Bulgaria: Cryptocurrency Platforms And Digital Wallet Providers In Bulgaria Will Soon Be Obliged To Apply Anti-Money Laundering Measures

Last Updated: 28 August 2019
Article by Maya Medzhedelieva and Kamen Chanov

Bulgaria last year announced its intention to join the European Exchange Rate Mechanism (ERM II) and Banking Union, which is expected to pave the way for the country to join the Eurozone. A roadmap has been adopted with specific regulatory measures to be implemented, including the transposition of the EU's anti-money laundering Directives, namely Directive 2015/849 ("AMLD4") and Directive 2018/843 ("AMLD5").

A draft bill amending the Bulgarian Measures Against Money Laundering Act (the "AML Act") for the purpose of transposing AMLD5 (the "Draft Bill") has been adopted by the Bulgarian parliament in the first reading. It is expected to be voted into law in the coming months to ensure that, from the AML standpoint, there are no obstacles against Bulgaria joining the Eurozone.

Notable changes

To transpose AMLD5, the Draft Bill introduces a set of amendments to the AML Act, the most notable of which are as follows:

  1. Extension of the scope of entities obliged to apply AML measures so as to capture, among others, also cryptocurrency platforms, digital wallet providers, art galleries and other traders and intermediaries in the trade of artwork for transaction values of EUR 10,000 or more;
  2. The imposition of a ban on credit and financial institutions against opening or keeping anonymous bank accounts and safe deposit boxes;
  3. Reduction of the threshold of the maximum monthly limit of electronically stored money in payment instruments from EUR 250 to EUR 150;
  4. The creation of a list of public offices and functions qualifying as politically exposed (which may be publicly accessible);
  5. The Imposition of stricter requirements with respect to applying enhanced due diligence measures;
  6. The possibility of customer identification via electronic identification; and
  7. The obligation for beneficial owners to provide the required information.

Cryptocurrency platforms and digital wallet providers as obliged entities

To a large extent, most proposed amendments are fully in line with and do not go beyond the minimum requirements set down in AMLD5. Therefore, the Draft Bill envisages, among other things, including providers of exchange services for virtual currencies not issued by a central bank as well as providers of custodian wallet services in the list of entities obliged to apply anti-money laundering measures. Considering that the current wording of the Bulgarian AML Act already contains a broader list of obliged entities than originally required by AMLD4 (such as wholesalers, traders of weapons, petroleum and petroleum products, and non-profit organisations, to name a few), the Draft Bill's specification of entities newly obliged to apply anti-money laundering measures raises questions about the supervisory capabilities of the local authorities.

If the Draft Bill is approved in its current wording, Bulgaria-based platforms for the exchange of cryptocurrencies and digital wallet providers will be required to comply with the full scope of anti-money laundering and anti-terrorist financing measures. This includes, but is not limited to, carrying out risk assessments; performing know-your-customer checks; introducing and abiding by bespoke internal rules, policies, procedures and processes for the prevention and control of money laundering and terrorism financing; maintaining meticulous records; and reporting suspicious transactions to the competent authorities.

The Draft Bill also reciprocates the definitions of "virtual currencies" and "custodian wallet provider" in their entirety.

Register of cryptocurrency platforms and digital wallet providers

In line with AMLD5, it has been proposed that providers of exchange services between virtual currencies and custodian wallet providers shall be entered into a public register administered by the National Revenue Agency.

It is envisaged that the rules for this register shall be laid down in an ordinance to be adopted by the Ministry of Finance within six months from the entry into force of the Draft Bill.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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