The whole world has joined the struggle against the legalization of “dirty” money. The major countries as well as Russia declare war against “black money” that serve as a financial source of anti state shady business ? terrorists, drug business and gun dealers.
Georgia, too, became involved in the process ? a bill on the prohibition of “black money” legalization is now being developed in the Ministry of Finance.
Situation in Russia
(based on the news from Russia):
The president of Russia, Vladimir Putin, has signed an order on the establishment of Financial Monitoring Committees (or, otherwise, Financial Intelligence Service). Since September the Intelligence Officers of the Ministry of Finance in Russia will obtain an information about the amounts of money of Russian citizens.
Already in summer 2000 the international organization FATF entered Russia in its “Black list”. The main claim that it lay to Russia was lack of Financial Intelligence Service in Russia. There can be no talk of struggle without the work of State Intelligence Service. In August 2001, a law on the struggle against money laundering was passed in Russia. The question was that an authorized agency ? banks are bound to supply information on each operation that is subject to control (f.e. withdrawal of more than 600 rubles from an account). The authorized agency will take a decision. This bill was developed in the Ministry of Finance. The order on the establishment of authorized agency was developed there, too (it was called Financial Monitoring Committee). The representatives of the Ministry of Internal Affairs believe that it was for the Ministry of Finance to decide in what case the matter would concern money laundering. According to the Internal Affairs Ministry, the authorized agency must become an interagency structure that would involve Ministries of Internal Affairs and Finance as well as tax police. Opposition and dispute has gone on for a long time? However, following the events of September 11, the authorities of Western countries started speaking about the efficiency of Financial Intelligence Service. After this, the Russian Government pushed things on. President Putin who signed a bill of the Finance Ministry in summer, hurried to create an authorized agency.
According to the law on the prohibition of legalization of fraudulent gains, banks and financial organizations are bound to notify an appropriate agency about the deals that exceed 600 thousand rubles. The main reason for the issue of this law in Russia was not the struggle against the “laundering” of “filthy” money but the desire to drop out of the FATF “black” list. FATF has granted Russia the status of “laundering”. Presently, Russia does its best to drop out of this list. This was the reason why President Putin signed the order about the establishment of an appropriate authorized agency ? Finance Monitoring Committee in November. This Committee functions at the Ministry of Finance and it is guided by Victor Zubkov.
The main reason of this struggle is accounts freezing of terrorist organizations.
The question of financial intelligence will soon arise in Georgia, too.
The events taking place in the whole world and in Russia will by any means affect Georgia. This process is still going on in spite of the fact that most Parliament members and officials are still unable to make any specific comment on this matter. Should we establish such a Financial Monitoring Committee in Georgia? What will it bring to us? In spite of the fact that Georgia is behind Russia as far as the scale and circulation of finances are concerned, there is still black money here, too. According to the specialists and analytics, “dirty” money is a source for financing drugs business, gun trade, etc. The possibility of “dirty” money being used for financing terrorism is not ruled out either. It may seem absurd, but still it is possible: there are favourable conditions for it in Georgia in view of its geopolitical location.
There are a lot of supporters as well as opponents of Financial Intelligence in Georgia. Some even say that speaking on this topic is tantamount to crime. However, this process is inevitable and Georgia will get involved in it, too.
A member of the Georgian Parliament, Nodar Javakhishvili opposes the establishment of Financial Monitoring in Georgia.
– I would like to say that I do not agree to the relation of International Financial Institutions and leading countries towards the “black” money, black business. I think that this struggle opposes banks, economic institutions. I have repeatedly said that if anyone (moreover, the whole world) starts struggle against drugs by means of controlling movement of money in the banks, it means nothing else but disability of appropriate agencies (in this case, law-enforcement body)
On the other hand, the source of this misfortune is lack of desire for struggling against it. I have repeatedly expressed my opinion to high-rank officials. We must not fight banks but Plantations. Nowadays, one can observe from the space what is going on in the bowels of the earth ? is it so difficult to discover Plantations? I think that narcotics trade is very strong and influential so that struggle against it is aimed at nothing else but at making this business more expensive and profitable.
