Bulgaria’s Inclusion in the FATF Grey List: AML/CFT Compliance, AMLD, and AMLR Implications

Corporate Clients, Banking & Finance

The Financial Action Task Force (FATF) has placed Bulgaria on its grey list, jurisdictions “under increased monitoring”, due to identified deficiencies in its Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) systems. This step follows MONEYVAL’s evaluation and signals that, while Bulgaria’s framework incorporates EU rules under the Anti-Money Laundering Directives and the upcoming Anti-Money Laundering Regulation, further reforms are required. FATF grey listing is not a sanction, but it subjects Bulgaria to enhanced monitoring and increases compliance scrutiny for businesses and individuals operating domestically and internationally. 

Importantly, FATF advises against blanket “de-risking” or automatic refusal of business solely on the basis of grey-list status.

How is Bulgaria’s inclusion in the FATF grey list defined and regulated?

The FATF places jurisdictions “under increased monitoring”, commonly referred to as the grey list, when they have identified strategic deficiencies in their AML/CFT frameworks but have formally committed to addressing them within agreed timeframes. The process is a form of enhanced supervision, designed to encourage reforms, and is not a sanction in itself. Importantly, FATF advises against blanket “de-risking” or automatic refusal of business solely on the basis of grey list status.

At EU level, the Anti-Money Laundering Regulation (AMLR) and the Sixth Anti-Money Laundering Directive (AMLD6) set harmonised rules for all obligated entities, including banks, payment institutions, and designated non-financial businesses and professions. These measures govern customer due diligence (CDD), enhanced due diligence (EDD) for higher-risk relationships, beneficial ownership transparency, sanctions compliance, and robust internal controls. The AMLR, which takes direct effect from July 2027, will establish a single rulebook for all Member States, removing national divergences.

In Bulgaria, the Prevention of Money Laundering Act (PMLA) transposes EU requirements into national law, enforced by the Financial Intelligence Directorate (FID-SANS) and relevant sector regulators. Obligated entities in Bulgaria are therefore already bound by the same standards applied across the Union; FATF grey listing adds additional scrutiny, not a separate set of rules.

Why was Bulgaria placed on the FATF grey list?

Bulgaria’s grey-listing in October 2023 followed MONEYVAL’s 2022 Mutual Evaluation Report, which assessed both technical compliance with FATF Recommendations and the practical effectiveness of the AML/CFT system. While Bulgaria has enacted many preventive measures required under EU law (AMLD, AMLR), MONEYVAL identified persistent shortcomings, including:

• Limited statistical and analytical capacity for assessing money laundering and terrorist financing risks
• Relatively low numbers of investigations and convictions for money laundering compared to identified risks, particularly in cases linked to organised crime and high-level corruption
• Infrequent use of parallel financial investigations to trace and confiscate criminal proceeds
• Gaps in the framework for targeted financial sanctions related to terrorist financing and proliferation financing
• Weak, inconsistent risk-based supervision of obligated persons/entities such as lawyers, real estate agents, and company service providers
• Deficiencies in the accuracy, verification, and use of beneficial ownership information

These findings led FATF to require Bulgaria to implement an action plan with both technical and operational measures, with progress reviewed at regular intervals. While some progress has been acknowledged, particularly in improving beneficial ownership data and mapping risks in the non-profit sector, further reforms and evidence of effectiveness are needed for removal from the grey list.

What are the consequences for businesses and individuals?

Grey-listing does not prohibit financial transactions or investment flows. EU-to-Bulgaria transfers, including via SEPA (Single Euro Payments Area), remain fully available. However, the status does affect risk perception and may trigger:

• More frequent requests for detailed documentation from banks and other financial institutions
• Longer transaction processing times, particularly for cross-border payments
• Enhanced due diligence by foreign counterparties, especially in high-value or high-risk sectors
• Increased scrutiny by correspondent banks when processing US dollar or other non-EU currency payments

Corporate clients may find that international partners require evidence of strong AML/CFT governance, independent audits, and accurate beneficial ownership records. For private clients, the impact is more likely to be procedural, additional verification steps for opening accounts, transferring funds, or receiving cross-border payments.

It is important to note that FATF expressly discourages wholesale de-risking, meaning that compliant and transparent businesses and individuals should still be able to maintain relationships with EU and global financial institutions.

What measures should be taken?

Obligated entities and their clients can mitigate the impact of FATF grey listing by proactively aligning with both FATF’s recommendations and EU AML/CFT obligations:

• Update risk assessments to reflect the threats identified in MONEYVAL’s report, including corruption-related laundering, organised crime proceeds, misuse of legal entities, VAT fraud, and real estate-based laundering
• Apply rigorous CDD and EDD for higher-risk clients, sectors, and jurisdictions; verify beneficial ownership through independent sources and maintain documented procedures for ongoing monitoring
• Strengthen sanctions compliance to ensure screening covers both terrorist financing and proliferation financing measures, with effective escalation and review processes
• Document and demonstrate compliance through policies, governance charts, staff training records, and internal or external audit reports, these form the basis of an “assurance pack” for banks and partners
• Prepare transaction support in advance, invoices, contracts, proof of source of funds, and tax compliance records, to minimise delays in cross-border transfers

Private individuals can take similar steps on a smaller scale: keeping identity documents current, maintaining clear records of income and wealth sources, and promptly responding to information requests from financial institutions.

How can Bulgaria exit the FATF grey list?

Bulgaria’s removal from the grey list depends on full implementation of the FATF action plan. This includes:

• Increasing the volume and quality of money laundering and terrorist financing investigations and prosecutions in line with identified risks
• Conducting parallel financial investigations to confiscate criminal proceeds
• Closing gaps in targeted financial sanctions for Terrorist Financing and Proliferation Financing
• Strengthening risk-based supervision of Designated Non-Financial Businesses and Professions and other high-risk sectors
• Demonstrating that the beneficial ownership register is accurate, up to date, and actively used by authorities

Only once FATF verifies, through documentation and an on-site visit, that these measures are both implemented and effective will Bulgaria be delisted.

NBLO Comments

For corporate and private clients, Bulgaria’s FATF grey-listing is a regulatory challenge rather than a business-ending event. Transactions remain legally permissible, but the environment demands more proactive compliance management. Those who can demonstrate strong AML/CFT controls, transparent governance, and readiness to provide documentation will maintain and even strengthen their international banking and commercial relationships.

NBLO has extensive experience in advising both corporate and private clients on AML compliance, cross-border structuring, and dispute resolution with financial institutions. We assist in preparing compliance frameworks, drafting assurance documentation for counterparties, and responding effectively to enhanced due diligence requests.

For tailored advice on operating successfully during Bulgaria’s FATF grey-list period or on strengthening your AML/CFT position to meet EU and FATF expectations please contact us at AML@newbalkanslawoffice.com