Bulgaria

1. Does Bulgaria have legislation making it a criminal offence to engage in money laundering and/or terrorist financing?

Yes. Money laundering is a criminal offence under Art. 253 of the Penal Code (“PC”) and terrorist financing is a criminal offence under Art. 108a (2) of the PC.

2. To whom does the legislation apply?

The PC shall apply to:

• all individuals who have committed a crime on Bulgarian territory;
• Bulgarian citizens who have committed a crime abroad;
• foreign citizens who have committed crimes of a general nature abroad, whereby the interests of the Republic of Bulgaria or of Bulgarian citizens have been affected.

In Bulgaria, only adult individuals above 18 years of age may be subject to criminal liability. Minors between 14 and 18 years of age may be held criminally responsible if they were able to understand the nature and meaning of the act and to direct their actions.

When a particular activity violates the anti-money laundering or counter terrorist financing rules but does not constitute a crime, administrative sanctions may be imposed to the perpetrators (this applies both to individuals and legal entities).

3. What does the legislation prohibit?

Money Laundering

Pursuant to Art. 253, para. 1 of the PC, the following activities constituting money laundering are prohibited:

• concluding a financial operation or property transaction or concealing the origin, location, movement or the actual rights in the property, which is known or assumed to be acquired through crime or another act that is dangerous for the public; or
• acquiring, receiving, holding, using, transforming or assisting, in any way whatsoever, the transformation of property, which is known or assumed, as of its receipt, to have been acquired through crime or another act that is dangerous for the public.

Terrorist Financing

Pursuant to Art. 108a, para. 2 of the PC, the following activities constituting terrorist financing are prohibited:

• directly or indirectly collecting or providing (regardless of the mode of operation) financial or other means, while knowing or assuming that they will be used entirely or partially:

1. for committing an act of terrorism, or for recruitment or training of people for terrorist acts, or for being trained for such act, or for the entry into or exit from the country for the purpose of getting involved in such act (N.B. – all of these acts are separately incriminated);
2. by an organisation or group which pursues the goal of committing an act of terrorism or recruitment or training of people for terrorist acts;
3. by a person who has committed a crime under item 1.

Pursuant to Art. 108a, para. 6 and 7 of the PC, crossing the Bulgarian frontiers by a Bulgarian national (to leave the country) or by a foreign national (to enter the country) for the purpose of getting involved in terrorist financing is also prohibited.

4. How is money laundering defined? Does underlying criminal activity have to be proven?

Pursuant to the Bulgarian Measures Against Money Laundering Act (“MAMLA”), money laundering is any of the following activities, when committed intentionally:

• the conversion or transfer of property, knowing that such property is derived from crime or from an act of participation in crime, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an activity to evade the legal consequences of that person’s action;
• the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that such property is derived from crime or from an act of participation in crime;
• the acquisition, possession, holding or use of property, knowing at the time of receipt, that such property was derived from crime or from an act of participation in crime;
• participation in any of the activities referred to in questions 1 to 3, association to commit such an activity, attempts to commit such an activity, as well as aiding, abetting, facilitating or counselling the commission of any such activity inciting, facilitating performing of such an activity or concealing such an activity.

Yes, the underlying criminal activity (the so-called “predicate offence”) should be proven in order for money laundering to have occurred.

5. What level of intent or knowledge is required to establish a violation?

Art. 253 of the PC provides that the money laundering offence will be constituted when the perpetrator knew or assumed that the property was acquired through crime or another act that is dangerous for the public (i.e. there is a legal assumption about intention even if the perpetrator did not know, but only assumed that the property is acquired through a criminal act).

Art. 2, para. 2 of MAMLA also provides that knowledge, intent or purpose required as an element of the money laundering activities may be inferred from objective factual circumstances.

6. What are the potential penalties for infringing the legislation?

Money Laundering (Art. 253 PC)

• Pursuant to Art .253, para. 1 of the PC money laundering offences are punishable with imprisonment from one to six years and a fine from BGN 3,000 to BGN 5,000 (approx. EUR 1,500 to 2,500).
• The punishment shall be imprisonment for one to eight years and a fine from BGN 5,000 to 20,000 (approx. EUR 2,500 to 10,000), if the act has been committed:

1. by two or more individuals who have conspired to perform the act, or by an individual who acts on the orders of or executes a decision of an organised criminal group;
2. two or more times;
3. by an official within the sphere of his office;
4. through opening or maintaining an account with a financial institution, under a false name or the name of an individual who has not given consent to this effect;
5. by an obligated person under the MAMLA or by his employee or worker during or on the occasion of fulfilment of the obligations under MAMLA.

• The punishment shall be imprisonment from three to twelve years and a fine from BGN 20,000 to BGN 200,000 (approx. EUR 10,000 to 100,000) where the money laundering crime has been committed by the use of funds or property which the perpetrator knew or supposed to have been acquired through a serious crime of intent.
• Where the funds or property are in extremely large amounts and the case is extremely grave, the punishment shall be imprisonment for five to fifteen years and a fine from BGN 10,000 to BGN 30,000 (approx. EUR 5,000 to 15,000), where the guilty person may also be deprived from the right to hold a certain state or public office, or to exercise a certain vocation or activity.

In any case, the object of crime or the property into which it has been transformed shall be forfeited to the benefit of the state, and where absent or alienated, its equivalent shall be awarded.

7. Does the legislation have extra-territorial reach?

Yes.

