Georgia

Sanctions

No

FATF AML Deficient List

No

Higher Risk

US Dept of State Money Laundering Assessment
Not on EU White list equivalent jurisdictions
Failed States Index (Political Issues)(Average Score)

Medium Risk

Non - Compliance with FATF 40 + 9 Recommendations
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)

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ANTI-MONEY LAUNDERING

 

FATF Status

Georgia is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

 

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Georgia was undertaken by the Financial Action Task Force (FATF) in 2012. According to that Evaluation, Georgia was deemed Compliant for 3 and Largely Compliant for 21 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 2 of the 6 Core Recommendations.

 

US Department of State Money Laundering assessment (INCSR)

Georgia is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

OVERVIEW

 

Much of the illegal income in Georgia derives from banking fraud, cybercrime, and misappropriation of funds.  Although authorities have started to conduct parallel financial investigations in drug cases, there is little hard evidence to suggest a significant volume of illegal narcotics proceeds is laundered through the formal financial system.  However, because Georgia is located in a significant and well-established trafficking corridor, bulk cash smuggling and money laundering are highly likely.  The Russian-occupied territories of South Ossetia and Abkhazia fall outside the control of Georgian authorities and are not subject to monitoring.

 

Georgian prosecutors and law enforcement authorities should put more emphasis on pursuing links between organized crime and money laundering.  Georgian law enforcement should develop a task-force approach to facilitate greater exchange of information and cooperation among the relevant bodies, pulling together intelligence and resources to attack financial crimes.  Georgia also should take steps to supervise its gaming industry. 

 

 

SANCTIONS

There are no international sanctions currently in force against this country.

 

BRIBERY & CORRUPTION

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           58

World Governance Indicator – Control of Corruption             77

Corruption presents a low business risk for companies looking to invest in Georgia. Overall, the country has had success in reducing corruption. Increasing government transparency and efficiency have led to Georgia becoming one of the easiest places in the world to start a business and to deal with licenses and permits. Georgia has made great progress in fighting visible low-level corruption, but high-level corruption by public officials remains a problem. Georgian anti-corruption legislation is largely contained within the Criminal Code which provides for a robust legislative framework for curbing corruption in the country, even though enforcement, which has been hampered by a lack of independence of law enforcement agencies, still lacks in some sectors. Deficiencies, for instance, exist in the judiciary and in public procurement. Georgian law does not make an exception for facilitation payments, so these should be assumed to be prohibited. Gifts are not commonly expected in everyday business transactions in Georgia. For further information - GAN Integrity Business Anti-Corruption Portal

ECONOMY

Georgia's main economic activities include cultivation of agricultural products such as grapes, citrus fruits, and hazelnuts; mining of manganese, copper, and gold; and producing alcoholic and non-alcoholic beverages, metals, machinery, and chemicals in small-scale industries. The country imports nearly all of its needed supplies of natural gas and oil products. It has sizeable hydropower capacity that now provides most of its energy needs.

 

Georgia has overcome the chronic energy shortages and gas supply interruptions of the past by renovating hydropower plants and by increasingly relying on natural gas imports from Azerbaijan instead of from Russia. Construction of the Baku-T'bilisi-Ceyhan oil pipeline, the South Caucasus gas pipeline, and the Kars-Akhalkalaki railroad are part of a strategy to capitalize on Georgia's strategic location between Europe and Asia and develop its role as a transit point for gas, oil, and other goods. The expansion of the South Caucasus pipeline, as part of the Shah Deniz II Southern Gas Corridor project, will result in a $2 billion foreign investment in Georgia, the largest ever in the country. Gas from Shah Deniz II is expected to begin flowing in 2019.

 

Georgia's economy sustained GDP growth of more than 10% in 2006-07, based on strong inflows of foreign investment and robust government spending. However, GDP growth slowed following the August 2008 conflict with Russia, and sunk to negative 4% in 2009 as foreign direct investment and workers' remittances declined in the wake of the global financial crisis. The economy rebounded in 2010-13, but FDI inflows, the engine of Georgian economic growth prior to the 2008 conflict, have not recovered fully. Unemployment has also remained high.

