Financial Monitoring Service may change hands
13 March, 2014
Financial Monitoring Service may change hands
The supervisory body of the Financial Monitoring Service may change hands. Davit Onoprishvili, Head of the Finance and Budget Committee of the Parliament, initiated a bill on the removal of the financial monitoring service handling anti-money laundering issues currently operating under to the central bank and subordinating it to Ministry of Finance of Georgia. Some economic analysts disapprove of the initiative as it weakens the central bank. Others believe that the financial monitoring service implies control levers on secret information
and that it would be better for it to be an independent body.
“Our company has been reporting to NBG and FMS on suspicious money-laundering transactions at the Georgian Stock Exchange for many years, but they never reacted while they immediately came down on Cartu Bank under false accusations. FSM has some control levers on companies and persons, therefore it should be completely independent from either the NBG or MOF,” Muller said.  “It would be much more reasonable to staff the NBG and FMS with qualified personnel and make them healthier and more effective, rather than weaken the NBG structure,” Eliava states. She also discerns risks of easier leakage of secret information or its mishandling once FMS will be under the control of MOF. As a matter of fact, NBG was  infamous in mishandling confidential information, analysts admit. Ditrikh Muller, co-founder of the Georgian Investment Group +, exemplifies the case of Cartu Bank, owned by the family of now ex-Prime Minister  Bidzina Ivanishvili who went in the opposition in 2011. As revenge,  the authorities then falsely accused Cartu Bank of  money-laundering and inflicted huge losses via NBG and FMS. “I would not approve such deprivation of functions for NBG, because the financial market of Georgia is really small and a mega-regulator is the best solution for its regulation and coordination,” Eliava said in an interview with Georgian Journal. “The redistribution of its regulation to several state structures will lead to chaos which will affect the stability of the Georgian financial sector and expose it to internal and external shocks more.” Moreover, she believes it is a squander of the state budget to finance different regulatory bodies of the financial market while NBG funded all of them under its umbrella. Economic analysts think the initiative on the FMS’ change of hands bespeaks of a latent attempt at control which undermines the NBG. They presume that ineffective activity of the NBG made the authorities to decide to get more control at its hands. Lia Eliava, a financial market analyst, disapproves of the idea to remove FMS from the NBG, which already lost control over the insurance sector and very likely will lose control on the securities market too in the near future, as the related bill is already under revision.The Financial Monitoring Service (FMS) is a legal entity of public law or an independent body, set up with and financed by the NBG. It is accountable to the government, while businesses related to the financial sector are responsible to send information on transactions higher than GEL 30 000 as well as reports on suspicious deals to the FMS. Nodar Khaduri, Minister of Finance, said the initiative requires an in-depth review and the government will only lay out its final decision after proper consultations with NBG. Giorgi Kadagidze, Governor of National Bank of Georgia (NBG), is against the alienation of its financial monitoring service to the MOF. As he reported to the media on 7 March, this change of hands cannot bring the results that will have a positive impact on either the economy or the banking sector. However, he restrained himself from further elaboration on the issue until he discusses it with the initiators of the idea and MPs to persuade them of the negative aftermath of such a decision.
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