Bulgaria between the Fourth and the Fifth Directives on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing

Bulgaria between the Fourth and the Fifth Directives on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing

(The 5^th Anti Money Laundering Directive)

Ever since 2015, with the publication of the Fourth EU Directive, the issue of money laundering and terrorist financing has been in the spotlight. In 2018, the Bulgarian Government attempted to reflect these changes by transposing the Directive in question by adopting an entirely new Anti-Money Laundering Measures Act (AMLA). The extremely rapid development in the matter led to the next step, the Fifth Money Laundering Directive of 30 May 2018, which introduces new points and stricter controls on the money circulating in the Union's financial system. Let us look at how the Fifth Directive builds on the Fourth and how this will eventually affect our legislation, the business world and the everyday lives of citizens.

Following an analysis of the Directive, a number of key objectives can be clearly identified as the most important to be achieved by short-term action, including the detection and identification of the factors leading to the increasing incidence of money laundering in EU banks so that adequate action can be taken to prevent it in the future; the identification of best practices to prevent terrorist financing; the convergence and improvement of supervision and the exchange of information and best practices in the fight against money laundering on a transnational

But what are the tools and the ways in which these goals are to be achieved?

First of all, we can point out that EU Directive No. 5 pays a lot of attention to increasing access to information on beneficial owners as well as to increasing transparency in relation to company ownership. It also removes the need to prove a legitimate interest when requesting access to information, which makes the right of citizens and businesses to access information on the beneficial owners of companies much stronger.

In this context, the European Commission is tasked with making the registers of the beneficial owners of companies public. In addition, all national registers must be linked by 10 March 2021.

The situation is different for trusts and similar legal entities (so-called trusts), which are now also obliged to have accurate and up-to-date information on their beneficial owners, which is a big step forward compared to the previous regulation, but data on their beneficial owners will only be provided to persons who must first prove a legitimate interest in requesting this data.

Something that will greatly affect the daily lives of individuals is the even greater restriction of the anonymity of prepaid cards когато се използват онлайн. Такива ще са допутими само в два случая: когато предплатена карта се използва в търговски обект и стойността й е под 150 евро или при онлайн плащания, но само на стойност до 50 евро.

In addition, information on accounts in national banks and safe-deposit boxes in public vaults will be recorded in a register to which national authorities will have access. Anonymous bank accounts, , savings accounts and bank vaults are also abolished.Information relating to the owners of such assets will be accessible to national financial intelligence units as well as to other competent authorities both nationally and internationally.

Another important point is the extension of the scopeof the obliged persons who have to apply the new AML measures, which now includes art dealers where the value of the transaction amounts to €10,000 or more, as well as real estate brokers when renting out property in respect of transactions where the monthly rent amounts to €10,000 or more. The new rules also cover all persons who provide any form of tax consultancy services as their principal business or profession.

Something that has not been regulated so far in Directive 4, but is central to the Fifth, is the control of virtual currency trading platforms and virtual wallet providers. This gives the Union a chance to reduce the ability of terrorist groups to move money into the EU financial system using virtual currency networks that offer a higher degree of anonymity.

There is also on working with high-risk third countries (e.g. Afghanistan, Iran, Syria, etc., 23 countries in total on the list). There are more and higher criteria than in the Fourth Directive for a country to meet in order to enter into financial transactions with the EU. In the case of business transactions, the risk assessment of obliged entities must comply with the new provisions and minimum standards of the Fifth Directive. Member States themselves may introduce additional measures as they wish. They also have an obligation to report financial transactions with high-risk third countries, and in some cases must restrict their business relationships or transactions with entities from such countries.

The Fifth Directive is a reality and should be fully implemented from the beginning of 2020, regardless of whether Bulgaria will manage to cope with its transposition. Most likely, the tendency for business to be the conduit of the European regulations and to deal with them on its own will remain, while the state regulator in the person of SANS will be left with the "duty" to observe compliance with the law.

If you have any questions about how this topic can impact your business, feel free to contact us!