Financial Crime World

Georgia’s Financial Sector Fights Money Laundering and Terrorist Financing

A recent report by MONEYVAL, an international organization monitoring anti-money laundering (AML) and counter-terrorism financing (CFT) efforts, has praised Georgia’s financial sector for its progress in combating these threats.

Progress in Combating AML/CFT

The report highlights that banks account for the majority of suspicious transaction reports (STRs), indicating active monitoring of customer activity. Other financial institutions (FIs) meet their reporting obligations to a moderate extent, while non-bank FIs and designated non-financial businesses and professions (DNFBPs) have a lower number of reports.

Supervisory Efforts

Georgia’s National Bank of Georgia (NBG) has been commended for its robust “fit and proper” entry checks for FIs under its supervision, as well as ongoing scrutiny of licensing requirements. The Insurance State Supervision Service (ISSS) also has a similar approach.

Areas for Improvement

However, the report notes that:

  • The Ministry of Finance does not undertake AML/CFT supervision of casinos in practice.
  • Technical deficiencies in licensing requirements undermine their effectiveness.
  • The application of “fit and proper” entry checks amongst other DNFBPs is mixed, and the level of AML/CFT supervision is insufficient and uneven.

Sanctioning Powers

The NBG’s use of sanctioning powers has been deemed effective, proportionate, and dissuasive. The report also praises the NBG and ISSS for providing extensive guidance and supervisory feedback to FIs, which has contributed to an increase in compliance.

Economic Overview

Georgia’s financial sector is dominated by two large commercial banks, with significant activities in gambling and real estate, representing 14.7% and 11.2% of GDP respectively. The country has a low risk of terrorist financing, according to its National Risk Assessment (NRA) for 2019.

Recommendations

The report concludes that Georgia has made progress in implementing the Financial Action Task Force (FATF) Recommendations, with some areas still requiring improvement. Specifically:

  • Weaknesses exist in assessing and mitigating risks.
  • Regulating non-profit organizations requires improvement.
  • Supervising virtual asset service providers and DNFBPs needs attention.

Overall, the report recommends that Georgia continue to improve its AML/CFT framework, particularly in relation to international cooperation, investigation and prosecution of terrorist financing offenses, and prevention of terrorists from raising and moving funds.