 

The country is pinning its hopes for renewed growth on a determined effort to continue to liberalize the economy by reducing regulation, taxes, and corruption in order to attract foreign investment, with a focus on hydropower, agriculture, tourism, and textiles production. Georgia has historically suffered from a chronic failure to collect tax revenues; however, since 2004 the government has simplified the tax code, improved tax administration, increased tax enforcement, and cracked down on petty corruption, leading to higher revenues. The government has received high marks from the World Bank for its anti-corruption efforts. Since 2012, the Georgian Dream-led government has continued the previous administration's low-regulation, low-tax, free market policies, while modestly increasing social spending, strengthening anti-trust policy, and amending the labour code to comply with International Labour Standards. The government published its 2020 Economic Development Strategy in early 2014 and former Prime Minister Bidzina IVANISHVILI launched the Georgian Co-Investment Fund, a $6 billion private equity fund that will invest in tourism, agriculture, logistics, energy, infrastructure, and manufacturing. In mid-2014, Georgia signed an association agreement with the EU, paving the way to free trade and visa-free travel.

 

Agriculture - products:

citrus, grapes, tea, hazelnuts, vegetables; livestock

Industries:

steel, machine tools, electrical appliances, mining (manganese, copper, gold), chemicals, wood products, wine

 

Exports - commodities:

vehicles, ferro-alloys, fertilizers, nuts, scrap metal, gold, copper ores

Exports - partners:

Azerbaijan 10.9%, Bulgaria 9.7%, Turkey 8.4%, Armenia 8.2%, Russia 7.4%, China 5.7%, US 4.7%, Uzbekistan 4.4% (2015)

Imports - commodities:

fuels, vehicles, machinery and parts, grain and other foods, pharmaceuticals

Imports - partners:

Turkey 17.2%, Russia 8.1%, China 7.6%, Azerbaijan 7%, Ireland 5.9%, Ukraine 5.9%, Germany 5.6% (2015)

Investment Climate - US State Department

Georgia is located at the crossroads of Western Asia and Eastern Europe. Since the Rose Revolution, Georgia has made sweeping economic reforms, moving from a near-failed state in 2003, to a relatively well-functioning market economy in 2015. Through dramatic police and institutional reforms, the government has mostly eradicated low-level corruption. According to a 2015 Georgia Messenger poll, only two percent of the population reported that they had to pay a bribe in the previous year to receive a government service or decision. In 2005, the government eliminated 84 percent of licensing requirements, and Georgia ranks 15th in the 2015 World Bank’s Ease of Doing Business index. Fiscal and monetary policy are focused on low deficits, low inflation, and a floating real exchange rate, although the latter has been affected by regional developments, including sanctions on Russia and other external factors such as a stronger dollar and weaker regional economies.

 

In early 2014, the government published its medium-term economic strategy Georgia 2020, which outlines Georgia’s economic policy priorities. It stresses the government’s commitment to business friendly policies such as low taxes, but also pledges to invest in human capital and to strive for inclusive growth across the country, not just in Tbilisi. The strategy also emphasizes Georgia’s geographic potential as a trade and logistics hub along the New Silk Road linking Asia and Europe via the Caucasus.

 

In June 2014, Georgia signed an Association Agreement (AA) and Deep and Comprehensive Free Trade Area (DCFTA) with the European Union. In 2012, following President Obama’s meeting with former Georgian President Mikheil Saakashvili, the U.S. and Georgia established a High-Level Dialogue on Trade and Investment to identify ways of increasing bilateral trade and investment. The U.S. and Georgia also discussed economic cooperation within the bilateral Strategic Partnership Commission’s Economic Working Group. Both countries signed a Bilateral Investment Treaty in 1994, and Georgia is eligible to export many products duty-free to the U.S. under the Generalized System of Preferences (GSP) program.

 

Under Prime Minister Giorgi Kvirikashvili, the current government has carried on the previous government’s low-regulation, low-tax, free market policies, while increasing social spending, strengthening anti-trust policy, amending the labor code to strengthen protections for workers, and consulting the private sector in the development of sound economic policies.

 

Companies in past years reported occasional problems arising from a lack of judicial independence, lack of intellectual property rights enforcement, lack of effective anti-trust policies, selective enforcement of economic laws, and difficulties resolving disputes over property rights. Georgia’s government continues to address these issues and, despite remaining challenges, Georgia stands far ahead of its post-Soviet peers as a good place to do business.

 

Country Links
National Bank of Georgia
Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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