The chaos with the Anti-Money Laundering Act continues - new changes in the regulation, which the Bulgarian legislator cannot transpose adequately for more than a year

The chaos with the Anti-Money Laundering Act continues - new changes in the regulation, which the Bulgarian legislator cannot transpose adequately for more than a year

Pressured by deadlines and the public, through a desperate lawmaking ploy, the National Assembly pushed through amendments to the MIPA, reflected in § 71 of the Transitional and Final Provisions of the Law on Amendments and Additions to the Law on Weapons, Ammunition, Explosives and Pyrotechnic Articles (promulgated in State Gazette No. 37 of 7 May 2019, in force since 11 May 2019).

The changes to the MIPA boil down to the two most delicate issues:

First of all on the declaration of the beneficial owners. A so-called "refinement" of the provision of Article 63(5) of the MLIPA has been made regarding the scope of beneficial owners under §2 of the additional provisions that are subject to registration. The new paragraph 5 of Article 63 looks as follows:

„"Legal persons and other legal entities established on the territory of the Republic of Bulgaria, with the exception of sole traders, shall be obliged to apply for registration in accordance with par. 1 of the Additional Provisions, if they are not registered as partners or sole owners of the capital in their accounts. Where legal persons or other legal entities are registered as partners or sole owners of the capital, the obligation under the preceding sentence shall arise:

if the beneficial owners referred to in § 2 of the additional provisions are not entered in the registers referred to in par. 1 as partners and/or sole owners of the capital in the accounts of participating legal persons or other legal entities established in the territory of the Republic of Bulgaria, or andли

if those legal persons or other legal entities are not established on the territory of the Republic of Bulgaria."

In other words, for the legal persons or other legal entities established on the territory of the Republic of Bulgaria, with the exception of sole traders, the obligation to register their actual owners in the Commercial Register and the Register of Non-Profit Entities and in the BULSTAT Register shall be abolished. This is the case if the beneficial owners of the same са are registered as partners and/or sole owners of the capital in their accounts. The following example can be given - "A" Ltd. has partners "B1" Ltd. and "B2" EAD. The sole owner of the capital of B1 Ltd. is individual X and the sole owner of the capital of B2 EAD is individual Y. In this case, 'A' Ltd is not obliged to declare X and Y as the beneficial owners of the capital, as this is evident from the accounts of 'B1' Ltd and 'B2' EAD.

The obligation to register the beneficial owners of legal entities and other legal entities in the relevant registers arises if they are registered on the territory of the Republic of Bulgaria, but their beneficial owners are not registered as partners and/or sole owners of the capital in the accounts of participating legal entities or other legal entities. The obligation under the preceding sentence also arises for foreign legal persons and other legal entities (for legal persons and other legal entities not established in the territory of the Republic of Bulgaria).

Secondly, regarding the deadline of 13.05.2019 for the adoption and submission to the Financial Intelligence Directorate of SANS of the Internal Rules by the obliged entities under Article 4 of the MIPA, which deadline threw into panic not only businesses, but also state institutions, with the amendments of 07.05.2019 has been cancelled.

With the amendments in paragraph 2(6) of the MIPA, the obligation of the persons obliged under Article 4 of the MIPA to send the internal rules under Article 101 of the MIPA to the Financial Intelligence Directorate of the State Agency "National Security" after adopting them is abolished.

In short, a new deadline is introduced for the adoption of Internal Control and Anti-Money Laundering Rules. Obliged persons under Article 4 of the AML Law will be obliged to adopt Internal Rules for the Control and Prevention of Money Laundering within 6 months of the publication of the results of the national risk assessment on the website of the State Agency for National Security ("SANS").

At the moment, SANS has not yet published the results of the national risk assessment, which is why the 6-month period foreseen by the new requirements has not yet started.

Also, with the amendments to paragraph 2(6) of the MIPA, the obligation of the persons obliged under Article 4 of the MIPA to send the internal rules under Article 101 of the MIPA for approval by the Director of Financial Intelligence of the State Agency for National Security after their adoption is abolished.

We can conclude that with the above-mentioned amendments, the Bulgarian legislator has to some extent neglected the efforts of all obliged entities under Article 4 of the MIPA, which have expended resources of all kinds to prepare themselves in accordance with the requirements of the Bulgarian legislative framework. However, obliged entities should take timely measures and prepare their internal documentation.