Financial Crime World

Azerbaijan’s Anti-Money Laundering Landscape: New Regulations Take Effect

In a major step towards strengthening its anti-money laundering (AML) framework, the Republic of Azerbaijan adopted new legislative acts on January 31, 2023. These regulations mark the termination of the existing law on the fight against the legalization of money or other property obtained through crime and the financing of terrorism. Two new laws, effective from February 1, 2023, are now in place to address AML and counter-terrorist financing (CTF) issues.

Enhancing Azerbaijan’s AML/CTF Framework

The new legislation aims to enhance Azerbaijan’s financial system’s resilience and comply with international standards, particularly the Financial Action Task Force (FATF) recommendations and European Union (EU) AML/CTF guidelines.

New Laws in Place

  1. Law on the Prevention and Counteracting of Legalization (Laundering) of Income Obtained Through Crime or Other Unlawful Activities
  2. Law on Amendments to the Law “On the Prevention of Legalization (Laundering) of Income Obtained Through Crime and the Financing of Terrorism” and Certain Legal Acts.

Key Provisions of the New Laws

First Law: Prevention and Counteracting of Legalization of Income Obtained Through Crime or Other Unlawful Activities

This act expands the scope of crimes that trigger financial transaction reporting requirements and imposes stricter penalties for non-compliance, including:

  • Up to 15 years of imprisonment
  • A fine of up to 30 minimum salaries.

Second Law: Amendments to the Current Legislative Structure

The second law introduces the following key changes:

  1. Establishing the Financial Monitoring Service and its responsibilities

    • Supervising financial organizations
    • Maintaining a register of Suspicious Transaction Reports (STR)
    • Cooperating with foreign financial intelligence units
    • Implementing and enforcing AML/CTF policies and procedures

  2. Revising the reporting entities and transactions subject to AML/CTF requirements

  3. Enhancing customer due diligence procedures and identifying the beneficial owners of legal entities

    • Verifying identity
    • Obtaining necessary documentation
    • Evaluating the risk of money laundering and terrorist financing
    • Periodically updating customer information

  4. Introducing a risk-based approach for financial monitoring

    • Assessing and mitigating risks based on the customer’s risk profile, transaction history, and geographical location

These new regulations are crucial for maintaining a transparent and robust financial system, reducing the risk of financial crimes, and ensuring the safety of Azerbaijani citizens and the global financial community. Caspian Legal Center, a leading Azerbaijani law firm, stands ready to provide expert advice and comprehensive legal assistance for businesses and individuals navigating these complex AML/CTF regulations.

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