Cryptocurrency and Financial Crime on the Rise in Georgia

The global cryptocurrency market’s fluctuations have prompted authorities in Georgia to sound the alarm over growing financial crime threats. Recent research indicates that nearly 28% of consumers in Georgia are showing increased interest in digital assets services, leading traditional financial institutions to re-evaluate their role in this rapidly changing landscape.

The Need for Increased Vigilance

The Georgian government has highlighted the need to address the risks associated with virtual assets, including money laundering and terrorist financing. In a recent publication, the Treasury emphasized the importance of identifying key threats, vulnerabilities, and illicit financing risks related to digital assets.

Prioritizing Risk Identification and Understanding

Local experts warn that financial institutions must prioritize the identification and understanding of these risks as they consider launching their own digital assets businesses or partnering with existing providers. For instance, partnering with virtual asset service providers (VASPs) that offer custody and exchange services can indirectly expose institutions to facilitating suspicious transactions.

FATF Guidance on Virtual Assets

The Financial Action Task Force (FATF) has updated its guidance on virtual assets, outlining anti-money laundering (AML) and combating the financing of terrorism (CFT) measures that financial institutions must adopt when partnering with VASPs. The guidance emphasizes the importance of conducting counterparty due diligence prior to partnerships, as well as ongoing monitoring and risk assessments.

Proactive Approach Required

Georgian authorities are urging traditional financial institutions to take a proactive approach in addressing these risks, including conducting thorough risk assessments of their own AML/CFT programs. By doing so, they can ensure compliance with evolving regulatory expectations while avoiding reputational risk implications.

Conclusion

As the digital assets market continues to grow in Georgia and beyond, it is clear that financial institutions must remain vigilant in their efforts to meet customer demand without compromising the integrity of their AML/CFT programs.

Key Takeaways

• The global cryptocurrency market’s fluctuations have led to growing financial crime threats in Georgia.
• Traditional financial institutions must prioritize identifying and understanding risks associated with digital assets.
• FATF guidance emphasizes the importance of conducting counterparty due diligence, ongoing monitoring, and risk assessments when partnering with VASPs.
• Financial institutions must take a proactive approach to address these risks and ensure compliance with regulatory expectations.