Bulgaria: Major Problems Caused by Illicit Money Transfer are Met with Grim Determination
| Pages | 331-332 |
| Published date | 01 February 1998 |
| DOI | https://doi.org/10.1108/eb027158 |
| Date | 01 February 1998 |
| Author | Nick Ridley |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control —
Vol.
1 No. 4
Bulgaria: Major Problems Caused by Illicit Money
Transfer are Met with Grim Determination
Nick Ridley
Bulgaria, at the height of what history judges, with
the benefit of hindsight, as the cold war, was one
of the most loyal of the Warsaw Pact nations.
Yugoslavia's schism with the Soviet Union and her
formation of the non-aligned bloc, the Hungarian
uprising of 1956, the Prague Spring of 1968 — all
these left Bulgaria comparatively unmoved in her
unshakeable loyalty.
Yet it would be incorrect to assume that Bul-
garia, even at her most steadfast period of such
loyalty, became totally doctrinaire and devoid of a
certain macro-economic reality. Limited reforms to
her fiscal and banking systems were attempted as a
response to increasingly adverse economic per-
formance during the 1970s and 1980s.
In a sense, Bulgaria's current economic ills stem
from the massive amount of foreign lending
incurred in the late 1980s, which, with the benefit
of economic hindsight, has proved to be an invest-
ment bubble. In essence international financial
markets misjudged Bulgaria's sovereign capacity to
earn foreign exchange and overpriced the net
values of Bulgaria's income-generating assets.
Therefore, when faced with the challenges and
difficulties of adapting to the change to a freer
market economy of the early 1990s, Bulgaria was
in addition hamstrung by massive foreign debt.
This was partially caused by the sequestration
and illicit transfer of capital out of the country, as
well as large-scale money laundering. Indeed, at an
anti money-laundering international conference in
the mid-1990s the official Bulgarian delegate stated
that most of the bulk of assets illegally transferred
out of the country was carried out in the decade
prior to the changes of 1988-89, implying that not
only was the damage done, but possibly irrepar-
able.
In terms of money-laundering techniques, on
the banking side, transaction recording is, at best,
delayed. Systems of recording within the major
banks were efficient for internal purposes, but
liaison with law enforcement on a regular basis
was not part of internal priorities. Such delays in
transaction reporting among several large banks
were of use to money launderers who could use
the techniques of duplicating and misinvoicing
international transfers. With collusion from bank
employees, or use of particularly gullible
employees, transactions could be routed to one
destination and recorded to another.
During this same period two of the principal
financial institutions were laundering funds
directly from Russian financial institutions under
the control of organised crime groups. This was
facilitated by simple contra transactions with EU
banks as the recipients, in some form of sequential
pattern, from the country of origin (Bulgaria) to
two different accounts in the same bank, then a
third separate account, then two different indivi-
dual accounts to the same bank again, then the
same individual account in the third bank. All such
transfers to EU financial institutions took place
within 72 hours of depositing in the Bulgarian
banks.
In general organised laundering was carried out
in several wide-scale ways by organised crime
groups. Large sums of money were transferred
abroad, in hard currencies, as payments of non-
existent foreign debt. Financial institutions them-
selves acquired furniture and fleets of vehicles,
paying prices on paper far in excess of the actual
sums paid out; the same fleet of vehicles would be
acquired by another branch, again with docu-
mentation indicating large-scale debits. Banking
institutions laundered money by advancing large
'loans'
to account holders who in fact had fictitious
addresses within Bulgaria. Such account holders
would deposit and withdraw monies using the
account over a period of two months; the net
result would be that the account was in credit by a
small amount, but enough to afford a respectable
veneer of a healthy balance and evidence of trans-
action movements. Then the large-scale monies to
be laundered would be deposited, then transferred
abroad usually in two or three tranches. The
account
itself,
with the comparatively minuscule
amount in credit, would then become dormant. It
would only be months, or even years later that it
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