In March 2018, the fourth EU Money Laundering Directive was implemented. Known as MLD4, the Directive came into force in June 2018, and saw Bulgaria adopt new anti-money laundering measures.
Among the main innovations in MLD4 and the Bulgarian AML Act is the obligation to collect and file information on the ultimate beneficial owners (UBOs) of companies, and any other entities that directly or indirectly control them.
For that purpose, all EU member states must organise central databases (registers) where they will maintain information on UBOs of all corporations, including trust ventures of UK and/or US 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, while international businesses must appoint local contact persons for that purpose.
Entities that do not have at least one legal representative with a registered permanent residence in Bulgaria are obliged to appoint one. Failure to comply with such legal obligations would lead to financial sanctions for the appointed contact person.
It should be noted that the UBO's details are very likely to be required by banks, notaries, lawyers and other "obliged entities". The information should be entered in the Commercial Register and Register for Non-Profit Legal Entities (or the BULSTAT Register) by February 1 2019.
Declarations in these registers will be made through a designated application form, with the official supporting documentation attached. The final form is yet to be approved by the Ministry Council, along with the 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.
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 a Bulgarian citizen).
Concept of a beneficial owner
Another important issue for consideration is the meaning of the term "beneficial owner" in the Act and the Directive. As for the term "control", the Act refers to the interpretation of the term in the Commercial Act.
An equally important consideration is when the beneficial owner cannot be identified, or if 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 the beneficial owner.
Non-compliance with these obligations within the announced deadline may lead to penalties ranging from BGN 500-5,000 ($290-$2,900) for individuals, and BGN 1,000-10,000 for legal entities. The penalties are to be applied monthly until the requested information is duly registered.