Important amendment to AML Act Significant amendments to the Bulgarian Anti-money Laundering Act have been recently promulgated. The changes broaden the specter of obliged persons that must follow the legal requirements for tackling money laundering and financing of terrorism. Among the new obliged persons are some providers of cryptocurrency-related services, in particular:

1. providers engaged in exchange services between virtual currencies and fiat currencies;
2. custodian wallet providers.

This is the first national legal act that implements regulation regarding virtual currencies. The changes implement the provisions of the Fifth Anti-money Laundering Directive (Directive (EU) 2018/843 of the European parliament and of the Council of 30 May 2018). One of the reasons for the adoption of the new Directive is that providers of cryptocurrency services are under no Union obligation to identify suspicious activity, whereas the anonymity of virtual currencies allows their potential misuse for criminal purposes. Therefore, terrorist groups may be able to transfer money into the Union financial system or within virtual currency networks by concealing transfers or by benefiting from a certain degree of anonymity on those platforms. This dictated the necessity for the European legislator to broaden the scope of obliged entities by implementing a balanced and proportional approach, safeguarding technical advances and the high degree of transparency attained in the field of alternative finance and social entrepreneurship.

With the amendments to the AML Act, for the first time in national legislation a definition of “virtual currency” is provided – any digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.

On the other hand, “custodian wallet provider” means an entity that provides services to safeguard private cryptographic keys on behalf of its customers, to hold, store and transfer virtual currencies.

Pursuant to the Act, cryptocurrency service providers are obliged to comply with the legal requirements, such as:
• carrying out due diligence and identification of clients;
• identification of the actual owners of a client – legal entity;
• establishing the source of funds;
• retention and disclosure of information to the authorities in case of suspicious activities;
• carrying out risk assessment and adoption of internal rules for control and prevention of money laundering.

Cryptocurrency service providers will also be subject to registration with the National Revenue Agency. The registration will be done pursuant to an ordinance of the minister of finance, which is yet to be adopted. This registration regime is probably implemented for taxation purposes. Here we have already discussed how the NRA views transaction with cryptocurrencies in the light of taxation.

State Agency “National Security” will be responsible for the general control for compliance with the AML Act. The control authorities can carry out inspections and require documentation, as well as other evidence of compliance from the obliged entities.

In case you want to start your own cryptocurrency venture but face difficulties regarding the AML obligation, do not hesitate to contact us – your online business consultant

Vassil Kostov

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Tags: Cryptocurrency