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MONEYVAL calls on Bulgaria to improve use of financial intelligence, investigation and prosecution, confiscations regime and other measures to combat money laundering and financing of terrorism

In a new report published today, the Council of Europe’s anti-money laundering body MONEYVAL draws up a comprehensive assessment of the country’s level of compliance with the Recommendations by the Financial Action Task Force (FATF) as at the date of the onsite visit in September 2021. It calls on Bulgaria’s authorities to improve the regulatory framework and to strengthen the practical application of measures to combat money laundering and financing of terrorism.

MONEYVAL says that Bulgaria achieved a moderate level of effectiveness regarding the assessment of money laundering and terrorism financing risks, and domestic coordination, investigation and prosecution of terrorism financing, targeted financial sanctions related to terrorism financing, the implementation of preventive measures by and supervision of financial institutions and non-financial professions (accountants, lawyers, notaries, trusts and company service providers, casinos and real estate agents), as well as in international cooperation. Bulgaria demonstrates a low level of effectiveness in areas related to the use of financial intelligence, investigations and prosecutions of money laundering, confiscation of proceeds of crime or property of equivalent value, targeted financial sanctions related to proliferation financing and the prevention of misuse of legal persons and arrangements.

MONEYVAL commends Bulgaria for conducting a comprehensive national risk assessment and notes that Bulgaria has, in general, a reasonable understanding of the main money laundering risks, while the understanding of the terrorism financing risks is limited. The report finds that the lack of comprehensive statistics limits the authorities’ understanding and their abilities to react to risks. Challenges exist also in relation to inter-agency co-operation between law enforcement agencies, which is particularly hindered by the lack of necessary technical tools.

The number of money-laundering investigations, prosecutions, and convictions, as well as the severity of the criminal sanctions for money laundering is generally low and is not commensurate with the identified money laundering risks. MONEYVAL notes that Bulgaria should improve the use of financial intelligence, the investigation and prosecution of the money laundering and confiscation regime, which are currently hampered by several technical and procedural constraints. In addition, the report finds that Bulgaria should take a more systematic approach to investigate the financing aspects of the terrorism-related offences, improve the national mechanism for implementing targeted financial sanctions and conduct more comprehensive analysis of terrorism financing vulnerabilities in the non-profit sectors. Bulgaria should also enhance risk-based supervision or monitoring of those non-profit organisations that are at risk of being misused for terrorism financing.

The knowledge of anti-money laundering and combating of financing of the terrorism obligations by obliged entities is generally high, however, the understanding of the business-related risks and the application of the preventative measures in higher-risk areas need to be improved. Supervisors are applying the risk-based approach for the financial sector to a large extent, while for other sectors the supervisory activities are still neither risk-based nor effective, which can be attributed to a significant lack of resources. In addition, the absence of measures to prevent criminals from entering the market for certain sectors (such as real estate brokers, trusts and company service providers, accountants, virtual asset service providers) is of concern. The report also notes that there are no criminality or other fit and proper tests performed regarding postal money operators or shareholders of currency exchange offices, and the ownership threshold for casinos that triggers fit and proper checks is higher than permitted by the FATF. MONEYVAL recommends establishing such market entry measures and to take proactive measures to prevent unlicensed (hawala) businesses.

Despite Bulgaria’s efforts to increase the transparency of the beneficial ownership regime, there are significant concerns in relation to accuracy of the beneficial ownership information held in the registers and by the obliged entities. MONEYVAL recommends urgently reviewing policies and taking urgent actions in this sphere.

Finally, the report concludes that although there are some technical and procedural constrains, Bulgaria provides generally timely and constructive assistance across the range of requests for international co-operation, including mutual legal assistance.