The Supervisory Perimeter and Its Legal Basis
A bank compliance audit in Georgia is never a purely internal exercise: it is measured against the mandatory expectations that the National Bank articulates. Article 48 of the Organic Law of Georgia on the National Bank grants the National Bank full authority to supervise the activities of commercial banks, microbanks, banking groups, non-bank deposit institutions, microfinance organizations, independent registrars of securities, brokerage companies other than insurance brokers, the stock exchange, the central and specialized depositories, asset management companies, accountable enterprises, the pension fund, currency exchange points, investment funds, authorized securitization special-purpose entities, payment system operators and payment service providers, the credit information bureau, loan-granting entities and virtual asset service providers.
The National Bank may issue resolutions and orders, give written instructions, impose additional requirements and restrictions, and apply supervisory measures and sanctions. Even at market entry it scrutinizes sources and structures: it may refuse registration, licensing, authorization or the acquisition of a significant share if such a step could threaten the stability of the financial sector, conflict with a requirement of an international organization's mandatory decision or recommendation, breach an agreement between Georgia and a foreign state, or rest on incomplete information about the origin of the funds needed to meet minimum capital requirements.
How Inspections and Audits Are Conducted
Article 49 of the Organic Law frames supervision broadly: issuance and revocation of licenses, including a conditional license for a commercial bank, inspection and regulation, written instructions, additional requirements and restrictions, supervisory measures and sanctions.
Decisive for audit purposes is the power to inspect a commercial bank, a microbank and a non-bank deposit institution, to examine their subsidiaries, to audit accounting documents, components of financial reports and other materials, and to receive any information within its competence. Where signs of a crime emerge, the materials go to the relevant authorities.
The National Bank also reviews rehabilitation plans submitted by commercial banks and may demand changes, and it appoints the temporary administrator and the liquidator, to whom the full powers of all bank organs, including the shareholders' general meeting, pass.
The Catalogue of Sanctions and Supervisory Measures
The sanctioning toolkit that may follow audit findings is described in detail. The National Bank may increase a commercial bank's, microbank's or non-bank deposit institution's mandatory reserve requirements, suspend its active operations, prohibit the distribution of profit, the accrual and payment of dividends, salary increases and the payment of bonuses and other similar remuneration, require the attraction of additional capital, and raise the norms of reserves for possible losses on assets and contingent liabilities.
At the level of governance, the National Bank may suspend an administrator's right of signature, impose monetary fines on administrators and demand their dismissal, while the institution itself may be fined and may have its license revoked. Fine amounts are directed to the state budget of Georgia, and their size and imposition procedure are set by a normative act of the National Bank. In exceptional cases conditional consent may be given to an administrator's appointment without fully completed documentation, with a deadline of no more than 6 months for its submission.
A legally important detail: a commercial bank, microbank or non-bank deposit institution may be declared insolvent or bankrupt only by decision of the National Bank, under a procedure it determines itself.
Anti-Money-Laundering Control and the Risk-Based Approach
Article 48 of the Organic Law sets out, as a separate block, the powers connected with facilitating the prevention of money laundering and the financing of terrorism. In this direction the National Bank may request and receive from a supervised entity information about the sources of the origin of its capital, its ownership structure, and the direct and beneficial owners of a significant share. Where legislation is violated, it may suspend or restrict certain operations, prohibit the distribution of profit and the accrual and payment of dividends, salary increases and bonuses, impose a monetary fine, revoke registration, authorization or recognition, and take away the license.
Supervision in this field proceeds on the basis of a risk-based approach: attention is distributed according to each entity's risk profile. The National Bank cooperates with local supervisory and law-enforcement bodies, supplies entities with lists of persons whose activities contain money laundering or terrorism financing risk, and imposes sanctions where requested information is not submitted in time or is submitted incompletely. Information about imposed sanctions is published on the National Bank's official website.
A separate emphasis is tax transparency: the National Bank also checks compliance with the requirements defined by the intergovernmental agreement on improving international tax obligations and foreign account tax compliance (FATCA), so the audit is not exhausted by banking norms alone.
Frequently Asked Questions About Bank Compliance Audits
Who conducts bank compliance audits in Georgia?
The National Bank. Under Articles 48 and 49 of the Organic Law it supervises commercial banks, microbanks and non-bank deposit institutions, examines their subsidiaries and audits accounting documents, financial report components and other materials.
Which measures can the National Bank apply when violations are found?
Higher mandatory reserve requirements, suspension of active operations, prohibition of profit distribution and dividends, additional capital demands, suspension of administrators' right of signature, monetary fines, dismissal demands and license revocation; fines go to the state budget.
What happens if a document cannot be delivered to the bank?
The President or Vice-President may then decide on public dissemination: the document is placed on the official website and deemed delivered on the 15th working day after dissemination.
Is National Bank information passed to the bank's auditor?
Yes: the National Bank may provide information connected with the entity, including confidential information, to its valuer and auditor, who are obliged to protect its confidentiality.
How We Help on Legal.ge
Our team helps banks and financial organizations prepare for the National Bank's requirements: we analyse the applicable norms, assess the documentation of capital origin and ownership structure, prepare files for inspections and assist with rehabilitation plans. If you want to meet regulatory risks from a pre-calculated position, contact us — a compliance audit begins exactly there.