On 12.12.2022 the Council of Ministers (“Council of Ministers”) submitted to the National Assembly the Act on Amendments and Supplements to the Anti-Money Laundering Measures Act (“AMLMA”). According to the Council of Ministers, the proposed amendments introduce additional means in the fight against money laundering and aim at greater efficiency and synchronisation of the Bulgarian legislation with the secondary European legislation in the field. In addition, the draft law is in line with the recommendations of the Fifth Evaluation Round of the Committee of Experts on the Evaluation of Anti-Money Laundering Measures (MONEYVAL) as well as with the standards of the Financial Action Task Force (FATF). The amendments to the AMLMA introduce additional measures from the Action Plan with measures to address the follow-up commitments of the Republic of Bulgaria after accession to the Exchange Rate Mechanism II (ERM II) and the Action Plan to mitigate the risks of money laundering and terrorist financing.
The subject of this article will be the more substantial amendments proposed by the Bill.
A public register of persons providing corporate governance services is introduced.
At present, for persons providing company management services, the AMLMA only requires that this fact be reflected in their scope of business. The proposed amendments introduce a special register in which persons providing corporate governance services are entered. Entry in the register is compulsory for the aforementioned persons and the register is public and held by the Minister of Justice.
The registration procedure is also regulated in the Bill and is a short administrative procedure. It is initiated by submitting an application in a form approved by the Minister of Justice. A state fee is payable for the registration.
It is also worth noting that the requirements for persons providing legal advice on a professional basis, persons providing company management services and intermediaries in real estate transactions, as well as procurators, managers, members of the management or control body of a legal entity providing the above services have been increased.
In order to hold the listed positions, the persons must not have been convicted of a deliberate crime of a general nature, must not have been in the management bodies of a company that is subject to proceedings or has been declared bankrupt, if there are unsatisfied creditors, must not have been deprived of the right to exercise a position of material responsibility, etc. In the grounds of the draft law, the change is justified by an increased guarantee of good governance.
A mechanism is introduced to resolve discrepancies regarding beneficial ownership information in the Commercial Register.
Under the current legal framework, the registration of the beneficial owner is an obligation of the legal entities themselves. However, it is possible that the circumstances concerning the figure of the beneficial owner may change and this may not be declared or that false data may be declared. In these cases, there are currently only two possibilities to remedy the discrepancy. The first is the legal person obliged to identify its beneficial owner to submit a subsequent application. The other is a court judgment ordering the removal of the beneficial owner’s entry from the Commercial Register (“CR”). The proposed Bill introduces a mechanism to resolve inconsistencies in company accounts in the CR regarding beneficial owners.
The draft law amending the AMLMA proposes to introduce a procedure to resolve discrepancies between the registered beneficial owners and information obtained by other means. In brief, the procedure is as follows:
The persons obliged under Article 4 of the AMLMA, the authorities and administrations under Article 63, paragraph 11 of the AMLMA are obliged to report to the Registry Agency any discrepancies between the data collected by them on the beneficial owners of an entity and the data entered in the CR on the beneficial owners of the same. When submitting the alert to the Registry Agency, whistleblowers are obliged to attach all documents relevant to the identified discrepancy. Upon receipt of a signal, the Registry Agency shall carry out two parallel actions – registration in the account of the legal entity of a notice of discrepancy and sending a written notification to the registered office of the legal entity of the need to apply for registration of a change in the circumstances of the beneficial owner or to provide documents establishing the existence of the circumstances registered in the account.
The Bill regulates two possible approaches when a legal entity is notified that a discrepancy has been identified in relation to its beneficial owner. Where the notification of a discrepancy is justified, the entity should declare a change in its beneficial owner by attaching the documents referred to in Art. 63 par. 4 and par. 5 of the AMLMA. If the notification of non-compliance is unfounded, the person shall request the deletion of the recorded notification of discrepancy by submitting the documents referred to in Art. 63 par. 4 and par. 5 which show that the information entered in the register is true, accurate and up-to-date.
Novelties in virtual currency transactions
The Bill makes it mandatory for persons under Article 4 of the AMLMA to apply due diligence measures to their customers when carrying out transactions between virtual currencies and recognised currencies without gold backing, of a value equal to or exceeding the lev equivalent of EUR 1,000 or their equivalent in another currency.
Registration of trustees of trusts
The innovations meet the requirement of Art. 31, par. 3a of Directive (EU) 2015/84, which requires the beneficial owners of trusts or other similar legal entities to be entered in a central register of a Member State.
The requirement for the entry in the BULSTAT register of information on trustees or persons holding similar positions in trusts, trustee funds and other similar foreign legal entities established and existing under the law of jurisdictions allowing such forms of trust ownership is introduced. In order to be entered in the BULSTAT register it is necessary to be established or to reside on the territory of Bulgaria or to be established outside the EU but to enter into business relations or acquire immovable property on behalf of the trust in Bulgaria.
The obligation to be entered in the BULSTAT register for the above-mentioned persons is waived when they are established or resident in different countries or carry on their business through the trust from different countries. The trustees shall then be identified by a certificate of registration or an extract from the information on the beneficial owners kept in the register of the Member State concerned.
With the proposed amendments, the Council of Ministers seeks to update the Bulgarian legal framework in the area of anti-money laundering, bringing it in line with Directive (EU) 2018/843, FATF standards, as well as to respond to MONEYVAL recommendations. The draft law is part of the package of legislation that we need to adopt to enter the Eurozone. Its adoption is therefore necessary. It remains to be seen what changes the National Assembly will pass in the Anti-Money Laundering Measures Act.