Bulgaria

Last updated 13/11/08

CENTRAL AUTHORITY FOR REPORTING

State Agency “National Security”;
Council of Ministers.

ANTI-MONEY LAUNDERING REGULATOR(S)

The Bulgarian FIU – The Financial Intelligence Agency.

The Bulgarian Financial Intelligence Unit was established in 1998 by the Law on Measures against Money Laundering (LMML). It is responsible to the Minister for Finance and is an independent administrative entity, with its own budget. The agency is structured into three sections: Financial and Economic Activities (general administration), Money Laundering and Terrorism Financing Information and an Inspectorate Directorate (specialised administration).

The FIA receives, stores, examines and analyses and discloses all information relating to suspicious or unusual transactions linked to money laundering or terrorist financing activities, to the relevant law enforcement authority. The FIA is authorised to request further information relating to suspicious transactions reported to it. It is authorised to exchange financial intelligence with FIUs in other jurisdictions, and can request information from other Bulgarian authorities. The FIA also performs on-site inspections of reporting entities, such as the State Agency and Council of Ministers, to assess their compliance with AML requirements.

Bulgaria is a member of the Financial Action Task Force (FATF) , the Committee of Experts on the Evaluation of Anti-Money Laundering Measures & the Financing of Terrorism (MONEYVAL) and the Egmont Group. The aim of these organisations is to facilitate international co-operation in order to combat money laundering and terrorist financing globally.

HAS THE THIRD EU MONEY LAUNDERING DIRECTIVE BEEN IMPLEMENTED? IF NOT, WHEN IS IT EXPECTED TO BE IMPLEMENTED?

The existing Law on the Measures against Money Laundering 1998 (the “Law”) was amended on 13 November 2007 to partially transpose the Third Directive and Directive 2006/70/EC (which regards the definition of ‘politically exposed person’ and the technical criteria for simplified client due diligence procedures and for exemption on grounds of a financial activity conducted on an occasional or very limited basis). The Law was published in the Bulgarian State Gazette on 13 November 2007and subsequently entered into force 3 days later on 16 November 2007.

The categories of persons and legal entities obligated to apply the preventive anti-money laundering measures was extended to include:

Legal entities dealing with companies that provide health insurance services; and
Persons and legal entities whose activities involve the trade of goods through cash payments whereby the price of the deal exceeds 30,000 BGL (approx. 15,000 EUR).

The Law adopted the risk-based approach to money laundering. The following measures have been introduced in this regard:

Persons and entities under the Law that are obligated to apply the relevant measures have to verify the client’s identity and the actual beneficial owner in advance, i.e., prior to the opening of an account, the establishment of commercial relations, etc. However, exceptions from that rule are provided in the following cases:
When the client is a state authority;
When the client is an EU-institution acting in such a manner that its activity is transparent and it is controlled and supervised;
When a bank account of a notary or of a person rendering legal advice is used for depositing a client’s money, under the condition that such a client has already been identified by the notary, etc. and the information is at the bank’s disposal upon request;
The Bulgarian National Bank and credit institutions under the Law are not obliged to identify a client who has already been identified by another credit institution.

No allowance for simplified procedures is provided for clients from states listed in Directive 2005/60/EC whose legislation is not in compliance with international rules and standards.

The updated version of the amended Law is available in Bulgarian here.

LIST THE LAWS REGARDING ANTI-MONEY LAUNDERING, INDICATING WHICH LAWS ARE APPLICABLE TO LAWYERS

Measures Against Money Laundering Act (Prom. SG, issue 85 of 24.7.1998, amended 13 November 2007 to partially implement the Third Directive, amended and supplemented iss.1 of 02.01.2001, amm. iss.102 of 27.11.2001, in force since 01.01.2002, Amended and supplemented, iss. 31 of 04.4. 2003, vol.8/98, p. 50; vol. 2/2001, p.42, it.8, r.1, no. 54); on 21 June, 2006 the Act was amended to ensure Bulgaria’s full compliance with the EU’s Second Money Laundering Directive;
Law on Measures Against Financing Terrorism (promulgated in the State Gazette No16/18.02.2003, amd. SG No31/4.04.2003).
Law on the Measures against Money Laundering – Prom. SG/1996, revoked by the New Measures Against Money Laundering Act in 1998;
The 1990 Strasbourg Convention – The Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime Strasbourg, 8.XI.1990