– For another thing, “black” money also circulates in guns trade.
– Who trades in guns? Of course, states. These very states struggle against guns trade. I would also like to say that banks are institutions that attract liquid assets and invest them profitably. It is written in the law of all countries. No one says that the matter concerns “white” money, drugs or other funds? The question is about money and movement of money. If state turned drugs into commodity, it, certainly, sets its own value, price, profit rate. As far as I know, the Georgian authorities are well informed on the location of these plantations. I repeat that I do not want so much money to come from drugs, they must destroy plantations! If they do not want “black” money to circulate in gun trade. Last of all, it will be more effective to put an end to the struggle
– What will the establishment of Financial Intelligence Service lead to in Georgia?
– Forming a similar structure in Georgia? It is an interesting question to ask We have organizations, commissions, law-enforcement agencies that fight the corruption. The question arises ? is their work effective? Is it worth forming a new organization? There is no use forming this structure, moreover in Georgia. It would be useful to form this Financial Intelligence agency in well-being countries. In Georgia it would lead to nothing else but stronger limitation of free competition (if there is any). The only ones who will profit by it are mafia clans and family castes. They will use it against those who poke their nose into this business. In Georgia there are plenty of people who will do it ? almost the whole government. So, speaking on this subject is tantamount to crime. We will give another lever to mafia that would make it possible for it to eliminate those who are not involved in their clan.
David Salaridze (fraction “Entrepreneurs”)/
– Generally speaking, our legislature does not envisage for anything of this kind. However, I think that this scheme would be an advantage to Georgia. Who controls outflow and movement of capital in Georgia? Therefore, it is the right time for the establishment of this institution. However, I doubt in the efficiency of this agency.
– Ministries of Finance and Internal Affairs fought each other in order to gain control over this body..
– Certainly, it should depend on the financial institutions and by no means on internal Affairs agencies. The agencies of Internal Affairs must fulfill their duties.
– One of the reasons for establishing this agency in Russia was struggle against terrorism?
– Russia is a great country. The control scheme in Georgia must be dependent on the viewpoint of leakage. Let us consider a simple example: as far as you know, export is taxable by zero rate. It means that the currency from product realization abroad promotes the stabilization inflow of currency, on the whole. The question arises: Does anybody control the amount of export? Which offshore zone will this money go to? No one controls is.
– As for financial monitoring, do you think it would be a good idea to establish it in Georgia? Will it promote corruption?
– I do not think so. We cannot refuse to create control mechanisms just because we fear that they will make for corruption. As far as the establishment of Financial Monitoring agency is concerned, I think it would be useful to consider this idea subsequent upon the formation of Cabinet Ministers. This Cabinet will promote the stability of financial institutions and the solution of complex matters.
Niko Lekishvili, chairman of tax-payers’ Union.
– I would like to assure you that “black” money does not circulate in Georgian Banks. It usually circulates in property. This money goes on the purchase of factories, plants, premises, etc. There is a very small percentage of “black” money in the banks. It is not the way with Russia where banks are established by the companies and organizations that own “black” money! There is a different situation in Georgia ? all major operating banks are formed and controlled by the European banks of Development and Reconstructions, KDF and others.
– And as for the bill?
– This law will govern lots of things. Yet, it is another point. As far as I know some people purchased 10-50 flats, premises, shops, inoperative factories? Thus, we must consider this matter from two viewpoints ? should we ban or legalize this?
– Do you think this will give rise to a new source of corruption?
– It is possible. This is why we should weigh everything. Nowadays, salaries are not legalized in our country, which is a great problem, of course. We should not do everything the other way round. We will be able to do nothing until these great global problems are settled.
At present a law is being developed in the Ministry of Finance “on the prohibition of the legalization of “black” money. This law is aimed at the protection of civil, social and state rights and interests.
– We will support all actions and normative acts that are aimed at the exposure of black economy. Any human limitations will be overcome by these very people. If these actions take place, we should consider all details! ? says Levan Dzneladze, minister of tax and income.
