Georgia -- Travel Rule Implementation Regulatory Overview

Georgia has adopted and implemented the FATF Travel Rule as part of its broader framework for regulating Virtual Asset Service Providers (VASPs) and combating money laundering and terrorist financing (AML/CFT).

Here's a breakdown of the implementation in Georgia:

Status: Adopted and Effective

Georgia has transposed the FATF recommendations, including the Travel Rule, into its national legislation. The primary regulatory body overseeing VASPs and AML/CFT compliance is the National Bank of Georgia (NBG).

Legislation and Guidance

The key legislative acts and regulations governing VASPs and the Travel Rule in Georgia are:

1. Law of Georgia on Facilitating the Suppression of Money Laundering and the Financing of Terrorism (AML/CFT Law): This foundational law was amended to include VASPs as obligated entities.
   • While a direct English URL for the specific amended law might be difficult to provide from an official government portal, the Law can be found in Georgian on legislations.gov.ge.
2. National Bank of Georgia Resolution No. 126/04 of December 29, 2022, "On Approval of the Rules for Regulation of Virtual Asset Service Providers" (NBG VASP Rules): This is the core regulatory document that details the licensing, operational requirements, and AML/CFT obligations for VASPs, including the Travel Rule.
   • This resolution is the practical implementation of the AML/CFT Law amendments regarding VASPs.
   • A direct, stable English URL to the NBG Resolution No. 126/04 is often not readily available from the NBG's website, as official translations are not always published for every regulatory act. However, reputable legal firms and compliance experts widely refer to and analyze this document.
   • You can often find references to it on the NBG's official website under their regulatory acts or news section, typically in Georgian.
   • General NBG press releases on VASP regulation often cite this resolution: NBG News & Press Releases (You may need to search for "virtual assets" or "VASP" within their news section).

Effective Date

• The amendments to Georgia's AML/CFT Law bringing VASPs under its scope became effective earlier.
• The NBG VASP Rules (Resolution No. 126/04), which fully detail the Travel Rule obligations, became effective on March 1, 2023. From this date, VASPs operating in Georgia were required to be licensed by the NBG and adhere to all regulatory requirements, including the Travel Rule.

Threshold Amounts

The NBG VASP Rules stipulate the following regarding thresholds for the Travel Rule:

• All Transactions: For all virtual asset transfers, regardless of amount, VASPs are required to collect and retain certain basic transaction information (e.g., transaction ID, amount, timestamp, wallet addresses).
• 1,000 GEL (Georgian Lari) Threshold: For virtual asset transfers exceeding the equivalent of 1,000 GEL, VASPs are required to collect and transmit full originator and beneficiary information (as per FATF Recommendation 16). This applies to both domestic and cross-border transactions.
  • Note: 1,000 GEL is approximately $370-380 USD as of late 2023/early 2024, which is significantly lower than the FATF's suggested $1,000/€1,000 threshold for inter-VASP information sharing, making Georgia's threshold more stringent.

Which VASPs Are Covered

The NBG VASP Rules broadly define and cover a range of Virtual Asset Service Providers (VASPs). An entity is considered a VASP if it conducts, on behalf of another natural or legal person, one or more of the following activities or operations:

1. Exchange between virtual assets and fiat currencies.
2. Exchange between one or more forms of virtual assets.
3. Transfer of virtual assets.
4. Safekeeping and/or administration of virtual assets or instruments enabling control over virtual assets.
5. Participation in and provision of financial services related to an issuer's offer and/or sale of a virtual asset.

This comprehensive definition ensures that most entities dealing with virtual assets, from exchanges to custody providers, are regulated and subject to the Travel Rule.

Technical Implementation Requirements

The NBG VASP Rules require VASPs to implement robust systems and procedures to comply with the Travel Rule. While the rules do not prescribe a specific technical solution (e.g., specific protocol or software), they mandate that VASPs must:

• Collect Required Information: Obtain and hold accurate and meaningful originator and beneficiary information (name, address, account number/wallet address, etc.) for transactions above the 1,000 GEL threshold.
• Transmit Information: Ensure that the required originator and beneficiary information is immediately and securely transmitted to the beneficiary VASP (or held available to the originator VASP for direct transfers not involving another VASP).
• Data Accuracy and Verification: Take reasonable measures to verify the accuracy of the collected information.
• Data Retention: Retain all collected information for at least 5 years following the transaction, in accordance with AML/CFT data retention requirements.
• Risk-Based Approach: Implement a risk-based approach to identify and mitigate money laundering and terrorist financing risks associated with virtual asset transfers.
• Interoperability: Be able to share the required information with other VASPs, implying the need for solutions that facilitate such data exchange (e.g., using industry-standard Travel Rule protocols).

Penalties for Non-Compliance

Non-compliance with the AML/CFT Law, including the NBG VASP Rules and Travel Rule obligations, can result in significant penalties imposed by the National Bank of Georgia. These may include:

• Administrative Fines: Substantial monetary penalties, which can be significant depending on the severity and recurrence of the violation.
• License Suspension: Temporary suspension of the VASP's operating license.
• License Revocation: Permanent revocation of the VASP's license, effectively forcing the entity to cease operations in Georgia.
• Other Supervisory Measures: The NBG has broad powers to impose other corrective actions and supervisory measures to ensure compliance.
• Criminal Liability: In cases of severe and intentional breaches related to money laundering or terrorist financing, individuals and management could face criminal charges under relevant provisions of the Georgian Criminal Code.

The NBG has shown a proactive stance in regulating the virtual asset sector, aiming to align with international standards and mitigate financial crime risks.