Situation Overview
Georgia's regulatory and sanctions environment has deteriorated significantly since 2023, driven by the convergence of two dynamics: the Georgian Dream government's authoritarian trajectory (foreign agent law, crackdown on protests, democratic backsliding) and Georgia's emergence as a potential conduit for Russian sanctions evasion following the comprehensive Western sanctions regime imposed on Russia after the 2022 invasion of Ukraine. These two dynamics are distinct but mutually reinforcing: the democratic backsliding makes Western sanctions against Georgian officials more likely, while Georgia's role in Russia-connected trade increases scrutiny from Western sanctions enforcement agencies.
The sanctions discussion concerning Georgia operates at multiple levels. At the individual level, Magnitsky-style targeted sanctions (asset freezes, travel bans) against Georgian Dream officials responsible for the crackdown on protesters and the passage of anti-democratic legislation are under active consideration in both the EU Council and the US Congress. The US has already imposed visa restrictions on unnamed Georgian officials. The European Parliament has passed multiple resolutions calling for targeted sanctions. At the institutional level, there is growing concern about Georgian financial institutions' exposure to Russia-connected transactions, which raises the possibility of enhanced due diligence requirements or, in extremis, de-risking by correspondent banks. At the country level, comprehensive sanctions against Georgia remain highly unlikely but the trajectory of the relationship between Tbilisi and Western capitals is negative.
For organizations operating in or through Georgia, this creates a risk environment that is characterized not by the certainty of imminent sanctions but by the uncertainty of a rapidly evolving regulatory landscape. Compliance decisions that were straightforward 18 months ago, banking through Georgian institutions, partnering with Georgian government entities, maintaining staff in Tbilisi, now require active monitoring and contingency planning.
Key Threats
EU/US Targeted Sanctions: Magnitsky-Style Designations
The most probable sanctions scenario is the imposition of targeted sanctions against individual Georgian Dream officials under existing Magnitsky-style frameworks: the EU Global Human Rights Sanctions Regime and the US Global Magnitsky Act. These frameworks allow asset freezes and travel bans against individuals responsible for serious human rights abuses or corruption, without requiring comprehensive country-level sanctions.
Potential designees include: Georgian Dream officials who directed security force violence against protesters in 2024, parliamentarians who championed the foreign agent law, senior officials in the State Security Service (SUS) implicated in surveillance and intimidation of opposition figures, and individuals linked to alleged corruption involving Russian-connected financial flows. The European Parliament has explicitly called for such designations. The US State Department's visa restriction actions suggest that internal designation processes are already underway, with visa restrictions serving as a lower-threshold precursor to full Magnitsky designations.
The operational risk for Western organizations is not direct: the sanctions target individuals, not companies, but indirect: any business relationship, contract, or partnership with a designated individual or their controlled entities would trigger sanctions compliance violations. Georgian government procurement contracts, public-private partnerships, and regulatory interactions all carry potential exposure if counterparties are subsequently designated. The time to map these relationships and assess exposure is before designations are announced, not after.
Banking Correspondent Risk: SWIFT Access Concerns
Georgia's banking sector is dominated by two institutions: TBC Bank and Bank of Georgia, which collectively control approximately 75% of the country's banking assets. Both are publicly listed on international stock exchanges (TBC on the London Stock Exchange premium segment, Bank of Georgia on the London Stock Exchange) and maintain correspondent banking relationships with major European and American banks that are essential for international wire transfers, trade finance, letters of credit, and SWIFT messaging.
The risk to these correspondent relationships operates through two channels. First, if targeted sanctions are imposed on Georgian officials, correspondent banks will conduct enhanced due diligence on their Georgian banking exposure, potentially slowing transaction processing or imposing additional compliance requirements. Second, if Georgia's role in Russian sanctions evasion attracts enforcement attention from OFAC (US Office of Foreign Assets Control) or EU sanctions authorities, Georgian banks may face secondary sanctions risk that causes correspondent banks to de-risk, reducing or terminating their Georgian relationships as a precautionary measure. This de-risking pattern has been observed in other jurisdictions (Latvia's ABLV Bank in 2018, multiple banks in Malta, correspondent banking withdrawals from Central Asian states).
A full SWIFT disconnection for Georgia is extremely unlikely and is not the assessed risk. The risk is degradation of service: slower wire transfers, rejected transactions, increased compliance documentation requirements, and potential loss of specific correspondent relationships that affect trade finance and foreign currency operations. For organizations operating in Georgia with significant financial operations, this degradation risk warrants contingency planning.
Foreign Agent Compliance: 20% Funding Threshold Mechanics
The Law on Transparency of Foreign Influence requires non-commercial legal entities receiving more than 20% of their annual revenue from "a foreign power" (defined broadly to include any foreign government, international organization, foreign NGO, or foreign individual) to register as an organization "carrying out the interests of a foreign power." The law's implementing regulations, administered by the Ministry of Justice, require registered organizations to submit to annual auditing, disclose their funding sources publicly, and accept a label that carries deliberate social and political stigma.
