Financial Crime World

Azerbaijan Grapples with Money Laundering as Economic Growth Surges

Introduction

Located at the crossroads of Europe and Central Asia, Azerbaijan has experienced remarkable economic growth in recent years. However, this prosperity has also brought a surge in illicit activities, including drug trafficking, theft, tax evasion, and human trafficking. Corruption remains a persistent challenge, with organized crime groups operating within the nation’s borders.

The Risks of Money Laundering

Azerbaijan is aware of the risks associated with money laundering and terrorist financing, which often find their conduits within the country’s banking sector. As such, they have made efforts to address these issues through cooperation agreements with other nations and by strengthening their legal framework.

Efforts to Combat Money Laundering

  • Azerbaijan has engaged in cooperation agreements with neighboring countries, including a trilateral agreement with Georgia and Türkiye focusing on joint efforts against organized crime and serious criminal activities, including terrorism.
  • The country has a Memorandum of Understanding with Iran aimed at combating the legalization of illicitly obtained funds and other assets.

Azerbaijan’s legal framework for combating money laundering is anchored in several key laws and regulations, including anti-corruption legislation, financial sector oversight, taxation and customs control, and the role of legal professions. Regulatory bodies such as the Central Bank play a vital role in supervising financial institutions to ensure AML compliance.

Government Bodies and Institutions

In Azerbaijan, various government bodies and institutions collaborate to combat money laundering, including:

  • Anti-Corruption Commission
  • Ministry of National Security
  • Chamber of Auditors
  • Foreign Affairs ministry

These agencies work together to shape anti-corruption policy, coordinate interagency efforts, monitor financial records, and engage in international cooperation related to prevention.

AML Compliance in Azerbaijan

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FATF Compliance

Azerbaijan remains “Partially Compliant” with FATF’s 40 Recommendations, but has actively worked to address its AML deficiencies and is not subject to any international sanctions. The country has undergone evaluations by MONEYVAL, which serves as the monitoring body of the Council of Europe, reporting to the Council of Europe’s Committee of Ministers.

Key Agreements on Money Laundering

  • Trilateral agreement with Georgia and Türkiye focusing on joint efforts against organized crime and serious criminal activities, including terrorism.
  • Memorandum of Understanding with Iran aimed at combating the legalization of illicitly obtained funds and other assets.