Georgia’s Financial Institutions Adopt Strict KYC Procedures Amidst Rising Financial Crimes
In an effort to prevent financial crimes and ensure customer onboarding efficiency, financial institutions in Georgia have been implementing stringent Know Your Customer (KYC) procedures. This process, which involves verifying and identifying clients’ identities, has become increasingly important in the wake of financial threats.
Importance of KYC Procedures
The KYC process offers a twofold advantage. It assists banks and financial institutions in:
- Preventing money laundering, terrorist financing, and other financial crimes.
- Ensuring compliance with local and international regulations.
Additionally, thorough KYC procedures enable institutions to streamline their onboarding process and offer smoother services to their customers.
Steps in the KYC Process
The KYC process typically consists of the following steps:
- Client Identification: Institutions request clients to submit various forms of identification such as government-issued identity cards, passports, or other documents. They also gather personal information like address, occupation, and source of income.
- Biometric Verification: In some cases, clients may be required to undergo biometric verification.
- Risk Assessment: Based on factors like business activities, wealth, and country of residence, institutions evaluate clients’ risk profiles and classify them as low, medium, or high risk.
- Ongoing Monitoring: Financial institutions are encouraged to conduct ongoing monitoring and risk assessment of their clients in addition to the initial verification process.
Georgia’s Regulatory Environment
Georgian authorities have been encouraging financial institutions to adopt KYC procedures. In July 2022, the National Bank of Georgia released new guidelines for banks on customer due diligence measures. These guidelines emphasized the importance of maintaining a reliable database of customers and their risk profiles for future transactions.
Financial Threats and KYC
According to the Financial Action Task Force (FATF), Georgia was identified as having a “moderate” overall effectiveness in its anti-money laundering (AML) and countering the financing of terrorism (CFT) framework in its 2021 Mutual Evaluation Report. The report highlighted gaps in various areas, including customer due diligence, risk assessment, and ongoing monitoring of transactions.
Case Study: TBC Bank
One local bank, TBC Bank, has pioneered KYC procedures. According to its Chief Executive Officer, George Shengelia, “strong KYC procedures are not only essential for compliance, but they also help build trust with our clients.” The bank invests significant resources in maintaining a robust compliance program that includes continuous employee training and technology upgrades.
Future Outlook for KYC in Georgia
As the financial landscape evolves, maintaining stringent KYC procedures is increasingly important for financial institutions in Georgia. With the recent regulatory developments and growing awareness of financial threats, KYC procedures in the country are expected to remain a priority in the coming years.