MP Davit Onoprishvili’s legislative initiative to amend the Georgian law, “Facilitating the Prevention of Illicit Income Legalization,” was registered in the Parliament of Georgia in early March 2014. The bill envisages transferring Georgia’s Financial Monitoring Service from under the management of the National Bank to the Ministry of Finance. The service’s main function is to discover illegal income and prevent attempts to legalize it. See our blog post for more background on the safeguards that ensure the independence of the Financial Monitoring Service.

On 20th March, before the first hearing in Parliament, the draft law was amended to put the Financial Monitoring Service under the governmental management rather than under the Ministry of Finance. But this change does not alter the substance of this draft law - which is to move the FMS to under the control of the executive. We believe this proposed arrangement will not guarantee the operational independence of the FMS.

1. Financial Monitoring, International Experience

During a meeting of the Parliamentary Committee on Budget and Finance on March 19, members of the Committee referred to other countries where the Finance Intelligence Units (FIU) are able to work effectively even though they are managed by the executive. We believe that this does not justify transferring the management of the Georgian Financial Monitoring Service from the National Bank to the government, for the following reasons:

1. A system of checks and balances, in which political institutions control each other, while present and active in most European countries, is either absent or quite weak in Georgia. In addition, the judiciary in many European countries enjoy a higher degree of independence than in Georgia.  Therefore, we believe the executive should not have access to confidential banking details, the disclosure of which may be required in order to comply with anti-money laundering legislation.
2. When it was set up in 2003, following consultations with MONEYVAL and the International Monetary Fund, the Georgian FMS was put under the management of the National Bank precisely to offset the effect of Georgia’s weak institutions. What has changed since 2003 is the government’s efficiency but not the system of checks and balances, which is almost as weak as in 2003. Therefore, we believe the time has not come for the Financial Monitoring Service to be handed over to the executive.
3. We were unable to find a single international example of the management of a Financial Intelligence Unit being handed over to the government from the National Bank (as is proposed by this draft law). This handover is even more controversial considering that, as noted in our previous publication, despite a few problematic issues, MONEYVAL’s (Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism) 2012 assessment of the Financial Monitoring Service was for the most part positive, and highlighted the progress that had been made in a number of areas compared to their previous assessment in 2007.

2. Recommendations:

Transparency International Georgia believes that:  

• The FMS should remain an independent body with the National Bank of Georgia: in light of prevailing international practice.  Another option is sharing responsibility for anti-money laundering measures between the FMS and the executive, providing that the FMS remains an independent body within the National Bank of Georgia. There are a number of countries, e.g., Poland, Greece and Romania,  where responsibility for anti-money laundering measures and financing of terrorism is shared between the FIU under the central bank and the government or resides solely with the central bank as in Italy.

• The Parliament of Georgia should give consideration to the reasons why — following consultations with the international organizations — the FMS was originally put under the National Bank of Georgia.