Russian companies in Bulgaria: how many are there and what new rules are in force?
According to the latest data from the credit agency Moody’s, Bulgaria ranks second among the countries of the European Union in terms of the number of companies with Russian capital. As of July 2024, there are 9,581 legal entities registered in the country with an ownership share exceeding 40% owned by Russian citizens or companies.
New reporting requirements and sanctions against Russia
Since July 2024, new reporting requirements for transactions related to Russia have come into force in the EU. These measures, regulated by Article 5r of Council Regulation (EU) No 833/2014, oblige financial institutions to report transfers exceeding EUR 100,000 if they are carried out by entities belonging to Russian individuals or companies. These transactions may include assets such as cash, cheques, transfers, deposits and other financial instruments.
This requirement was part of the 12th EU sanctions package aimed at reducing financial flows to Russia and is aimed at strengthening controls over possible violations of the sanctions regime.
What are the risks for banks and financial institutions?
Financial institutions in Bulgaria and other EU countries are required to closely monitor not only direct transfers of Russian funds, but also indirect financial transactions, which are often difficult to detect. This is especially important in conditions where Russian ownership can be disguised through complex corporate structures.
A key task for banks is to assess the extent of participation of Russian individuals in companies and financial transactions. Moody’s helps with this task by providing data on legal entities with Russian ownership. As of July 2024, the agency identified more than 46,000 companies in the EU that fall under the new reporting rules.
According to Moody’s, as of July 2024, the five EU countries with the largest number of Russian-owned companies are:
Countries with the largest number of Russian companies
Czech Republic – 12,480 companies
Bulgaria – 9,581 companies
Germany – 4,296 companies
Latvia – 3,338 companies
Italy – 2,539 companies
Bulgaria, in second place, plays an important role in the EU financial landscape in terms of Russian business. Banks and other financial institutions in these countries are required to report transactions to the relevant national authorities to avoid violating the sanctions regime.
What does the new regulation include?
The EU regulation covers transactions worth more than €100,000, including both one-off and aggregate transfers over a six-month period. An important feature is that there is no minimum threshold for each individual transaction – all of them must be included in the report.
According to the rules, companies are considered to be Russian-owned if more than 40% of their ownership is controlled by Russian persons – directly, indirectly or through shared ownership.
How does reporting work?
The first reporting period ended on June 30, 2024, and financial institutions had to submit their reports by July 15, 2024. Thereafter, reporting will be submitted every six months: January 15, 2025, July 15, 2025, and so on.
Moody’s also provides detailed data on corporate structures and beneficial owners, which allows financial institutions to better understand the risks associated with Russian companies and prevent sanctions circumvention.
The importance of compliance with sanctions
A comprehensive approach to reporting and assessing transactions with Russian companies helps to enhance transparency and control potential violations of the sanctions regime. This not only contributes to the financial security of the EU, but also reduces risks for credit and financial institutions.овой безопасности ЕС, но и снижает риски для кредитно-финансовых учреждений.