ARE VISITING LAWYERS SUBJECT TO LOCAL LAWS REGARDING ANTI-MONEY LAUNDERING, AND, IF SO, TO WHAT EXTENT?

Yes, to the same extent that local lawyers are subject to the laws.

LIST ANY MONEY LAUNDERING GUIDANCE FOR LAWYERS (FOR EXAMPLE, LAW SOCIETY OR BAR ASSOCIATION GUIDELINES) CURRENTLY IN PLACE

Guidance is available from the Financial Intelligence Agency. An English version of the guidelines is available here. The English version of the guidelines deal with obligations relating to “persons dealing by profession with high value goods”, which, dependant upon the details of the transaction involved may include Lawyers. Alternatively, the Bulgarian version of the guidelines is available here. The Bulgarian version of the guidelines refers to all persons obligated to complete client due diligence under the amended Law, including Lawyers.

IS THE LAW SOCIETY/BAR ASSOCIATION INVOLVED IN SUPERVISING OR ENFORCING COMPLIANCE WITH ANTI-MONEY LAUNDERING REGULATIONS?

No, not at this time.

DESCRIBE CLIENT DUE DILIGENCE REQUIREMENTS, INCLUDING WHEN IT MUST BE UNDERTAKEN BY LAWYERS

The lawyers’ responsibility is provided for in Art. 3 para 2 point 28 of the Law where persons rendering legal advice:

Participate in planning and performing an operation or transaction for their customers concerning:
1. Purchase and sale of an immovable property or transfer of an enterprise to a dealer;
2. Management of money, securities or other financial assets;
3. Opening or disposal of a bank account or securities account;
4. Raising funds for incorporating a dealer, increasing the capital of a company, extending a loan or any other form of providing funds for a dealer’s business;
5. Incorporation, organization or management of an offshore company, a company under trust management or other similar structure; and
6. Confidential management of property
Act on the account or on behalf of their customer in any real estate financial operation or transaction.

Under Art. 4 para. 1 of the Law persons under Article 3, paras. 2 and 3 shall identify clients thereof upon establishing long-term business relationships, including upon opening a bank account or government securities account, as well as upon effecting operations and making transactions therewith, where the value or its exchange equivalent exceeds BGN 30,000, and also upon making cash operations in BGN or foreign currency exceeding BGN 10,000. Opening and maintenance of an anonymous or fictitious account is forbidden.

Under Art. 4 para 4 of the Law when the person under Article 3, paras. 2 and 3 is unable to identify the client pursuant to the requirements of this Law and the rules for its enactment, as well as in case of failure to submit the required declaration under para. 7, that person is obliged to refuse to effect the operation or transaction, or the establishment of commercial or professional relations, including opening of an account. If the person under Article 3, paras. 2 and 3 is unable to identify the client in case of already established commercial or a professional relation, that person is obliged to terminate these relations. In this case the person under Article 3, paras. 2 and 3 is required to determine whether or not to inform the Financial Intelligence Office, State Agency “National Security”, That rule shall not apply to lawyers falling under the exceptions in Article 3 para 6 (the exceptions).

Under Art. 4 para 7 of the Law persons conducting an operation or a transaction through or with a person under Article 3, paras. 2 and 3 in an amount exceeding BGN 30,000 or the equivalent in foreign currency or BGN 10,000 or the equivalent in foreign currency where the payment is effected in cash, shall declare the origin of the funds. The persons under Article 3, paras. 2 or 3 shall require the declaration before effecting the said operation or transaction.

