TBC Bank chairs step down over money laundering investigation

The Chair and Deputy Chair of TBC Bank Group PLC, which owns one of Georgia’s largest banks, TBC, have resigned. The resignations followed a demand from the Georgian National Bank a week ago that they go, due to an ongoing investigation into possible money laundering.

The National Bank demanded that TBC let go of the two citing alleged violations that occurred 11 years ago. The case is being investigated by the Prosecutor’s Office.

Mamuka Khazaradze, the chair of London-based TBC Bank Group, announced he had resigned from the post via Facebook on Thursday.

‘Today, in London, the supervisory board of the Bank decided to end their legal challenge against the [Georgian] National Bank, guided only — and only — out of the interest of the Bank, its shareholders, and depositaries. Therefore, I decided to leave the Bank where I spent 27 years of my life, from a bank with $500 [initially] that my group and I had turned into the largest player in the region’, Khazaradze wrote on 21 February.

He said that the bank could not afford to be in a protracted court dispute with the regulator, ‘especially when the latter is not independent in their decisions’.

The former chair reiterated in his farewell address that TBC was ‘under attack’ and that the money laundering investigation into him ‘without any investigation and court ruling’ led to ‘reputational damages’.

He said that TBC Bank’s international shareholders had lost $200 million as a result of the dispute.

Khazaradze said he regretted in his letter that no Georgian official, ‘including the Prime Minister and his ministers’ expressed a desire to communicate with TBC, even after he had shared ‘relevant documents’ with them.

‘I understood that the aim was to discredit me’, Khazaradze wrote.

In the end, Khazaradze vowed to continue his legal fight for in Georgia and abroad ‘independently’ of the bank.

The investigation

Mamuka Khazaradze and his deputy, Badri Japaridze, chair and co-chair respectively of both the advisory board and the board of directors of TBC Bank Group, have been under investigation since May 2018. The Prosecutor’s Office revealed the investigation only on 8 January.

Authorities said that they were looking into $17 million worth of loans that were fast-tracked to two companies in 2008. According to the authorities, Khazaradze and Japaridze took loans of the same amount from these two companies, which was followed by TBC writing off the debts.

In information released to the London Stock Exchange on 9 January, TBC confirmed they had also been fined about ₾1 million ($375,000) by the National Bank for ‘violations’ of laws regulating conflicts of interest discovered in transactions from 2007–2008.

On 13 February, the National Bank stripped Khazaradze and Japaridze of their signature authority and ordered TBC to remove them from their board within two months.

Later that day, Khazaradze wrote on Facebook that the 2007–2008 transactions had been thoroughly scrutinised by the international legal giant Dentons, who he said found no conflict of interest.

In their letters to the London Stock Exchange and the Georgian public after the order from the National Bank, Khazaradze indicated he and his deputy had no intention of resigning and vowed to mount a legal challenge to the decision.

OC Media has reached out to the Prosecutor’s Office for an update on the investigation into possible money laundering.

Joint statement

Khazaradze’s farewell post on Facebook was soon followed by a joint statement from the National Bank and TBC.

The statement said that TBC would stop challenging the National Bank’s February ruling in court and would pay approximately ₾1 million fine.

According to the statement, TBC would have their advisory board restructured in order to allow Khazaradze and Japaridze to retain their position in the board of directors without remaining as the heads.

TBC also promised to work with the National Bank on its corporate quality management system and would recruit a ‘reputable’ audit company to go through their bank practices.

In the same announcement, the National Bank hailed the decision and said that though they would monitor its implementation, the issue had been ‘solved by both parties’.

In the joint statement, the National Bank reiterated TBC’s good standing, their ‘full compliance’ with the regulations set by the National Bank, and urged all parties to ‘abstain from speculating’.

‘Speculation’ about the Anaklia port

In his resignation statement on 21 February, Mamuka Khazaradze said he would dedicate all his energy to the Anaklia Deep Sea Port project, and was looking forward to meeting MPs on 26 February to share more information about recent developments related to his bank.

Since January, members of the parliamentary minority European Georgia party and opposition United National Movement party claimed that ‘pressure’ on TBC from the authorities was related to Khazaradze’s conflict with the former prime minister and current head of Georgian Dream Bidzina Ivanishvili.

The opposition groups requested Khazaradze appear in parliament to speak publicly about the deep-sea port project in Anaklia, which they said was in jeopardy due to the investigation.

The opposition groups and several local media outlets indicated that the Anaklia Development Consortium’s winning bid for the project was the primary reason for a fallout between Giorgi Kvirikashvili, who became Georgia’s Prime Minister that year, and Georgian Dream founder Bidzina Ivanishvili, who was Prime Minister from 2012 to 2013.

The port, with total investment value of $2.5 billion, is set to be developed by the Anaklia Development Consortium (owned by TBC Holding, another subsidiary of the TBC Bank Group) and US-based Conti Group LLC.

The consortium won the bid to develop Anaklia City in 2015. UK-based international transport and logistics company Wondernet Express, American port operator SSA Marine, and Bulgarian G-Star are also involved in the Anaklia project.

The Port is expected to start operations by the end of 2020.

Khazaradze made references to the Anaklia port project in his 14 February Facebook post, claiming that the National Bank’s ‘speedy ruling and deliberate campaign against’ them coincided with his bank’s bid to build the Anaklia port.

Two months after returning to formal politics in May 2018, Bidzina Ivanishvili lashed out at TBC, accusing them, and the Bank of Georgia, of ‘eating up the whole country’. Ivanishvili’s comeback followed Giorgi Kvirikashvili’s resignation from the prime-ministerial post, with both him and Ivanishvili citing disagreements over economic policies.