BULGARIA: NGOs and the new Anti-Money Laundering Measures Act

(BCNL) The new Anti-Money Laundering Measures Act was promulgated on 27 March 2018. This law transposes Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.

The Bill which was published for discussion in May 2017  prompted a serious reaction amongst the civil society community. BCNL submitted a position to the institutions responsible for the drafting of the law – the State Agency for National Security (SANS) and the Ministry of Interior (MOI) – and, together with the National Network for Children, the Citizen Participation Forum, the Bulgarian Donors Forum, the Institute for Market Economics, the European Institute, and the Center for the Study of Democracy, initiated raising support for our position on the Bill, in particular the sections regarding non-governmental organizations. Our joint positionwas supported by over 200 organizations across the country.
The reason for this reaction was that the Bill provided for a broader scope of obligations for NGOs, thus putting them on equal footing with banks, insurance companies, investment mediators, etc. The Bill stipulated that NGOs shall apply the same amount of enhanced –  compared to the then effective regulation – measures as these institutions, irrespective of the substantial difference in terms of the volume and scope of activity, including the absence, as of that time, of a clearly recognized risk of any potential use of NGOS’ activities for the purpose of money laundering or terrorist financing in our country.
We continued our campaign after the new Anti-Money Laundering Act was submitted to the National Assemblyon 22 August 2017. We once again submitted our position which was addressed to the leading in the discussion on the Bill within the Parliament – the Committee for Internal Security and Public Order. The first session, which was also attended by representatives of BCNL, addressed our arguments, and we were invited to take part in an expert working group with the Committee tasked with drafting proposals for changes in the Bill before its submission for a second reading.
BCNL had the opportunity to defend the need to have a regulation which:
  • is in conformity with the relevant international standards (the Recommendations of the Financial Action Task Force (FATF), and the criteria for assessing the states’ compliance with these standards – first and foremost, my means of the risk-based approach. In other words, regulating measures on the basis of a preliminary analysis of the risks inherent to the organizations’ activity in terms of money laundering and/or terrorist financing, as well as taking into consideration the effects of the practical application of these measures;
  • is in line with the specific features of the Bulgarian NGO sector – 1) the limited financial capacity of the majority of non-profit organizations in our country; 2) the impossibility to observe the whole set of complex measures laid down in the law, as such observance requires that NGOs have substantial human and organizational resources;   3) the risk of an NGO becoming insolvent, if, in the event of a formal breach of the law, it is imposed property sanctions in the same amount as the ones imposed on a bank, for example.
At the end of the day, our position was that the measures to be imposed in respect of the NGO sector should be implementable, without making a compromise with the need to take measures for countering the risks of money laundering and terrorist financing that are adequate in the context of the contemporary world, on the one hand, and, on the other hand, without unjustified restrictions on the right to association and the freedom to exercise this right. 
Unlike the previous Anti-Money Laundering Measures Act which defined all NGOs as obliged entities under the general regime, and as such they  were obliged to apply the same amount of measures to counter money laundering and terrorist financing as any other obliged entities envisaged in the law (introducing internal rules, identification of clients, gathering data about the origin of each donation, etc.), the new Law sets forth an alleviated regime for NGOs and an approach tailored to their specific characteristics. You can find more information on the obligations of NGOs under the new regulation here.
After the promulgation of the Law and its entry into force, the next step is drafting the regulations thereto: a regulation for the application of the Law, and sample internal rules to be applied by NGOs in implementing specific criteria. BCNL is continuing its efforts to be part of this process of further developing the new legal provisions in order to be able, on the one hand, to provide civil society organizations with timely information on what obligations they have, how and why they need to observe them, and, on the other hand, ensure that the responsible institutions observe the relevant international standards by taking into account the specifics of the Bulgarian NGO sector and guaranteeing the right to free association.


Article by BCNL