Financial Compliance in Azerbaijan: What You Need to Know
Azerbaijan has made significant strides in implementing anti-money laundering (AML) and combating the financing of terrorism (CFT) regulations, earning it a spot on the Financial Action Task Force’s (FATF) list of countries with partial compliance. As a result, the country is not subject to any foreign sanctions.
Regulatory Bodies
Azerbaijan has several key regulatory bodies responsible for ensuring AML/CFT compliance:
1. Central Bank of the Republic of Azerbaijan
Established in 1992, the Central Bank is the primary regulator of credit institutions and leasing companies, ensuring they comply with AML/CFT legislation.
2. Financial Markets Supervision Authority (FMSA)
Created in 2016, FMSA oversees the securities market, investment funds, and insurance, as well as enhancing AML/CFT prevention systems.
3. Financial Monitoring Services (FMS-AZ) - Financial Intelligence Unit (FIU)
As Azerbaijan’s FIU, FMS-AZ was established in 2018 to centralize supervision and control, coordinating activities to prevent money laundering and terrorism financing.
Compliance Requirements
To ensure compliance with AML/CFT regulations in Azerbaijan, designated service providers must:
Develop and Implement a Compliance Program
- Identify and verify customers and beneficial owners
- Conduct ongoing due diligence
- Obtain senior management approval for onboarding politically exposed persons
- Establish strong internal control mechanisms
Adopt a Risk-Based Approach
- Consider the unique market, corporate structure, clients, and transaction types when implementing initiatives and procedures to ensure effectiveness.
Reporting Obligations
As a designated service provider, companies are required to notify FIU-Azerbaijan about suspicious activities and maintain appropriate records:
Recordkeeping
- Collected information must be held for at least 5 years or more upon request from the relevant supervisory authority.
Suspicious Transaction Report (STR)
- An STR must be submitted within three business days after receiving the order to execute a transaction that raises suspicion of funds being proceeds of a crime or related to terrorism financing.
Threshold Reporting
- Entities must identify and verify customers and beneficial owners before carrying out occasional transactions above the designated threshold of 15,000 manats.
By understanding these compliance requirements and regulations, designated service providers in Azerbaijan can ensure they are meeting their AML/CFT obligations and maintaining a strong reputation in the financial sector.