Financial Crime World

Azerbaijan’s AML/CFT Regime Shows Mixed Results

=====================================================

Azerbaijan has made progress in combating money laundering and terrorist financing (ML/TF), but significant challenges remain according to a recent assessment by the Financial Action Task Force (FATF).

Progress Made

  • Informal cooperation with foreign partners has been effective
  • Azerbaijan has adopted three National Action Plans as a result of its NRAs, demonstrating political commitment to addressing ML/TF risks and vulnerabilities identified

Challenges Remain

  • Limited information available on the effectiveness of other law enforcement agencies (LEAs) in addressing ML/TF risks
  • Financial Monitoring Service (FMS) has not taken full advantage of available resources due to concerns about risk and context
  • Geographical location poses significant risks related to drug smuggling and higher-risk jurisdictions

Identified Risks

  • Domestic corruption, tax-related crimes, and drug smuggling are the highest ML risk areas
  • Azerbaijan is recognized as a transit point for the Transcaucasian drug transport route

Need for Improvement

  • Technical improvements needed in areas such as supervision, sanctions, and transparency of legal persons
  • Scope for formal analysis of links with organized crime, drug trafficking, and the misuse of legal persons in the context of Azerbaijan

Areas for Improvement

  • Supervision: greater oversight and monitoring needed to ensure effective implementation of AML/CFT measures
  • Sanctions: more effective sanctions needed to address ML/TF risks and vulnerabilities
  • Transparency: greater transparency required for legal persons to prevent money laundering and terrorist financing

Coordination Council

  • Azerbaijan’s Coordination Council has a range of expertise beneficial for its responsibilities in conducting AML/CFT/CPF national risk assessments, preparing action plans, and drafting laws
  • However, at the operational level, the AML/CFT regime would benefit from greater cooperation among competent authorities

Conclusion

While Azerbaijan has made progress in addressing ML/TF risks, significant challenges remain. Continued efforts are needed to strengthen its AML/CFT system and address the identified vulnerabilities.