The PC shall apply to:

• all individuals who have committed a crime on Bulgarian territory;
• Bulgarian citizens who have committed a crime abroad;
• foreign citizens who have committed crimes of general nature abroad, whereby the interests of the Republic of Bulgaria or of Bulgarian citizens have been affected.

Further, particularly with respect to money laundering offences, Art. 253, para. 7 of the PC provides that the provisions of this Article shall also apply where the crime through which property has been acquired falls outside the criminal jurisdiction of the Republic of Bulgaria.

8. Are there additional anti-money laundering or counter terrorist financing regulations or obligations, such as registration or reporting obligations, for businesses or individuals that operate in particular sectors or undertake particular activities?

Yes.

The provisions of Directive (EU) 2015/849 (as amended with Directive (EU) 2018/843) are implemented in the MAMLA and the Rulebook.

The MAMLA obliges a broad range of persons including persons from the financial and insurance sector, auditors, notaries, lawyers, accountants and tax consultants, operators of gambling games, non-profit organisations, art dealers, crypto currency exchange and wallet service providers, and others as listed in Art. 4 of the MAMLA, to comply with additional any money laundering requirements.

According to Art. 6 of the MAMLA, the obligations under MAMLA apply to persons incorporated or operating on Bulgarian territory trough а local branch, as well as to branches of local entities established abroad. The provision suggests that the obligations under the MAMLA do not apply to foreign entities, even if their activities fall under the scope of regulation of the law, however this position remains untested in practice, due to which it currently remains uncertain whether a court of law will share such an interpretation.

The MAMLA provides several specific obligations, including the following core obligations:

• Customer Due Diligence (CDD):

1. Obtaining information on the purpose and intended nature of the business relationship with a client, or the occasional transaction respectively, and assessing thereof;
2. Obtaining information on the source of funds used for the business relationship or a specific transaction;
3. Conducting ongoing monitoring of the business relationship;

• Risk Assessment of the business and Client’s risk profile;
• Implementation of internal AML policies and procedures
• Internal organisation and control including the implementation of a specific AML unit or appointment of a specific person who is in charge of the obliged person’s AML compliance, etc.
• Reporting obligations: obliged persons should report any suspicious transaction to the Financial Intelligence Directorate with SANS (and, if possible, should postpone the completion of the transaction until given specific instructions from SANS);
• Notification obligations: MAMLA sets a number of cases where an obliged person should give specific written notice to the Financial Intelligence Directorate with SANS;
• Document retention requirements
• UBO disclosure and identification requirement

Pursuant to the MAMLA, providers engaged in exchange services between virtual currencies and fiat currencies, and custodian wallet providers are required to file for registration with a special register maintained by the Bulgarian National Revenue Agency (the “NRA”).

As noted above, Art. 6 of the MAMLA suggests that the MAMLA applies only to Bulgarian-based entities and Bulgarian-based branches of foreign entities, but not to foreign entities themselves. Therefore, based solely on the text of the law, it may be concluded that the discussed registration requirement shall not apply to foreign providers of exchange and custodian services pertaining to virtual currencies.

However, our verification with the NRA register revealed that three Estonia-based entities dealing in crypto-to-fiat exchange services have also been registered. On that basis, it may be concluded that even though not mandated by applicable law, the NRA seems to enter foreign entities into the special register of crypto-to-fiat exchange and custodian wallet providers as well. In any case, entities wishing to start crypto-related activities in Bulgaria are still advised to consult counsel with respect to applicability of local regulatory requirements.

9. What are the potential penalties for failing to comply with these obligations?

Penalties for breach of the anti-money laundering obligations under MAMLA:

If the breach does not constitute a crime, the perpetrator would be subject to administrative penalty of up to:

• for natural persons:

1. up to BGN 10,000 (approx. EUR 5,000) for first violation,
2. up to BGN 20,000 (approx. EUR 10,000) for subsequent violation;
3. up to BGN 2,000,000 (approx. EUR 1,000,000) if the same type of violation is performed 5 or more times in 1 year, or if the violation is severe;

• for legal entities:

1. up to BGN 50,000 (approx. EUR 25,000) for first violation,
2. up to BGN 200,000 (approx. EUR 100,000) for subsequent violation,
3. up to BGN 10,000,000 (approx. EUR 5,000,000) or up to 10% of the annual turnover, including gross income, according to the consolidated accounts of the parent undertaking for the previous year, comprising interest receivable and other similar income, income from shares and other variable or fixed yield securities income and receivables from commissions and/or fees - if the same type of violation is performed 5 or more times in 1 year, or if the violation is severe.

10. Who are the relevant enforcement authorities in Bulgaria and what are their contact details?

The enforcement authorities of administrative sanctions for when the violation does not constitute a crime under the PC, are:

• SANS (the Financial Intelligence Directorate),
• NRA – with respect to the registration obligation of providers engaged in exchange services between virtual currencies and fiat currencies, and custodian wallet providers; and
• the Bulgarian National Bank and respectively the Financial Supervision Commission as regards violations by AML obliged persons over which they exercise supervision (i.e. credit institutions, financial institutions, payment service providers, e-money firms, investment intermediaries and insurance companies).

The authorities responsible for criminal investigations are:

• investigating magistrates;
• investigating police officers and investigating customs inspectors; and
• general police officers and customs inspectors.

The specific competent investigating authorities depend on the type of criminal offence being investigated. Investigative bodies always operate under the guidance and supervision of a public prosecutor. The public prosecutor indicts the accused.

Contact details: