Georgia – Know Your Customer (KYC) Rules

 

 

Illegal income in Georgia derives from tax evasion, falsification of documents, embezzlement, misappropriation of funds, corruption, illegal entrepreneurship, intellectual property rights violations, customs fraud, environmental crimes, and theft. According to the Georgian Ministry of Justice, the bulk of criminal proceeds laundered in Georgia are derived from domestic criminal activity and only a small portion of money laundering is related to narcotics trafficking. Yet there is a market for narcotics based on the number of arrests for drug abuse. South Ossetia and Abkhazia fall outside the control of Government of Georgia authorities and are not subject to monitoring.

According to the Investigation Service of the Ministry of Finance, there is a small black market for smuggled goods in Georgia. There is little evidence to suggest it is significantly funded from narcotics proceeds, or that the funds generated by smuggling are laundered through the formal financial system. Smuggled goods are sold in black or gray markets to avoid tax and customs duties. The extent of black market trading in the breakaway territories of Abkhazia and South Ossetia is unknown.

Georgia-Flag-128

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: YES
    • Domestic PEP: YES

Georgia – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Georgian Law:

    • Banks
    • Currency exchange bureaus
    • Non-bank depository institutions and microfinance organizations
    • Money remitters
    • Securities brokers and registrars
    • Insurance companies and non-state pension scheme founders
    • Organizers of lotteries and other commercial games
    • Entities engaged in activities related to antiquities, precious metals, precious stones and products thereof
    • Customs authorities
    • Entities engaged in extension of grants and charity assistance
    • Notaries
    • The National Agency of the Public Registry

Georgia – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 11,616 from January 1 to July 31, 2011

Number of CTRs received and time frame: 65,427 from January 1 to July 31, 2011

The following is a list of STR covered entities covered by Georgian Law:

    • Banks
    • Currency exchange bureaus
    • Non-bank depository institutions and microfinance organizations
    • Money remitters
    • Securities brokers and registrars
    • Insurance companies and non-state pension scheme founders
    • Organizers of lotteries and other commercial games
    • Entities engaged in activities related to antiquities, precious metals, precious stones and products thereof
    • Customs authorities
    • Entities engaged in extension of grants and charity assistance
    • Notaries
    • The National Agency of the Public Registry

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

 

Prosecutions: 63 from January to July, 2011
Convictions: 54 from January to July, 2011

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

In 2011, Georgia achieved better results in detection, investigation and prosecution of money laundering, and training and awareness improved. There are a large number of autonomous money laundering prosecutions and convictions. Georgian law enforcement authorities should put more emphasis on pursuing the link between organized crime and money laundering. For example, investigations into narcotics, extortion, weapons of mass destruction, and smuggling rarely pursue financial components. Georgia recognizes an existing drug problem, yet narcotics trafficking is rarely recognized as a predicate offense for money laundering. In 2010 – 2011 the seizure of bulk currency on the borders increased significantly compared to previous years. Between October 2006 and July 2008 only one individual was interdicted attempting to smuggle currency from Georgia. In 2010 – 2011 there were 14 cases. The currency smuggling cases are not being investigated for possible money laundering.

In 2011, a large number of STRs and CTRs were filed by casinos in Georgia but there were no resulting investigations. Similarly, the reports filed by financial institutions, notaries, broker companies and micro finance organizations generate few inquiries. The data compiled by the Financial Monitoring Service, the financial intelligence unit, remains an untapped tool for discovering money laundering from a variety of predicate offenses. There is a lack of information sharing between concerned government agencies and departments.