The Statutory Content of Risk Assessment
The Georgian statutory content of a general "risk assessment" page comes from the law on the prevention of money laundering and terrorism financing: the law regulates the assessment system itself, the national context, the external factor and the detection indicator. At the same time, international voluntary risk-management frameworks and generic corporate risk models are non-Georgian, voluntary guidance and cannot serve as the foundation of this page — the page is carried by the Georgian statutory, risk-based regime.
The Assessment and Management System
An accountable person must, considering the nature and volume of its activity, introduce an effective system for the assessment and management of money-laundering and terrorism-financing risks. It must assess and record, with appropriate periodicity, the risks connected with its activity, and in the case of a head enterprise — also the risks existing at group level: on the basis of the client and beneficial owner, the essence of their activity and the jurisdiction of location, the product, service or delivery channel, the transaction and other risk factors. Before introducing a new technology, product or service, or before another material change in business practice, the accountable person must assess the risks connected with the change. Client-related risks and the client's risk level are determined before concluding a one-off transaction and before establishing a business relationship, and also periodically — during the relationship and upon changes in material circumstances. Effective measures are carried out to manage and reduce the identified risks, and upon the supervisory body's request the accountable person must demonstrate that it assessed the risks properly and managed them effectively.
The National Context
A company's assessment does not happen in a vacuum. The Government of Georgia approves the national risk assessment report and action plan on money-laundering and terrorism-financing risks upon the submission of a standing inter-agency commission. The document's aims are the detection, analysis and assessment of risks at national level and by sector, the implementation of necessary legislative and institutional measures, and the promotion of priority allocation of state resources. The national report and plan are public and are updated as needed, but no less than once every 3 years. In assessing risks and implementing management measures, the accountable person must take into account the information in the national report and action plan, as well as the instructions and recommendations of the service and the supervisory body, and must reflect the results of the national report in its own system.
The External Factor — High-Risk Jurisdictions
A high-risk jurisdiction is a country or territory where the anti-money-laundering or counter-terrorism-financing system has serious deficiencies. The National Bank approves the list of such jurisdictions upon the service's submission and amends it as needed. Toward a person located in such a jurisdiction, the accountable person applies enhanced preventive measures proportional to the risk, the business relationship and the transaction. Enhanced measures also apply where the client is a legal person registered in such a jurisdiction or is managed or operated from there, where the client's registration or actual residence is there, or where the transaction is concluded through a financial institution located in a high-risk jurisdiction. At the same time, the law allows proportion: enhanced measures are not mandatory toward a citizen of Georgia or a foreigner with a residence permit here, nor where the institution located there is a subsidiary of a Georgian-registered institution and risk management at group level is ensured.
The Detection Indicator — the Unusual Transaction
The operational instrument of risk detection is the concept of the unusual transaction: a complex, unusually large transaction or an unusual combination of transactions with no apparent economic or lawful purpose. The accountable person must study such a transaction, its purpose and grounds, and where necessary conduct enhanced monitoring to detect a suspicious transaction. Upon the supervisory body's request it must demonstrate that it studied the transaction and took reasonable measures. It is this concept that links the assessment system to operational reality: the risk factors described on paper are measured at shop-floor level by the signs of unusual transactions.
Frequently Asked Questions
Below we summarise the questions that arise most often in practice on this topic.
How often is the risk assessment performed?
With appropriate periodicity, and also before a one-off transaction, before establishing a relationship and upon material changes; a separate assessment precedes the launch of a new product.
What is the role of the national report?
It is the context of the company's assessment — its results must be reflected in the accountable person's own system; the document is renewed no less than once every 3 years.
When do enhanced measures activate by jurisdiction?
When a person's location, registration, management or the executing institution connects to a high-risk jurisdiction — the list is approved by the National Bank.
What is an unusual transaction?
A complex, unusually large transaction or unusual combination without an apparent economic or lawful purpose — it triggers the duty to study.
How We Help on Legal.ge
Our team will help you introduce the risk assessment and management system, compile the catalogue of risk factors, reflect the national report's results in your own system and write procedures for studying unusual transactions. Contact us on Legal.ge — we will build a risk assessment system proportionate to the law's requirements.