The 20% threshold is calculated on an annual basis, and the definition of "foreign source" is broad enough to capture EU grants, US government funding (USAID), foundation grants (Open Society, Soros, NED), bilateral development funding, and private donations from foreign individuals. For international organizations, the compliance question is whether their Georgian-registered legal entity falls within scope. Organizations operating through local partners face the additional question of whether their funding renders the partner organization subject to registration.
Non-compliance penalties include fines of up to 25,000 GEL (approximately $9,000) per violation, with the prospect of repeated fines for ongoing non-compliance. While the financial penalties are modest for large international organizations, the reputational and operational consequences of the "foreign agent" label are significant: it stigmatizes the organization in the eyes of Georgian government institutions, may affect access to government cooperation and permits, and creates a public record that can be used in information operations against the organization.
Sanctions Arbitrage: Georgia as Russia-West Circumvention Route
Since the imposition of comprehensive Western sanctions on Russia in 2022, Georgia has experienced a significant increase in trade flows that raise sanctions evasion concerns. Georgian exports to Russia surged in 2022-2023, particularly in categories that correspond to sanctioned goods: vehicles, electronics, machinery, and dual-use items. The pattern is consistent with re-export schemes in which sanctioned goods are imported into Georgia from Western or Asian sources and then re-exported to Russia, circumventing the direct trade restrictions.
The Georgian government has stated that it complies with international sanctions but has not imposed its own sanctions on Russia: a position that is technically legal but creates a structural enforcement gap. Georgia is not a member of the EU sanctions regime and is not legally bound to enforce EU restrictive measures, though its EU candidate status creates a political expectation of alignment. The US secondary sanctions framework, however, can reach Georgian entities that facilitate sanctions evasion regardless of Georgian domestic law. OFAC can designate Georgian companies and individuals that materially assist sanctioned Russian entities.
For Western businesses operating in Georgia or transacting with Georgian counterparties, the sanctions arbitrage risk is direct: if your Georgian partner, supplier, or customer is involved in re-export schemes that benefit sanctioned Russian entities, your organization faces potential secondary sanctions exposure. This risk is particularly acute in sectors with dual-use applications: technology, automotive, industrial machinery, and components. Enhanced due diligence on Georgian counterparties' Russia-connected trade activity is no longer optional, it is a compliance necessity.
Operational Implications
Banking and Financial Operations
Organizations with banking relationships in Georgia should assess their exposure to correspondent banking disruption. Identify which Georgian banks you use, which correspondent banks they rely on for international transfers, and what alternative banking channels exist. Maintain at least one banking relationship outside Georgia (Turkish, Armenian, or Azerbaijani banks provide regional alternatives; European banks provide international alternatives) that can process payments if Georgian banking access is degraded. Monitor TBC Bank and Bank of Georgia's regulatory filings and earnings calls for commentary on correspondent banking relationships and compliance costs, these are early indicators of systemic pressure.
Trade Finance and Supply Chain
Georgia's role as a transit corridor for goods moving between Europe, Turkey, Central Asia, and the Caucasus makes trade finance a key risk domain. Letters of credit, trade guarantees, and import/export financing that transit Georgian banks are subject to the same correspondent banking risk described above. Additionally, organizations using Georgian logistics infrastructure (the Port of Poti, the Baku-Tbilisi-Kars railway, Georgian trucking companies) should screen their logistics partners for Russia-connected trade activity. The EU's 12th and 13th sanctions packages have expanded the anti-circumvention provisions that target transit countries, and Georgia is increasingly in the enforcement spotlight.
NGO and International Organization Operations
International NGOs, development organizations, and media entities face the most direct regulatory impact from the foreign agent law. Organizations receiving any foreign funding must determine their registration obligations, assess the operational and reputational consequences of registration, and decide whether to comply, challenge the law legally, or restructure their Georgian operations to fall below the 20% threshold. Several major international organizations have publicly stated their intention not to register, accepting the legal risk rather than the stigma of the foreign agent label. This is a business decision that should be informed by legal counsel with expertise in Georgian administrative law and an assessment of the organization's dependence on Georgian government cooperation.
Corporate Compliance and Due Diligence
Western companies with Georgian operations, partners, or suppliers need to update their compliance frameworks to reflect Georgia's changed risk profile. This includes: sanctions screening of all Georgian counterparties (individuals and entities) against OFAC SDN, EU Consolidated List, and UK sanctions lists; enhanced due diligence on any Georgian counterparty with Russia-connected trade activity; monitoring of Georgian political developments for sanctions escalation triggers; and internal policies on engaging with Georgian government entities that may include individuals subsequently designated under Magnitsky frameworks. The compliance burden has increased materially since 2023, and organizations that have not updated their Georgia-specific compliance procedures are operating with outdated risk assessments.
Recommendations
- Conduct a comprehensive Georgia sanctions exposure audit. Map all organizational relationships with Georgian entities, banking, suppliers, partners, government counterparties, and staff. Screen all identified entities and individuals against current OFAC, EU, and UK sanctions lists. Identify any counterparties with known or suspected Russia-connected trade activity. This audit should be completed before any sanctions designations are announced, not after. Designations can be implemented with immediate effect and no advance notice to affected parties.
