Azerbaijan’s Fight Against Money Laundering and Terrorist Financing: A Mixed Bag
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Azerbaijan, a transcontinental country located at the boundary of Eastern Europe and Western Asia, has been assessed for its efforts in combating money laundering (ML) and terrorist financing (TF). The assessment found that while some areas have shown improvement, others require significant attention.
Identified Money Laundering Risks
Azerbaijan has identified ML risks related to:
- Drugs smuggling
- High-risk jurisdictions
- Tax-related crimes
However, the assessment noted that some areas, such as the use of cash in the economy and misuse of real estate, require further analysis.
Effectiveness of AML/CFT System
The country’s Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) system is considered to be unsatisfactory in terms of its effectiveness. While moderate outcomes have been achieved in ML and TF investigations, prosecutions, and confiscation of proceeds of crime, there is room for improvement.
International Cooperation
Azerbaijan has shown commendable levels of international cooperation by providing basic and beneficial ownership information on legal persons and legal arrangements to foreign partners.
Technical Improvements Needed
The assessment highlighted the need for technical improvements in areas such as:
- Supervision
- Sanctions
- Transparency of legal persons
FATF Compliance
Azerbaijan has achieved a commendable level of compliance with FATF’s six main recommendations. However, more work is needed to ensure the effective implementation of these measures.
Risk Assessment and Coordination
In terms of risk assessment, coordination, and policy setting, Azerbaijan has made significant progress in identifying ML/TF risks and articulating its National Risk Assessment (NRA) findings. However, there is room for more comprehensive analysis to substantiate the understanding of ML risks and links with organized crime, drug trafficking, and misuse of legal persons.
Coordination Council
The Coordination Council, responsible for conducting AML/CFT national risk assessments and preparing action plans, has a range of expertise and appears to have adequate coordination at the policy level. However, operational-level cooperation is lacking, and there is a need for greater collaboration between competent authorities.
Conclusion
While Azerbaijan has made progress in combating ML/TF, more work is needed to ensure the effective implementation of its AML/CFT regime. The country’s financial intelligence system requires significant improvement, and supervision over financial institutions and designated non-financial businesses and professions (DNFBPs) needs to be enhanced.
Overall, Azerbaijan must continue to address these areas to effectively combat money laundering and terrorist financing.