Financial Crime World

Azerbaijan’s Fight Against Money Laundering and Terror Financing: A Mixed Bag

Azerbaijan has made significant strides in combating money laundering (ML) and terror financing (TF), but a lack of coordination and limited cooperation with international partners have hindered its effectiveness, according to a recent report.

Financial Intelligence Unit (FIU) vs. Law Enforcement Agencies (LEAs)

The country’s FIU has demonstrated the benefits of informal cooperation, but the same cannot be said for other LEAs. The Financial Monitoring Service (FMS) does not fully leverage assistance due to risks and context-pecific challenges.

National Risk Assessment (NRA) Findings

Azerbaijan has made significant progress in identifying ML/TF risks and articulating its NRA findings. However, there are areas that require further analysis, including:

  • Use of cash
  • Misuse of real estate
  • Legal persons
  • Virtual assets

Uneven AML/CFT System

The country’s AML/CFT system is uneven, with some authorities aware of the NRA conclusions but lacking sufficient understanding of ML risks. The outcomes of ML/TF investigations and prosecutions, as well as confiscation of proceeds of crime and targeted financial sanctions, are moderate at best.

Positive Developments

Azerbaijan has achieved a commendable level of compliance with FATF’s six main recommendations and has a robust legal framework in place. However, technical improvements are needed regarding:

  • Supervision
  • Sanctions
  • Transparency of legal persons

Need for Greater Cooperation

The report highlights the need for greater cooperation between LEAs and FIUs to effectively combat ML/TF. The use of financial intelligence is limited, with LEAs preferring to gather information directly from the private sector rather than utilizing FMS analysis.

Room for Improvement

While Azerbaijan has made progress in identifying ML/TF risks and articulating its NRA findings, there is still room for improvement. The country’s Coordination Council has a range of expertise beneficial for:

  • Conducting AML/CFT/CPF national risk assessments
  • Preparing action plans
  • Drafting laws

However, the operational level of coordination between LEAs and FIUs requires greater cooperation.

Conclusion

Azerbaijan’s fight against ML/TF is a mixed bag, with some areas showing progress while others require significant improvement. To achieve full effectiveness in combating money laundering and terror financing, the country must address these limitations and enhance its coordination and cooperation with international partners.