Bulgaria remains high-risk country for the initiation of money laundering schemes. The high share of informality in its economy, coupled with the low level of enforcement against corruption and organized crimes, renders the country’s financial system highly susceptible to money laundering.
Bulgaria has made significant progress in the area of anti-money laundering, both in terms of institutional set-up and legislative efforts. At the same time investigating and proving money laundering in court remains challenging, in particular as it relates to higher echelons of power and politically exposed persons. For Bulgaria to progress in countering money laundering it would need to advance on tackling higher level corruption.
The influence of the major criminal markets (e.g. drug trafficking, prostitution, smuggling, etc.) on Bulgaria’s economy is significant. Over the past decade, despite the continuous decline in the influence exerted by organised crime, the share of the criminal economy continued to pose a serious risk to the legitimate business, distorting market competition and threatening the democratic functioning of public institutions. The cash-based grey economy and high levels of administrative corruption, tax and customs offenses, fraud, electronic crimes (especially cybercrime, ATM and credit card fraud), as well as smuggling of contraband goods (i.e. cigarettes, alcohol, and fuel) illustrate the fertile ground for money laundering in Bulgaria.
Despite a late start, the Bulgarian legislative framework has been gradually improved to provide a good anti-money laundering foundation. The evolution of the legal framework, including the introduction of a considerable number of amendments and expanded coverage of the Bulgarian legislation in the area of anti-money laundering is by a large degree influenced by developments on the international and European level. Whilst progress on the development of relevant legislation concerning certain aspects, such as customer due diligence has been made, in other areas, including beneficial ownership legislative challenges remain pervasive.
The level and quality of cooperation between the different elements of the institutional set up of the anti-money laundering system in Bulgaria remains underdeveloped. According to international assessments, Bulgaria has been largely compliant with international standards when developing its institutional and legislative anti-money laundering framework. Yet institutional representatives have pointed out significant problems arising from fragmented responsibilities for cases related to financial crime and money laundering, resources spread among the involved agencies, and a lack of a national coordination mechanism. The duplication of functions and the lack of human resources sustainability constitute further important challenges, which decrease the efficiency and effectiveness of the entire system.
Countering money laundering requires a holistic approach on multiple levels. Such an approach needs to be underpinned by an enhanced national investigative capacity, improved coordination and inter-agency collaboration, and systematic implementation and enforcement of the rules within the anti-money laundering system. The use of risk assessments and evidence-based measures coupled with an effective national registry of bank accounts could further facilitate the efficiency of the anti-money laundering system.
The study has been conducted with financial support under the Bulgarian-Swiss Cooperation Programme.
Author: Center for the Study of Democracy
Anti-money laundering (AML), institutional set-up, legislative framework, Bulgaria