Financial Crime World

Azerbaijan’s Anti-Money Laundering Regulations: A Comprehensive Overview

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Despite being removed from the Financial Action Task Force (FATF) list of countries with strategic anti-money laundering (AML) deficiencies, Azerbaijan continues to strengthen its AML/CFT framework. The country’s financial regulators and institutions have implemented various measures to prevent money laundering and terrorist financing.

AML/CFT Supervisors in Azerbaijan

Azerbaijan’s AML/CFT supervisors include:

Central Bank of the Republic of Azerbaijan (CBR)

Established in 1992, the CBR is responsible for ensuring that credit institutions and leasing companies comply with AML/CFT legislation.

Financial Markets Supervision Authority (FMSA)

Set up in 2016, FMSA oversees the securities market, investment funds, and insurance.

Financial Monitoring Services (FMS-AZ) / Azerbaijan’s Financial Intelligence Unit (FIU)

Established in 2018, FMS-AZ/FIU is responsible for detecting and preventing money laundering and terrorist financing.

Compliance Requirements for Designated Service Providers

For designated service providers, compliance with AML/CFT regulations is crucial. To achieve this, they must develop and implement a comprehensive anti-money laundering/counter-terrorism financing policy that includes:

Key Measures

  • Identifying and verifying customers and beneficial owners before establishing a business relationship
  • Conducting ongoing due diligence of business relationships, including scrutiny of transactions and updating data collected during the customer due diligence process
  • Obtaining senior management approval for onboarding politically exposed persons from foreign countries
  • Establishing strong internal control mechanisms to prevent the legalization of illegally acquired funds and funding of terrorism
  • Implementing an internal audit process to ensure compliance with AML/CFT regulations

Risk-Based Approach to Customer Due Diligence

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 understand your reporting obligations, including:

Key Requirements

  • Notifying FIU-Azerbaijan about any suspicious activities
  • Maintaining appropriate records for at least five years or more upon request from the relevant supervisory authority
  • Submitting Suspicious Transaction Reports (STRs) within three business days after receiving an order to execute a transaction that raises suspicion of money laundering or terrorist financing
  • Identifying and verifying customers and beneficial owners before carrying out occasional transactions above the designated threshold of 15,000 manats

Conclusion

By understanding Azerbaijan’s AML/CFT regulations and compliance requirements, financial institutions can effectively prevent money laundering and terrorist financing while maintaining a strong reputation in the global financial market.