This Week in AML

Treasury Sanctions on Bulgarian Corruption

This week, John Byrne is joined by AML RightSource resident Sanctions expert and Special Advisor, Tim White. John and Tim discuss the recent release of the Global Magnitzsky Designations, and a few examples of what's happened recently in Bulgaria relating to the release. From gambling institutions, to professional basketball teams, the designations will undoubtedly affect a substantial amount of assets, now frozen.

Link to Global Magnitsky Designations


Treasury Sanctions on Bulgarian Corruption TRANSCRIPT

John Byrne: Tim, how are you doing today? 

Tim White: Doing great, John and yourself?

John Byrne: Good! Thanks for stepping in for our colleague - Elliot's out this week, but more importantly, we thought just given the issue of the week being sanctions, to bring you back on to chat about this. So I'm wanting to ask you, obviously a lot of sanctions have been issued during the past number of years, and it's a big topic, but I thought the one this week warranted a couple of minutes of our time.

And so this was a treasury sanction on Bulgarian individuals and focusing on corruption. Give us a sense of the rationale and let me just preface it by saying - the issue of corruption we realize is very important to our financial crimes community. And we're going to be doing a corruption related webinar later this month, because we wanted to focus on some of those issues. But talk a bit about how the administration issued this particular sanction. 

Tim White: Yeah, John, this is a significant action by the U S treasury. In fact Andrea [Gacki] the director at OFAC made note in her press release that this is the largest single sanctioned program going in play, utilizing the global Magnitsky human rights sanctions program to counter corruption in that there were the largest number of entities issued on a single day, if you will. 

The country being focused on here is Bulgaria. And there's a couple of things that I think are quite interesting in this action. First of all, there's again, a showing of convergence with state department and that there's a reference within the press release that talks about section 219 of the immigration naturalization act.

And I think that's noteworthy that we're seeing more and more between commerce, state and treasury. And I think that trend will continue, but, at a simple level the treasury identified three individuals, a “BOJKOV, Vassil Kroumo”,  “PEEVSKI, Delyan Slavchev”, and an “ZHELYAZKOV, Ilko Dimitrov”. Obviously I did not come from booklet, Bulgaria. 

John Byrne: Good try anyway, though. 

Tim White: Exactly. Fundamentally, they're focusing on bribery and corruption of governmental officials. And this is just the three individuals, but all said and done, there are 64 separate entities, businesses that are owned or controlled by these individuals. And just to start off, businessmen and oligarchs predominantly is what we're talking about here. BOJKOV was basically the chairman of the gambling commission in Bulgaria and the major illegalities that he has committed are are bribing the government to turn down all of his competitors applications for licensing, for gambling facilities.

So he basically had a monopoly to put it in perspective. He was indicted, he was convicted. He fled he is in the UAE right now. And they're still trying to, to prosecute him. 

Big list of gambling entities that are sanctioned here. And noteworthy is a professional basketball team that there are several Americans that are in fact players for that team - so they're in for a surprise there. 

The next individual PEEVSKI, was a former member of parliament and basically controls a lot of the media in Bulgaria and was fundamentally getting kickbacks from politicians in order to make sure that the media didn't say anything negative about them. And that's a pretty simplistic description of it. 

The last one is very interesting in that the individual fundamentally was selling citizenship of Bulgaria to immigrants. And those of you that aren't geography majors, Bulgaria sits right next to Turkey, right where the Syrian refugee crisis is playing out.

But what that individual was doing besides selling citizenship is he was able to manipulate government entities that are embezzling and selling state assets for personal gain. So some pretty nasty stuff there. 

John Byrne: So let's say final question is the implications of these sanctions - there's two implications, right?

There's practical, which you're going to cover in a second in terms of the names of the entities in terms of those of us that have to do filtering, but also just in general what's an implication of a particular sanctuary you've already said, obviously with, for example, the people on the professional basketball teams? They're not going to get paid, but how are these sanctions utilized?

And then what are some of the challenges to OFAC practitioners that you have worked with throughout your career in terms of looking at this list and making a decision on how to filter the list? 

Tim White: Yeah. So I think the big picture here is that there's going to be US financial institutions, possibly brokerage firms, insurance companies that may have accounts for many of these business entities.

And this was, there was no leak on this. This was a very swift action. So there's probably some pretty substantial assets being frozen right now, of these businesses that are owned and controlled by these people, because those of us that have been in this world for some time know that when money is stolen, it is often moved to the United States because of security and the stability of our currency.

So I think that's probably the big picture practical implications. I was looking through the entities here and the one that jumped out to me the most, if there is an interest crust limited there is a large Intrust bank in Wichita, Kansas. So you would have transactions and wires being originated to interest today that would be hitting filters, right and left. There was another one named “real estate limited”. I've got to think that's just popping everywhere. “Bullet trade” - there were a number of Euro entity type names, “domino games”, “domino pizza”. There are just a lot of common words in here that are going to create some filtering troubles for people for quite some time.

John Byrne: Well, Tim. Thanks. Thanks so much for your insight. Reminding folks on June 24th at 1PM ET, we will have a webinar on corruption related issues. So you're going to want to look for that. Also, you can subscribe to our weekly podcast on iTunes or wherever you get your podcasts from Tim white.

Thanks so much for your time today. Really appreciate it. 

Tim White: Thanks John.