Under Art. 4 para 11 in the event a transaction value may not be established upon its performance due to the nature of the said operation or transaction, the person under Article 3, paras. 2 or 3 shall identify the client upon determining the value of the operation or transaction where it exceeds BGN 30,000 or the equivalent in foreign currency or BGN 10,000 or the equivalent in foreign currency if the payment is effected in cash. This case shall not exclude the obligation for identification upon establishing long-term business relationships.

Under Art. 5 of the Law:

Para 1: the persons under Article 3, paras. 2 and 3 are obliged to determine whether the client is acting on his own behalf or by proxy or on someone else’ behalf. In case of authorization the lawyers shall demand a proof of the powers of proxy and shall identify the representative and the represented person.

Para 2: Should the operation or transaction be effected in favor of a third party without a proxy or through a third party, who is the bearer of the document for the effecting of the operation or transaction, the persons under Article 3, paras. 2 and 3 shall identify the third party in favor of whom the operation or transaction has been effected, the person who has effected the operation or transaction, and the bearer.

Para 3: Should there be any suspicion that the person effecting the operation or transaction does not act on his own name or account, the persons under Article 3, paras. 2 or 3 shall notify the Financial Intelligence Office, State Agency “National Security” and undertake appropriate measures to collect information about identification of the person in whose favor the operation or transaction is actually effected.

Under Art. 5a lawyers are obliged to apply apply enhanced measures to clients who are or have been politically exposed persons in Bulgaria or abroad or connected with such persons.

Under Art. 5c lawyers are obliged to apply enhanced measures to products or deals which may lead to anonymity.

Art. 6 provides for explicit requirements regarding the identification of the client.

Under Art. 7a lawyers are obliged to keep under special surveillance commercial or professional relations and transactions with persons from states which do not apply or do not entirely apply the international standards for measures against money laundering.

DOES YOUR COUNTRY FOLLOW A RISK-BASED APPROACH TO CLIENT DUE DILIGENCE BY LAWYERS?

The Law has adopted the risk-based approach to money laundering. See above for more details.

ARE THERE ENHANCED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, POLITICALLY EXPOSED PERSONS?

Under Art. 5a lawyers are obliged to apply extended measures to clients who are or have been politically exposed persons in Bulgaria or abroad or connected with such persons.

Under Art. 7a lawyers are obliged to keep under special surveillance commercial or professional relations and transactions with persons from states which do not apply or do not entirely apply the international standards for measures against money laundering.

ARE THERE SIMPLIFIED DUE DILIGENCE MEASURES FOR CERTAIN TYPES OF CLIENTS, FOR EXAMPLE, LISTED COMPANIES?

Please see above.

ARE LAWYERS PERMITTED TO RELY ON THIRD PARTY DUE DILIGENCE? IF YES, PLEASE DESCRIBE.

Please see above Client Due Diligence Requirements.

When a lawyer suspects that financial operations or transactions are aimed at financing terrorism.

Where a lawyer is aware that the legal consultancy is to be used, or that his client aspires to use his services, for the purpose of money laundering.
Wherever suspicion of money laundering arises, the law firm is under an obligation to collect information about the essential elements, amounts involved, respective documents, and other identifying data.

There are exemptions from this obligation to report information obtained either before, during or after judicial proceedings, or in the course of ascertaining the legal position of a client.

WHEN IS A LAWYER UNDER AN OBLIGATION TO REPORT SUSPICIOUS TRANSACTIONS?

Under Art. 3 para 6 of the Law lawyers in the process of or on the occasion of participation in legal proceedings which are pending, or will be opened or have been closed, shall not be obligated to disclose facts regarding the legal status of the client.

DOES ATTORNEY/CLIENT PRIVILEGE AND/OR DUTIES OF CONFIDENTIALITY PROVIDE A DEFENCE OR PARTIAL/TOTAL EXCEPTION TO THE REQUIREMENT TO REPORT SUSPICIOUS TRANSACTIONS?

