MR PLAMEN NUNEV
CHAIRMAN OF THE COMMISSION
ON INTERNAL SECURITY AND PUBLIC ORDER
MRS MENDA STOYANOVA
CHAIRMAN OF THE COMMISSION
ON BUDGET AND FINANCE
ABOUT: Proposal to change the provision of Article 4, Item 19 of the Law on Measures Against Money Laundering (AMLI)
DEAR MR NUNEV,
DEAR MRS STOYANOVA,
The Confederation of Employers and Industrialists in Bulgaria (KRIB) is an officially recognized representative organization of employers, uniting 131 branch organizations in all sectors, including manufacturers and traders of various goods. Among the main goals of KRIB is the improvement of the business climate in the country and increasing the competitiveness of the Bulgarian economy.
The Law on Measures Against Money Laundering introduced requirements and obligations to the subjects listed in Article 4 thereof, significantly increasing the administrative burden of the affected persons and introducing serious sanctions for their non-fulfilment.
The specific occasion for this presentation is the category of obliged persons under Article 4, item 19 of the ZMIP - "wholesalers".
Pursuant to Art. 4, item 19 of the ZMIP, the "wholesalers" are obliged persons under the law. In contrast to item 20 of the same article, where the range of subjects is defined according to the nature of the goods being traded - "weapons, oil and oil products", for which goods it is clearly assumed that there is an increased risk of money laundering money or terrorist financing, the text of item 19 does not make such a distinction, i.e. covers all "wholesalers", regardless of the type and value of the goods, without giving a definition of the term "wholesaler", which contradicts the logic and purpose of Directive (EC) 2015/849 and places Bulgarian traders in a -unfavorable position compared to their competitors from other European countries, in which the Directive has been implemented according to its exact meaning and logic.
In this regard, KRIB offers:
Repeal of Item 19 of Article 4 of the ZMIP.
Motives:
We present an analysis on the inclusion of the category of "wholesalers" among the obliged entities in the area of measures against money laundering and terrorist financing in the Member States of the European Union ("EC"), as well as which rules should be applied in the case where a parent company is registered in one member state and its subsidiary in another.
- EU law
EU member states, including the Republic of Bulgaria, are obliged to transpose into their internal legislation EU directives in the field of prevention and combating money laundering and terrorist financing, the main of which is Directive (EU) 2015/849 ("The directive").
In Art. 2 of the Directive defines the circle of obliged persons as follows:
"1. This directive applies to the following obliged entities:
1) credit institutions;
2) financial institutions;
3) the following natural or legal persons acting in the exercise of their professional activities:
a) auditors, external expert accountants and tax consultants;
b) notaries and other self-employed legal practitioners when they participate, acting on behalf of or at the expense of their client, in any financial or real estate transaction or by assisting their client in planning or carrying out transactions concerning up to:
i) the purchase and sale of immovable property or commercial enterprises;
ii) the management of funds, securities or other assets of the client;
iii) the opening or management of bank accounts, savings accounts or securities accounts;
iv) the organization of contributions necessary for the creation, operation or management of companies;
v) the creation, operation or management of trusts, companies, foundations or similar structures;
c) providers of trust or company management services not covered by letters a) or b);
d) real estate agents;
e) other persons dealing in goods, when the cash payments made or received amount to EUR 10 or more, regardless of whether the transaction is carried out in one or several operations that appear to be related;
(f) gambling service providers.'
The Directive does not explicitly include wholesalers among the obliged persons, but it contains one specific provision for traders, namely letter e) of Art. 2, para. 1, item 3 – other persons dealing in goods when the cash payments made or received amount to EUR 10 or more.
Pursuant to Art. 3 of the Law on Restriction of Cash Payments, cash payments on the territory of the country are limited only for amounts up to BGN 10, equal to EUR 000 at the fixed exchange rate of the Bulgarian National Bank BGN 5 = EUR 112,92.
