Foreign Investments In Bulgaria - Dirty Money Laundering?

As EU newcomer Bulgaria aims to attract ever larger flows of foreign investment, authorities and analysts have raised fears that part of the money streaming into the country may have been laundered.

"A growing number of investigations come to a dead end as we find that money that we had good reason to consider dirty, or resulting from criminal activity, has been transferred through foreign banks and returned to Bulgaria as 'fresh' investment," said national investigation service chief Boyko Naydenov.

"You just have to look at the posh cars on the streets of Sofia, which exceed the number of luxury vehicles in any other European capital ... or the construction boom in our Black Sea resorts," he told a conference Thursday in Sofia.

Bulgaria attracted some 6.14 billion euros (9.48 billion dollars) in foreign investment in 2007, official data shows.

"A large part of this money came to Bulgaria via companies registered in offshore zones. Proving the origin of these funds is beyond the capabilities of any Bulgarian institution right now," said Emil Ivanov of the directorate for fighting organised crime.

A spokeswoman for the government's investment agency explained to AFP that the agency "trusts bank recommendations and the declaration of origin that every investor is obliged to present."

Naydenov also told AFP Friday that "offshore zones are an international problem that has to be addressed."

Another problem was the widespread practice of paying cash, even for expensive purchases like cars and property, Naydenov noted.

The chief investigator also complained about a lack of trust abroad in the Bulgarian judiciary, which contributed to slowing down the judicial process.

"The reply to a request made at the same time by the German and Bulgarian investigation services to a third country arrived in Germany four months earlier than here," he noted.

Bulgaria's interior ministry was seriously shaken in April by a corruption scandal that revealed how high-ranking ministry officials had scuppered police investigations by leaking sensitive information to key crime suspects.

Interior Minister Rumen Petkov himself came under fire and resigned after admitting to having contacts with shadowy businessmen while the scandal sparked calls for "urgent action" by the European Union and angry commentary in the international press.

"Bulgaria's reputation has suffered from the scandal," US Ambassador to Bulgaria John Beyrle recently told the daily Trud in an interview.

The US secret service and the FBI might be reluctant to share information with their Bulgarian counterparts on "for fear that it might be leaked to the criminals under investigation," he said.

Bulgarian courts have handed down 14 sentences for money laundering over the past two years. Most of the cases concerned relatively small amounts of money resulting from the trafficking of prostitutes.

The Bulgarian Financial Investigation Agency meanwhile blocked 432 suspicious financial operations worth a total 260 million euros in 2007.

But a recent study by the non-governmental Risk Monitor foundation claimed that "the big fish" remained untouched.

Widespread corruption is hindering the authorities' efforts to prosecute money-launderers, Naydenov said.

"Current or former police officers are part of every organised crime group," he said.

Tens of thousands of police officers have been dismissed since the fall of communism in 1989 as a result of interior ministry reforms.

But well-qualified officers are discouraged by low salaries, resulting in money-launderers being "better prepared than the police," said Ivanov.

Bulgaria joined the European Union last year as its poorest member but is still being closely monitored by Brussels for failing to meet its pledges in the fight against corruption and organised crime.international.ibox.bg