As for the minister of Finance, Mr. Zurab Nogaideli, he can not conceal his admiration of the bill developed in his Ministry: “There was no special reason for the development of the law ? legalization of “black” money is not so large-scale in Georgia. Yet, it is an important problem for the whole world. To tell you the truth, I was very surprised by the scale and level of the bill. It is a very serious work. I am sure that international financial institutions will help us not to only to prepare this law but also to realize it. The geographic location of our country makes for the movement of contraband goods; the legalized “dirty” money will be used against the state. I think that this law serves the interests of all major companies because there will be more legal basis for business in Georgia.
What was the reason for the project development.
“MME” is interviewing director of financial and investment policy department.
– The bill “On the prohibitions of “black” money legalization was developed by the President. Then we applied to the Ministry of Foreign Affairs that informed us of the similar bill; we got acquainted with the bills of Israel, Italy, Switzerland, Russia. There is the same problem in all countries. Each country fights as hard as it can against the legalization of “black” money. It is noteworthy that the work on this issue started at the recommendation of international organizations. It is FATF ? organization that struggles against the legalization of “black” money.
– What does this bill envisage for?
– The principal moments of the bill: the bill provides for the procedures that will help to eliminate the legalization of “black” money: domestic control, necessary control, etc. The organizations that exercise control over subordinate operations ? banks, credit establishments, exchange boxes; insurance and leasing companies; organizations dealing with antique things, valuables; real estate property agencies; investment companies, notaries.. These are the organizations where there is a possibility for the legalization of “black” money.
– According to the similar law, other organizations that deal with bank and other financial operations are bound to report to the appropriate agency about more than 600 rubles worthy transactions.
– Transactions with money or other property are liable to control.
– Mr. Zurab, what are other measures regulating the legalization of “black” money.
– To begin at the beginning, it is necessary to have a legal decision in order to deliver information to the law-enforcement agencies. I am reluctant to say that law-enforcement or other agencies will have the right to require bank information about the monetary movement of specific person . This will not happen.
– Who will govern this system?
– It is a serious question. I am sure it will give rise to discussions. It is for the President to decide what this authorized agency will be.
– What is the way of regulating it in other countries?
– F.e. this system is quite complex in Italy. There are a number of such organizations (five). Each receives this information; at the same time they control each other. Some of them are accountable to Parliament, some to banks, etc. The law enforcement agencies will get involved as soon as some breach is detected.
“The law on the prohibition of the legalization of black money was submitted to the Parliament and appropriate administrations for consideration. As far as we know, the National Bank took a great interest in this project?
– The information received by an authorized agency will not be able to decipher the firm, company and institution information that will damage their business! ? says Zurab Anteladze. The law forbids revealing proprietary secrets, opening anonymous accounts. The bill must still be brought to perfection. It will probably be finished in a couple of months. Though, according to the experts, it will become a subject of disputes and discussions.
Russian Oligarchs come…
What will the Georgians do?
“Nezavisimaya gazetta” highlighted interesting events. Large oligarchs decided to sell their assets, some of them handed the assets over to foreign partners.
Besides, businessmen work hard on the creation of foreign subsidiary companies. The head of the united engineering plant Kakha Burdukidze has officially required registration of subsidiary companies in Holland. “Alpha group” has even purchased ?NAN AA?I? , a Dutch subsidiary, which will make it possible for the Holding of European Unions countries to establish branches. Besides, according to the unofficial information of Alpha-group”, Michael Friedman has set his mind to invest corporation money abroad. It is supposedly one of Arabic countries?
But what does all this mean? capital exemption, establishment of subsidiary companies abroad, handling over assets to foreign companies means nothing else but an attempt of Russian businessmen to insure themselves against the interference of state into their business. Russian businessmen are sure that the state will soon launch an attack at them.
The Financial Monitoring Committee of Russia will probably start work since February ? and will collect information about the organizations dealing with the legalization of “black” money. The similar problems in Georgia will soon come on the agenda. The Georgians are gifted with the imagination ability and will easily manage to drive a coach and four.