In March 2018, the 4th EU Money Laundering Directive was implemented, known as MLD4, which came into force in June 2017. With this Directive, Bulgaria adopted a new anti-money laundering measure that was transposed in the relative legislation.
Among the main innovations in the MLD4 and the Bulgarian AML Act is the obligation for collecting and filing information on ultimate beneficial owners (UBOs) of companies and other entities and the legal persons and other bodies that directly or indirectly control them.
For that purpose, all EU Member States must organize central databases (registers), where they will maintain the information on UBOs of all corporations, including trust ventures of UK and/or USA origin. Once set up, central registers will considerably increase the quality of the available data for identification of the beneficial owners and therefore also meet the demand of the Financial Action Task Force (Groupe d’action Financiere) for stronger transparency when it comes to the identity of the UBOs.
As a result, businesses operating in Bulgaria need to identify and provide such information about them, while international businesses must appoint local contact persons for that purpose.
Entities that do not have a legal representative – at least one individual with a registered permanent residence in Bulgaria – have the obligation to appoint a contact person that resides permanently in Bulgaria or is a Bulgarian citizen. The contact person’s details must be kept updated in the Central Register. Their obligations are to obtain, hold and provide (to the legally obliged persons under the Act and the State Agency for National Security) adequate, accurate and up-to-date information on the UBO of the respective entity. Failure to comply with such legal obligations would lead to financial sanctions for the appointed contact person.
One must consider that UBO details’ disclosure is very likely to be required by banks, notaries, lawyers and other “obliged entities”.
The above information is to be entered in the Commercial Register and Register for Non-Profit Legal Entities, or the BULSTAT Register, not later than 1 February 2019.
The declaring of the required information in these registers will be done on the basis of a designated application form containing the detailed information about the UBO of the respective entity, the legal persons and other establishments that directly or indirectly control it, as well as about the appointed contact person. This declaration is to be accompanied with the official supporting documentation (translated and legalized where needed). The final form of this document is yet to be approved by the Ministry Council, along with the adoption of new Rules for Implementation of the Act. The New Rules for the Implementation of the Act will enter into force shortly after, thus launching the UBO disclosure procedures.
Compliance requirements
To ensure compliance, companies must carefully consider whether they are subject to the newly introduced requirements. This means that they should:
• Disclose the ID of the UBO and the entities that directly or indirectly control it; and/or
• Appoint and register a contact person (with registered permanent residence in Bulgaria, or Bulgarian citizen)
Concept of “Beneficial Owner”
Another important issue is the meanings of the term ‘beneficial owner’ as introduced with the Act which corresponds to the term as defined in the Directive. As for the term ‘control’, the Act refers to the interpretation of the term in the Commercial Act.
An equally important new scenario introduced is the one when the beneficial owner cannot be identified, or the case of doubts that the person declared and identified is not the beneficial owner. In such cases the individual who acts as a senior managing officer in the respective company will be considered as a beneficial owner.
Penalties
Any non-compliance with these obligations within the announced deadline may lead to penalties ranging from BGN 500 to BGN 5,000 for individuals and from BGN 1,000 to BGN 10,000 for legal entities. The penalties are to be imposed on a monthly basis until the requested identification information is duly registered in the respective register.
Eurofast advises companies active in Bulgaria to seek professional custom-made assistance in determining the actions they need to fulfill to ensure compliance within the prescribed deadline. Our team in Sofia remains at your disposal for advisory related to this matter and other AML requirements in Bulgaria.
Rossitza Koleva, Country Executive, Eurofast Bulgaria
rossitza.koleva@eurofast.eu
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