Azerbaijan’s AML/CFT Efforts Under Scrutiny: Supervisors Fall Short in Risk-Based Approach

Introduction

A recent assessment has revealed that Azerbaijan’s efforts to combat money laundering and terrorist financing (AML/CFT) have been uneven, with supervisors failing to apply a risk-based approach to their duties.

Understanding of ML Risks Varies Amongst Supervisors

According to the report, the understanding of ML risks varies amongst supervisors, with the Central Bank of Azerbaijan (CBA) and the Bar Association demonstrating a better grasp of the issue. However, the State Tax Service (STS) and Chamber of Auditors have shown limited understanding, highlighting a need for improvement in supervision.

Key Findings:

• The CBA and Bar Association demonstrate a better understanding of ML risks
• STS and Chamber of Auditors have limited understanding, requiring improvement in supervision

Measures to Prevent Money Laundering/Terrorist Financing

Azerbaijan has implemented certain measures to prevent the use of legal persons and arrangements for ML/TF purposes. However, there is no requirement for legal entities themselves to gather and retain beneficial ownership information. Authorities rely heavily on banks to obtain this information, which can be impacted by deficiencies at the registry level.

Key Findings:

• Azerbaijan has implemented measures to prevent ML/TF
• No requirement for legal entities to gather and retain beneficial ownership information
• Authorities rely heavily on banks, which can be impacted by deficiencies

International Cooperation

Azerbaijan has made progress in international cooperation, providing mutual legal assistance (MLA) to pursue ML and predicate offenses investigations. However, international cooperation on tracing, seizing, and confiscating assets moved abroad is limited, with authorities making efforts to overcome this deficiency.

Key Findings:

• Azerbaijan has made progress in international cooperation
• Limited cooperation on tracing, seizing, and confiscating assets

Real Estate Agents

The report highlighted concerns over the lack of supervision of real estate agents, which has been identified as a main method of money laundering in corruption cases. While some positive legislation changes have been made recently, their effectiveness remains to be seen.

Key Findings:

• Lack of supervision of real estate agents
• Concerns over money laundering in corruption cases

Recommendations

The assessment called for greater cooperation amongst competent authorities at the operational level, as well as implementation of effective actions beyond legislative changes.

Recommendations:

• Greater cooperation amongst competent authorities
• Effective actions beyond legislative changes

Conclusion

Azerbaijan has achieved a commendable level of compliance with FATF’s six main recommendations. However, technical improvements are needed in supervision, sanctions, and transparency of legal persons.

In response to the report, Azerbaijani authorities have committed to addressing these shortcomings and improving their AML/CFT efforts.