwide.

  • Stricter, smarter, stronger

A number of measures are adopted to help the obliged persons and the competent authorities to combat money laundering more efficiently, including, among others:

– A ban on opening and maintaining safe deposit boxes under a fictitious name is now formally introduced.

– The threshold for simplified customer due diligence applied by e-money issuers is lowered.

– All member states are obliged to provide to the European Commission a list of prominent public functions in order to ease the obliged entities in conducting customer due diligence and especially checking whether a customer is a politically exposed person.

– Obliged entities are now eased at determining what specific enhanced measures to apply to customers domiciled in high risk third countries (where the level of anti-money laundering measures application is not satisfactory). Such indicative measures are now consolidated in art. 46 of AMLMA. The text enumerates measures already known to the obliged entities such as the collection of additional information, enhanced surveillance, approval by a senior managing official for entering into relations. However, obliged entities shall be aware that the list is non-exhaustive and the measures to be applied in the specific situation would always depend on the specific risk determined.

– Among the amendments of the Directive which do not have direct effect on Bulgarian legislation are some new rules regarding transparency and access to information about ultimate beneficial ownership of trusts and similar legal arrangements. All member states where such entities exist are obliged to ensure that registries on beneficial ownership are maintained. Although trusts are not known to Bulgarian legal system, this new measure would help Bulgarian obliged entities in conducting customer due diligence in case the customer is a trust or similar legal arrangement.

  • And now what?

It is obvious that the anti-money laundering measures will only get more and more serious. This will result in complications in daily business relations – both for obliged entities and for their customers.

All eyes in Bulgaria (and not only) are now on the State Agency for National Security which is expected to publish the National Risk Assessment (NRA). However, it is hardly perceivable that this Assessment would be exhaustive, clear and in the same time specific enough in order to solve all practical issues that practitioners are facing. Most probably, entities will need professional assistance to implement the legislative rules and recommendations of the NRA into their internal rules and practices in order to lower the risk of exposure to money laundering and all related consequences.




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