Witch hunt on offshore stakeholders?
13 February, 2014
Witch hunt on offshore stakeholders?
The Security Council of Georgia has been asked for vigilance on offshore stakeholders’ high presence in leading Georgian banks. The Georgian newspaper Banks and Finances (B&F) believes this poses risks to stability of the Georgian banking system and the security of the national economy, and calls for more transparency regarding bank ownership. Sector pundits counter that the state has no mandate to track down banks’ offshore owners if banks do not violate the law.
In its statement to the Security
Council, B&F underlined that the banking system is a pillar of economic security and thus a part of national security too: “Therefore it is very important to know who owns Georgian banks that create this system. The obligation of publicizing stakeholders holding more than 1% in banks is not sufficient to make the issue of bank owners transparent. We do not know all the owners of Bank of Georgia (BOG), TBC Bank, Liberty Bank, etc. The point is that in the Georgian banking system - and likewise the entire Georgian business - it became a tendency to register important volumes of shares or control packages in offshore companies and figureheads. This frequently hides real owners of banks – representatives of power or some sort of mafia business groups affiliated with the power.”
B&F also recalled that some banks during the previous administration were used as a kind of punishing tool for business, and participated in illegal property and business seizure cases. More than that, high ranking officials from the Prosecutors’ Office enjoyed direct access to banking accounts of “interesting” clients through the online system.
“Confidentiality never means ignoring national security in the banking business,” B&F stated, and asked the Security Council to pay attention to the problem.
In her response released on 7 February, the Secretary of the Security Council of Georgia, Irina Imerlishvili, shared the concern of B&F “not as a Secretary of the Security Council but as a citizen of Georgia” and advised the publication to appeal to Georgian government instead. “The issue is beyond the competence of the Security Council,” Imerlishvili stated.
Zurab Gvasalia, Head of the Association of Georgian Banks, finds the B&F concern spurious since banks do not violate any law. Besides, National Bank of Georgia (NBG) has full information on each beneficiary of banks and is capable of responding to any question if the Security Council takes an interest.
Ditrikh Muller, a co-founder of Georgian Investment Group+, is concerned that the publication dares to make public speculations on banks without evidence of illegal activity, and the Security Council gives a silent consent by “joining the concern”. He believes the Security Council has absolutely nothing to do with the confidential information on banks, even if banks violate the law, for this falls within the purview of law enforcement.
“Disclosure of confidential information by offshore owners and the likes can be required by the state only if there is a warranted suspicion that the bank is involved in illegal activity,” Muller said. “Even in this case there are instances like the Prosecutors Office, anti-smuggling and anti-money laundering structures that should handle the issue without much noise. Otherwise, if the state starts a witch hunt on offshore companies it will ruin the investment image of the country. B&F did not put out any confirmed evidence of the alleged illegal activity of banks, and identified banks can sue this publication for slander. It will affect the involved banking business and scare investors off. BOG is listed at London Stock Exchange and after this speculation BOG shares value may plummet.”
According to him, to insure stability of the banking system and national economy, government has to make banking regulation stronger and prohibit non-profile business activity that will hamper banks from being competitors for their client businesses - this is the biggest challenge to Georgian business at the moment. Also, finally making the law on competition valid will free the market of monopolists.

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