Payments with a value equal to or exceeding BGN 10, as well as with a value below BGN 000, but when they can be considered as part of interconnected payment operations on the same basis, the total value of which is equal to or exceeds BGN 10 000 BGN, are made only by transfer or payment to a payment account. These rules also apply in cases of payments in foreign currency, when their BGN equivalent is equal to or exceeds BGN 10. The equivalence in Bulgarian levs is determined according to the exchange rate of the Bulgarian National Bank on the day of payment.
Therefore, in Bulgaria, persons dealing in goods with a value of EUR 10 or more must necessarily make or receive payments only by transfer or deposit to a payment account, since cash payments in an amount equal to or greater than BGN 000 is prohibited.
- Bulgarian law
The cited provision of Art. 2 of the Directive is transposed into Bulgarian legislation through Art. 4 of ZMIP.
According to Art. 4, item 19 of the ZMIP "wholesalers" are among the obliged persons who must comply with the requirements of the law. There is no differentiation by individual types of merchants or high-risk sectors/industries, nor by the type or amount of payments made or received, which in practice creates substantial and unjustified difficulties for wholesalers in relation to the implementation of the provisions of the ZMIP and becomes an obstacle to implementation of their core business activity, while putting them at a disadvantageous, disadvantageous and non-competitive position compared to wholesalers from other EU Member States and third countries who are not obliged to carry out due diligence and to request and collect documents, data and information from its customers in relation to anti-money laundering and anti-terrorist financing measures.
Considering that the Directive does not foresee "wholesalers" among the obliged persons, and the Bulgarian law includes them explicitly, we made a study whether the same approach was adopted by the other EU member states.
- Survey among EU Member States
A survey of EU Member States was carried out as to whether their domestic legislation implementing the Directive and subsequent acts of EU law included wholesalers as obliged entities. The analysis is based on consultations with the offices of PricewaterhouseCoopers ("PwC") in the respective countries, as well as on the basis of a parallel study from publicly available sources, made by PwC employees in Bulgaria.
From the research it is clear that no member state (with the exception of the Republic of Bulgaria) includes wholesalers among the circle of obliged persons in the way they are included in the ZMIP.
- Examples from other EU member states
The legislations of Белгия и Естония include among the circle of obliged persons the wholesalers of precious metals, products and precious stones, and in certain hypotheses.
The legislation of Germany defines "merchants of goods" as obliged entities, but again in precisely defined hypotheses, if they carry out:
- transactions involving works of art worth at least EUR 10;
- transactions involving high-value goods according to section 1 (10), sentence 2, number 1 of the German Anti-Money Laundering Act, in which they make or receive cash payments of at least EUR 2 for their own benefit or through a third party; or
- transactions involving other goods where they make or receive cash payments of at least EUR 10 by themselves or for their benefit or through a third party.
Section 1 (10) of the German Anti-Money Laundering Act:
"(10) For the purposes of this Act, valuables mean goods which:
- by reason of their quality, market value or purpose they stand out from articles of daily use; or
- due to their price, they are not everyday purchases.
These include in particular:
- precious metals such as gold, silver and platinum;
- Gems;
- jewelry, watches;
- works of art and antiques;
- motor vehicles, ships and motor boats as well as aircraft.'
The following legislations introduce obligations for wholesalers in cases of receipt of payment or payments in cash.
В Унгария the scope of liable persons includes wholesalers who receive a cash payment of a value exceeding HUF 3, which is approximately EUR 000.
В Czech Republic и Полша this threshold is EUR 10, and in Sweden – EUR 5.
An additional analysis was also carried out on the question of whether there are provisions in the relevant national legislation of EU member states and third countries (similar to Article 6 of the AML/CFT) regarding the application of anti-money laundering and terrorist financing measures in relation to subsidiaries and branches of foreign legal entities and other legal entities registered in their territory, and if there are such provisions, what they provide in this regard.
The results of the analysis show that the laws of the EU Member States do not distinguish between a parent company and a subsidiary and require all obliged entities and their subsidiaries to comply with the rules on anti-money laundering and anti-terrorist financing measures introduced in the respective Member State , where they are established.
With respect,
Eugene Ivanov
Ex. director and member of the Board of Directors
http://www.turbulence.tech