- Diversify banking relationships to include at least one non-Georgian institution. Maintain operational banking capacity outside Georgia that can process international wire transfers, payroll, and vendor payments if Georgian banking access is degraded. Preferred alternatives include Turkish banks with Caucasus operations (Ziraat Bank, Isbank), European banks with direct relationships to your parent entity, or Azerbaijani banks for regional operations. Test these alternative channels before you need them, establishing new banking relationships takes weeks, not hours.
- Establish a sanctions monitoring protocol with weekly review cycles. Georgia's sanctions risk is evolving in real time. Assign a compliance officer or external counsel to monitor: EU Council conclusions and European Parliament resolutions mentioning Georgia, US State Department and Treasury OFAC announcements, UK Foreign Office statements, and Georgian government legislative and regulatory announcements. A weekly review cycle is the minimum frequency, daily monitoring is warranted during periods of heightened political tension (protest escalations, EU summit periods, US Congressional hearings on Georgia).
- Engage Georgian legal counsel with sanctions and regulatory expertise. The foreign agent law, potential sanctions designations, and evolving compliance requirements all require legal interpretation specific to Georgian administrative law. Engage a Georgian law firm with demonstrated expertise in international sanctions compliance and regulatory law, not all Georgian firms have this capability. Ensure your counsel has the capacity to provide rapid-response legal analysis if sanctions are announced or regulatory enforcement actions are initiated.
- Develop contingency plans for three escalation scenarios. Scenario A: Targeted Magnitsky sanctions against individual Georgian officials (most probable), impact on government-facing contracts and partnerships. Scenario B: Correspondent banking degradation affecting Georgian financial institutions (moderate probability), impact on payments, trade finance, and financial operations. Scenario C: EU suspension or revocation of Georgia's candidate status (low probability but increasing), impact on regulatory alignment, funding frameworks, and strategic positioning. Having contingency plans for all three scenarios provides decision-ready options regardless of how the situation evolves.
Frequently Asked Questions
Are there sanctions against Georgia?
As of February 2026, there are no comprehensive Western sanctions against Georgia as a country. However, targeted Magnitsky-style sanctions against individual Georgian Dream officials are under active consideration by both the EU and the United States. The US has already imposed visa restrictions on Georgian officials. The European Parliament has called for asset freezes and travel bans. The risk for businesses is not direct country sanctions but secondary effects: correspondent banking disruption, reputational risk from association with sanctioned individuals, and regulatory uncertainty as the sanctions landscape evolves.
How does Georgia's foreign agent law affect international businesses?
The law primarily targets non-commercial entities receiving more than 20% foreign funding. Commercial businesses are technically excluded, but face indirect effects: stigmatized NGO partners, diminished independent media for due diligence, a chilling effect on civil society partner ecosystems, and a regulatory trajectory that signals increasing government scrutiny of foreign-connected entities. Businesses with EU or US parent companies also face reputational risk from operating in a jurisdiction the EU has flagged for democratic backsliding.
What is the risk of banking disruption in Georgia?
Georgian banks (TBC Bank and Bank of Georgia, controlling 75% of assets) maintain critical correspondent banking relationships with European and American banks. If Western sanctions target Georgian officials or Russia-connected Georgian entities, correspondent banks may conduct enhanced due diligence or de-risk their Georgian exposure. The risk is not SWIFT disconnection but service degradation: slower transfers, rejected transactions, increased compliance requirements. Organizations should maintain banking relationships outside Georgia as a contingency.
Is Georgia being used for Russian sanctions evasion?
Georgian trade with Russia surged after 2022, particularly in categories matching sanctioned goods: vehicles, electronics, and dual-use items. Georgia has not imposed its own sanctions on Russia, creating a structural enforcement gap. OFAC's secondary sanctions framework can reach Georgian entities facilitating sanctions evasion regardless of Georgian law. Western businesses transacting with Georgian counterparties must conduct enhanced due diligence on Russia-connected trade activity. This is particularly acute in technology, automotive, and industrial sectors.
How does Region Alert monitor sanctions risk in Georgia?
Region Alert monitors Georgia's sanctions environment through multi-source intelligence: Georgian-language parliamentary proceedings and regulatory announcements, EU Council conclusions and European Parliament resolutions, US State Department and Treasury OFAC announcements, London Stock Exchange filings from TBC Bank and Bank of Georgia, Georgian-language business media (BM.GE, Forbes Georgia), and EU/US sanctions enforcement actions against Russia-connected entities in the Caucasus. We provide early warning on designation discussions, regulatory changes, and correspondent banking developments before they become compliance emergencies.
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Daily monitoring of Georgia's sanctions landscape, regulatory changes, and banking sector developments. Early warning on EU/US designation discussions, foreign agent law enforcement, and correspondent banking risk indicators for your Georgia operations.
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