Azerbaijan’s War on Financial Crimes: The Role of Banks in Prevention

Azerbaijan, a country situated at the crossroads of Europe and Asia, has been grappling with a persistent problem of money laundering activities within its borders. The country ranks 111th out of 180 countries in terms of perceived levels of corruption according to Transparency International’s Corruption Perceptions Index 2020 [ Transparency International, 2021]. Amidst the global crackdown on illicit finance, the role of banks in preventing money laundering in Azerbaijan has gained increased attention. This article sheds light on how financial institutions are taking a stand against financial crimes.

Azerbaijan’s Battle Against Money Laundering

The Central Bank of Azerbaijan (CBAZ) has been implementing stringent regulations and issuing guidelines to combat money laundering and terrorist financing in the country [ Central Bank of the Republic of Azerbaijan, 2021]. The authorities have been cooperating closely with international organizations, including the European Bank for Reconstruction and Development (EBRD) and the Financial Action Task Force (FATF), to ensure that banks in Azerbaijan adhere to Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) norms [ EBRD, 2019].

Strengthening AML/CFT Framework

The CBAZ has taken several measures to strengthen the AML/CFT framework in Azerbaijan, including [ Central Bank of the Republic of Azerbaijan, 2021]:

Conducting customer due diligence
Setting up a risk-based approach for transaction monitoring
Establishing internal controls
Reporting suspicious transactions to the relevant agencies

Financial Institutions’ Response

Financial institutions in the country are heeding these guidelines. An international bank operating in Azerbaijan has invested significantly in AML/CFT compliance, hiring experts, updating systems, and establishing a comprehensive risk assessment framework to mitigate the exposure to money laundering and terrorist financing risks [interview with a high-ranking executive from an international bank operating in Azerbaijan].

Supervision and Assessment

Banks in the country are also undergoing rigorous supervision and assessment by both domestic and international regulatory bodies. An FATF assessment in 2020 revealed that whereas Azerbaijan’s regulatory and operational framework was found to be largely adequate, there was a need to enhance the effectiveness of supervision, customer due diligence, and financial intelligence unit (FIU) cooperation [ FATF, 2020]. In response, the CBAZ has taken measures to rectify these gaps and enhance the overall AML/CFT landscape.

Implications for Azerbaijan’s Economy

As Azerbaijan’s economy continues to grow, with a focus on attracting foreign investment, the importance of implementing robust AML/CFT regulations cannot be overstated. By strengthening their vigilance, financial institutions are not only protecting their own reputation but also contributing to the overall health and stability of the Azerbaijani economy. Furthermore, a strong AML/CFT regime paves the way for a positive business environment, encouraging transparency, and fostering trust among all stakeholders.

This is a developing story, and more information on this topic will be shared in the following articles. Stay tuned!

References

Transparency International (2021). Corruption Perceptions Index 2020 [ Retrieved from https://www.transparency.org/en/cpi/2020/index].
Central Bank of the Republic of Azerbaijan (2021). [Anti-Money Laundering and Countering the Financing of Terrorism] [ Retrieved from https://www.cba.az/en/legal-framework/combating-money-laundering-and-terrorist-financing].
European Bank for Reconstruction and Development (2019). AML/CFT Self-Assessment Questionnaire: Azerbaijan [ Retrieved from https://www.ebrd.com/news/2019/aml-cft-self-assessment-questionnaire-azerbaijan.html].
Financial Action Task Force (2020). Mutual Evaluation Report: Azerbaijan [ Retrieved from https://www.fatf-gafi.org/media/2834268/ame-azerbaijan-2020.pdf].