On the contrary, the Law provides for an obligation for notification of the Financial Intelligence Office, State Agency “National Security” under Art. 11, before completion of the transaction and the persons shall postpone execution thereof within the admissible time-limit in compliance with laws and regulations governing that type of activity.

DOES LOCAL LAW PROVIDE ANY CRIMINAL AND/OR CIVIL INDEMNITY TO A LAWYER WHO HAS REPORTED A SUSPICIOUS TRANSACTION?

No provisions are stipulated in this regard.

ONCE A SUSPICIOUS TRANSACTION REPORT HAS BEEN FILED, IS A LAWYER ALLOWED TO PROCEED WITH THE LEGAL ADVICE/TRANSACTION, AND, IF SO, MUST CONSENT FROM AUTHORITIES BE OBTAINED FIRST?

Yes, it is provided for in Art. 14 para 1 of the Law.

IS THERE A TIPPING-OFF PROHIBITION? IF YES, PLEASE DESCRIBE.

There is no provision in the Bulgarian Legislation to this regard.

DESCRIBE ANY RESTRICTIONS ON ACCEPTING A NEW CLIENT

Lawyers are obligated to apply the relevant measures to verify the client’s identity and the actual beneficial owner in advance, i.e. prior to the opening of an account, the establishment of commercial relations, etc. However, exceptions from that rule are provided in the following cases:

When the client is a state authority;
When the client is an EU-institution acting in such a manner that its activity is transparent and it is controlled and supervised, when a bank account of a notary or of a person rendering legal advice is used for depositing a client’s money;
Under the condition that such a client has already been identified by the notary, etc. and the information is at the bank’s disposal upon request;
The Bulgarian National Bank and credit institutions under the Law are not obliged to identify a client who has already been identified by another credit institution.

For one or more related transactions in an amount greater than BGL 30,000 or its equivalent in foreign currency, the client shall be obliged to declare the source of their funds when payments in cash are carried out. Lawyers are required to demand such a declaration before conducting the transaction.

ARE THERE ONGOING MONITORING REQUIREMENTS FOR EXISTING CLIENTS? IF YES, PLEASE DESCRIBE

Law firms are obliged to identify their clients when they establish ‘long-term commercial relations’.

DESCRIBE ANY OTHER WAYS IN WHICH LAWYERS ARE AFFECTED BY ANTI-MONEY LAUNDERING LEGISLATION

No other provisions in the Bulgarian legislation to this regard.

HAVE LAWYERS IN YOUR JURISDICTION BEEN IMPLICATED IN MONEY LAUNDERING, INCLUDING ANY TYPE OF COMPLAINT, ARREST OR PROSECUTION?

At present, there have been no prosecutions involving persons from the legal profession.

HAS THE FINANCIAL ACTION TASK FORCE (FATF) CONDUCTED A MUTUAL EVALUATION OF THIS COUNTRY, AND, IF SO, WHAT WERE THE FINDINGS CONCERNING LAWYERS’ COMPLIANCE WITH THE FATF 40+9 RECOMMENDATIONS?

At present there is no Mutual Evaluation Report by the FATF. However, MONEYVAL, the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism, published a report on Bulgaria in 2008.

The report stated that further education should be provided on how to report suspicious transactions. MONEYVAL criticised the fact that most Designated Non-Financial Businesses and Professions, such as lawyers do not fully know what their due diligence obligations are.

The link to this report is available here.

Information supplied by:

Nina Boteva
Boteva & Kantutis Law Office
2 Nikolay Pavlovich Str.
Sofia 1142
Bulgaria
Tel: (+359 2) 986 19 38, (+359 2) 989 72 90
Fax: (+ 359 2) 989 72 90
e-mail: b-klegal@bulinfo.net
www.bklegal.com

Sources:

1. The Financial Intelligence Agency - www.fia.minfin.bg