The National Bank of Georgia (NBG) has taken a significant step in combating money laundering and ensuring compliance with sanctions by announcing its plans to regulate and supervise virtual asset service providers (VASPs) starting from September 1, 2023. This move aims to enhance the country's efforts in the fight against money laundering and promote adherence to Anti-Money Laundering measures.
Archil Mestvirishvili, the acting governor of the NBG, highlighted the importance of the new regulatory regime in Georgia's anti-money laundering initiatives. By supervising VASPs, the NBG will play a crucial role in ensuring compliance with the sanctions imposed on Russia and Belarus by Western nations. This action aligns with the responsibility of the NBG as the primary authority overseeing the enforcement of relevant sanctions. The initiation of the supervision process in 2022 was a direct response to the sanctions imposed by the United States and the European Union on Russia.
In addition to regulating VASPs, the government of Georgia is actively preparing to introduce comprehensive cryptocurrency legislation during the upcoming autumn session. This legislative initiative comes after aligning local laws with EU directives and aims to provide a legal framework for firms engaged in digital asset trading. The primary goals of this legislation are to prevent money laundering and terrorist financing through cryptocurrency transactions and position Georgia as a global destination for the crypto industry.
Research has indicated that a significant portion of the Georgian population is involved in cryptocurrency ownership, with approximately 115,000 individuals, accounting for around 2.89% of the total population, currently owning cryptocurrency. The presence of 130 crypto ATMs further emphasizes the country's growing interest in cryptocurrencies. Moreover, a study conducted in July 2022 ranked Georgia as the fourth most crypto-ready nation globally, underscoring its potential as a favorable environment for crypto-related activities.
By implementing robust regulations for VASPs and introducing comprehensive cryptocurrency legislation, Georgia aims to strengthen its anti-money laundering measures, ensure compliance with sanctions, and foster a secure and transparent environment for digital asset trading. These initiatives will not only protect the financial system from illicit activities but also contribute to positioning Georgia as a leading global player in the crypto industry.
Anti-Money Laundering in Georgia
In Georgia, efforts to combat money laundering and terrorist financing are primarily governed by the Law of Georgia on Combating Money Laundering and Terrorism Financing. This law establishes the legal framework for AML activities in the country.
The Financial Monitoring Service of Georgia (FMS) is the primary government agency responsible for overseeing and enforcing AML regulations in the country. The FMS is responsible for receiving and analyzing reports on suspicious transactions, conducting investigations, and cooperating with international organizations and other countries in AML efforts.
The AML regime in Georgia requires various entities, such as financial institutions, designated non-financial businesses and professions (DNFBPs), and virtual currency exchanges, to implement AML measures. These measures include customer due diligence (identifying and verifying the identity of customers), record-keeping, reporting suspicious transactions, and implementing internal controls and risk management systems.
Furthermore, Georgia is an active member of international organizations working to combat money laundering, such as the Financial Action Task Force (FATF) and the Council of Europe's anti-money laundering body (MONEYVAL). Through its participation in these organizations, Georgia aligns its AML efforts with international standards and best practices.