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2005: International Narcotics Control Strategy Report: Money Laundering and Financial Crimes – Georgia Review

Georgia is not considered an important regional financial center. Prior to 2003, the international community was concerned regarding the Government of Georgia’s (GOG) lack of an anti-money laundering regime. In Georgia, the sources of laundered money are primarily corruption, financial crimes, and smuggling, rather than narcotics-related proceeds. Also prior to 2003, smuggling of goods across international borders was one of the country’s most serious problems, with thriving black markets in Ergneti (near the uncontrolled territory of South Ossetia), Red Bridge (on the border with Azerbaijan), and Abkhazia (breakaway region bordering Russia on the Black Sea coast). At the time, law enforcement officials provided protection to smugglers, instead of prosecuting them, helping to maintain the shadow economy that made up to 90 percent of Georgia’s economic activity (based on an estimate by the Transnational Crime and Corruption Center). The new government that came into power in November 2003 placed a stronger emphasis on financial crimes and terrorist financing.

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2003: International Narcotics Control Strategy Report: Money Laundering and Financial Crimes – Georgia Review

Although Georgia is not considered an important regional financial center, in past years the international community has raised concerns regarding the Government of Georgia’s (GOG) lack of an anti-money laundering regime. In Georgia, the sources of laundered money are primarily corruption, financial crimes and smuggling, rather than narcotics-related proceeds. Smuggling of goods across international borders is one of the country’s most serious problems, given the existence of thriving black markets in Ergneti (near the uncontrolled territory of South Ossetia), Red Bridge (on the border with Azerbaijan), and Abkhazia (breakaway region bordering Russia on the Black Sea coast). Law enforcement officials provide protection to smugglers, instead of prosecuting them, helping maintain the shadow economy which makes up 90 percent of Georgia’s economic activity (based on an estimate by the Transnational Crime and Corruption Center). A new government came into power in November 2003. The new Administration has launched several investigations relating to financial misdeeds undertaken by former members of the Georgian government.
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2002: International Narcotics Control Strategy Report: Money Laundering and Financial Crimes – Georgia Review

Georgia has a small economy and is not a regional financial center. The scope of money laundering in Georgia involves small-scale schemes with proceeds from various illegal activities. Contraband, which is a large part of the “shadow economy” in Georgia, generates substantial revenues. Estimates of the “shadow economy” are in the range of 60 percent of GDP. Reportedly, some commercial banks have become involved in laundering funds generated by the smuggling of alcohol and cigarettes, but these proceeds are generally held in dollars outside the banking system. Most financial transactions in Georgia are conducted in cash. Only between three to five percent of the population currently maintain a personal bank account, as following independence there was a mushrooming of banking institutions, the majority of which collapsed, causing bank customers serious losses. Corruption also remains an issue in Georgia. Overall, Georgia is very vulnerable to money laundering, as there are serious deficiencies in the anti-money laundering system in all areas—legal, financial and law enforcement.
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