Financial Crime World

Georgia Cracks Down on Financial Crime in Cryptocurrency: NBG Announces Regulation of Virtual Asset Service Providers and Upcoming Comprehensive Legislation

Tbilisi, Georgia: National Bank of Georgia (NBG) Takes a Bold Stance Against Money Laundering and Financial Sanctions Evasion

The National Bank of Georgia (NBG) is taking a significant step in combating money laundering and financial sanctions evasion in the cryptocurrency sector. The Bank has announced plans to regulate and supervise Virtual Asset Service Providers (VASPs) starting from September 1, 2023.

AML Initiatives and International Sanctions

Archil Mestvirishvili, the acting governor of the NBG, emphasized the importance of the new regulatory regime in the context of Georgia’s ongoing anti-money laundering (AML) initiatives:

“The new regulatory regime for VASPs is a crucial step in Georgia’s ongoing AML initiatives. By supervising these entities, we will play a pivotal role in enforcing international sanctions against Russia and Belarus, aligning with our mandate as the primary authority overseeing their implementation.”

The NBG’s decision to regulate cryptocurrency VASPs stems directly from international sanctions imposed on Russia earlier this year. With over 115,000 Georgian citizens already owning cryptocurrencies and the country boasting 130 crypto ATMs, this new regulatory regime is crucial in preventing illicit activities in the digital asset market.

Comprehensive Cryptocurrency Legislation and Georgia’s Position as a Global Leader

The Georgian government aims to introduce comprehensive cryptocurrency legislation during the upcoming autumn session. This legislative initiative seeks to provide a legal framework for firms engaged in digital asset trading and position Georgia as a global leader in the crypto industry.

Robust AML Framework in Georgia

Georgia’s AML framework is already robust, with the Law of Georgia on Combating Money Laundering and Terrorism Financing serving as its foundation since 2012. The financial monitoring service of Georgia (FMS) is the primary government agency responsible for overseeing and enforcing AML regulations.

Current Regulations

Current AML regulations require a range of entities, such as:

  1. Financial institutions
  2. Designated non-financial businesses and professions (DNFBPs)
  3. Virtual currency exchanges

to implement measures for AML and counter-terrorism financing (CTF), including:

  • Customer due diligence
  • Record-keeping
  • Suspicious transaction reporting
  • Internal controls and risk management systems

International Collaboration

Participation in international organizations like the Financial Action Task Force (FATF) and the Council of Europe’s anti-money laundering body (MONEYVAL) ensures that Georgia’s AML efforts are constantly aligned with international standards and best practices.

As the crypto industry continues to grow, these initiatives will protect the financial system from criminal activities, bolster trust, and enhance Georgia’s reputation as a leading international player in the digital asset market.