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AML/CFT Regulatory Bodies in Azerbaijan: A Comprehensive Guide
Azerbaijan has made significant strides in combating money laundering and terrorism financing, earning it a spot on the Financial Action Task Force’s (FATF) list as having partially implemented its anti-money laundering (AML) and counter-terrorism financing (CFT) recommendations. In this article, we will delve into the country’s AML/CFT regulatory bodies and provide guidance on how to comply with regulations.
Central Bank of the Republic of Azerbaijan
Established in 1992, the Central Bank is responsible for ensuring that credit institutions and leasing companies adhere to AML/CFT legislation. The bank takes a proactive approach by implementing administrative and control measures to guarantee compliance with these requirements.
Financial Markets Supervision Authority (FMSA)
Created in 2016, FMSA aims to enhance oversight of Azerbaijan’s AML/CFT prevention system and licensing/supervision of the securities market, investment funds, and insurance sector. The authority plays a crucial role in enforcing regulatory standards.
Financial Monitoring Services (FMS-AZ)
As Azerbaijan’s Financial Intelligence Unit (FIU), FMS-AZ was established in 2018 to conduct centralized supervision and control activities. The agency is responsible for coordinating efforts to prevent money laundering and terrorism financing across the country.
Complying with AML/CFT Regulations
To comply with AML/CFT regulations, designated service providers must:
- Identify and verify customers and beneficial owners before establishing business relationships
- Conduct ongoing due diligence of business relationships, scrutinizing transactions, and updating customer data continuously
- Obtain senior management approval for onboarding politically exposed persons from foreign countries
- Establish strong internal control mechanisms to prevent the legalization of illegally acquired funds and funding terrorism
- Implement an internal audit process to ensure compliance
A “one-size-fits-all” solution may not be suitable in the financial sector, as each registered entity should consider its unique market, corporate structure, clients, and transaction types when adopting initiatives and procedures.
Risk-Based Approach
Azerbaijan has adopted a risk-based approach towards customer due diligence, which is tailored to various types of customers, business relationships, and transactions. The AML/CFT program must have a defined connection between risk categorization, processes, policies, and controls that address those risks.
Reporting Obligations
As a designated service provider, it is essential to notify FIU-Azerbaijan regarding any suspicious activities and maintain appropriate records:
- Recordkeeping: Collected information must be held for at least five years or more upon request from the relevant supervisory authority.
- Suspicious Transaction Report (STR): For transactions that raise suspicions or reasonable grounds for suspicion that funds are proceeds of a crime or related to terrorism financing, an STR must be submitted within three business days after receiving the order to execute the transaction.
- Threshold reporting: Entities must identify and verify customers and beneficial owners before carrying out occasional transactions above the designated threshold of 15,000 manats.
In conclusion, Azerbaijan’s AML/CFT regulatory bodies play a vital role in combating money laundering and terrorism financing. By understanding the country’s regulations and implementing effective compliance programs, financial institutions can ensure they meet their reporting obligations and contribute to a safer financial environment.