The Georgian authorities are being urged to strengthen measures to better understand the risks of trade-based money laundering (TBML), including its use in the financing of terrorism in a new report published by the Council of Europe’s anti-money laundering body.
The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) says that while Georgia is increasingly recognising money laundering and terrorism financing risks, it needs to strengthen the practical application of its anti-money laundering and counter financing of terrorism (AML/CFT) measures.
Better understanding needed
The report acknowledges that Georgia displays a fair understanding of many of its money laundering and terrorism financing risks but the authorities particularly need to better understand several risks.
These include those posed by TBML, the use of cash in the economy and the roles played by casinos, the real estate sector, free trade zones and non-profit organisations in money laundering and terrorism financing.
Trade-based terrorism financing
In recent years, Georgia has made some significant improvements to its anti-money
AML/CFT system, including developing the National Risk Assessment (NRA) but MONEYVAL says this assessment is incomplete in some areas.
The NRA contemplates potential terrorism financing abuse of the Georgian financial system but does not, for example, fully assess all forms of potential risks in this area, especially trade-based terrorism financing and the origin and destination of financial flows.
Free zones and shelf companies
The NRA does not systemically consider the extent to which some of the features of the Georgian system, including special trade companies, international trading companies and free zone companies may create vulnerabilities according to MONEYVAL’s report.
It says that whilst the NRA report recognises vulnerabilities including the use of shelf companies and nominees (front persons) as well as an absence of any requirement for minimum share capital, it merely describes them without analysing their impact and consequences.
The report concludes by calling on Georgia to make more efforts to use financial intelligence to detect and investigate money laundering and to strengthen supervision and regulation of high-risk non-financial sectors.
The Council of Europe’s report, Anti-money laundering and counter-terrorist financing measures, Georgia, can be found here.
Categories: Trade Based Financial crimes News