Number of Russian Companies in Bulgaria: Statistics and Analysis

Russian companies in Bulgaria: how many are there and what new rules apply?

According to the latest data from Moody's, Bulgaria ranks second among European Union countries in terms of the number of companies with Russian capital participation. As of July 2024, 9,581 legal entities with ownership interests exceeding 40% owned by Russian citizens or companies were registered in the country.

New reporting requirements and sanctions against Russia

New reporting requirements for transactions related to Russia came into force in the EU in July 2024. These measures, governed by Article 5r of Council Regulation (EU) No. 833/2014, require financial institutions to report transfers exceeding €100,000 if they are carried out by entities owned by Russian individuals or companies. These transactions may involve assets such as cash, cheques, transfers, deposits, and other financial instruments.

This requirement became part of the 12th package of EU sanctions aimed at reducing financial flows to Russia and is aimed at strengthening control 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 given that Russian ownership can be disguised through complex corporate structures.

A key task for banks is to assess the extent of Russian participation in companies and financial transactions. Moody's assists in 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.

Countries with the largest number of Russian companies

According to Moody's, as of July 2024, the five EU countries with the largest number of Russian-owned companies are:

• Czech Republic – 12,480 companies
• Bulgaria – 9,581 companies
• Germany – 4,296 companies
• Latvia – 3,338 companies
• Italy – 2,539 companies

Bulgaria, ranked second, plays a significant role in the EU financial landscape for Russian businesses. Banks and other financial institutions in these countries are required to report transactions to the relevant national authorities to avoid sanctions violations.

What does the new regulation include?

The EU regulation covers transactions worth over €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 must be reported.

Under the rules, companies are considered Russian-owned if more than 40% of their property is controlled by Russian persons – directly, indirectly, or through shared ownership.

How does reporting take place?

The first reporting period ended on June 30, 2024, and financial institutions were required to submit their reports by July 15, 2024. Thereafter, reports 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, allowing financial institutions to better understand the risks associated with Russian companies and prevent sanctions evasion.

The importance of complying with sanctions

A comprehensive approach to reporting and assessing transactions with Russian companies helps enhance transparency and monitor potential sanctions violations. This not only enhances the EU's financial security but also reduces risks for financial institutions.