CoE MONEYVAL Releases Second Follow-Up Report

On May 7, the Council of Europe’s Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL) released its second Enhanced Follow-up Report and Technical Compliance Re-Rating on Georgia, examining the country’s progress in addressing the technical compliance deficiencies identified in the September 2020 assessment and subsequent follow-up reports on its measures to combat money laundering and terrorist financing. As a result of the follow-up, the rating has improved on one recommendation and remained unchanged on eight others.

MONEYVAL is a permanent monitoring body of the Council of Europe, which works on evaluating compliance with international standards and their implementation, in the direction of combating money laundering and terrorism financing. Its previous reports on Georgia were released in 2020, and 2022.

According to the document, Georgia had requested a reassessment of nine of the forty recommendations contained in its comprehensive 2020 Mutual Evaluation Report (in particular R.1, R.6, R.7, R.12, R.15, R.22, R.23, R.28, R.35).

For the remaining recommendations rated as partially compliant (PC) (R.24, R.25) or non-compliant (NC) (R.8), the authorities did not request a re-rating. For now, Georgia is rated “compliant” on seven recommendations, “largely compliant” on 22 recommendations, “partially compliant” on ten recommendations, and “non-compliant” on one recommendation.

When it comes to the recommendation number twelve on politically exposed persons, Georgia’s rating has improved from “partially compliant” to “compliant.” As for the other recommendations, the ratings remain unchanged.

Rating on the recommendation one regarding assessing risks and applying of a risk-based approach has remained the same. “Deficiencies identified in the identification and assessment of ML/TF [money laundering/terrorist financing] risks by Georgia, and application of exemptions have a bearing on the rating,” the authors say.

Speaking of the unchanged rating on recommendation number six which is about targeted financial sanctions related to terrorism and terrorist financing, the report recognizes that Georgia has made a “serious effort” in boosting its compliance with the UN instruments on freezing of terrorist assets. However, there are still some notable weaknesses in the system, particularly concerning the implementation of Targeted Financial Sanctions (TFS) outlined in UNSCR 1373. These include requirements for individuals and organizations to freeze the assets of individuals designated by both the UN and domestic authorities, ensuring protection for legitimate third parties, and promptly communicating designations. In a similar fashion, the rating on recommendation number seven on targeted financial sanctions related to terrorism and terrorist financing remained the same.

The document suggests that Georgia has made significant efforts to follow recommendation number 15 guidelines, focusing on adopting new technologies and regulating VASP [virtual asset service providers] activities. However, there are still some issues, such as applying and adequacy of sanctions and implementing preventive measures and international cooperation.

In its justification not to change the rating on the recommendation number 22 regarding the designated non-financial business and professions (DNFBPs), the MONEYVAL identifies several shortcomings, including the fact that there are no anti-money laundering/combating of terrorism financing requirements for real estate agents and trust and service company providers.

Among other issues, real estate agents and TCSPs lack AML/CFT requirements, which is seen as a moderate issue, impacting the recommendation number 23 compliance.

As for the recommendation number 28, the report reiterates that there is no regulation and supervision of real estate agents trust and service company providers. “There are no, or insufficient, provisions in place to prevent associates of criminals from owning or controlling casinos and sanction are not always available in line with R.35 for failure to comply with AML/CFT requirements. R.28 remains rated partially compliant.”

Recommendation number 35 remained unchanged, including because there was no evidence that civil or administrative sanctions (other than suspension) could be applied to leasing companies and lawyers, and no evidence that appropriate sanctions could be applied to notaries.

“Georgia will remain in enhanced follow-up and will continue to report back to MONEYVAL on progress to strengthen its implementation of AML/CFT measures. Georgia is expected to report back within one year’s time, in December 2024,” the report notes.