Financial Crime World

Supervisors of Notaries, Lawyers, and Auditors Test Their Knowledge on Money Laundering Risks

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A recent assessment revealed significant variations in the understanding of money laundering (ML) risks among supervisors in Azerbaijan. The Central Bank of Azerbaijan (CBA) and the Bar Association demonstrated a good grasp of ML risks, while the State Tax Service (STS) and Chamber of Auditors showed a lesser degree of understanding.

Risk-Based Approach Proves Ineffective

The risk-based approach (RBA) to supervision did not prove effective during the review period. Notably, no supervision was conducted in the real estate sector, despite it being identified as a high-risk area for ML.

Lack of BO Register Hampers Authorities

Azerbaijan does not have a beneficial ownership (BO) register, and legal entities are not required to gather and retain BO information. While authorities have access to basic information kept by the STS, which is generally accurate and updated, the quality of BO information is impacted by deficiencies at the registry level.

International Cooperation

Azerbaijan has a sound legal framework for international cooperation in relation to ML, associated predicate offenses, and terrorist financing (TF). Mutual legal assistance (MLA) is provided in a constructive and timely manner, despite the lack of a case management system. The country’s Coordination Council plays a crucial role in conducting national risk assessments, preparing action plans, and drafting laws.

Room for Improvement

While Azerbaijan has made commendable progress in implementing FATF recommendations, there are areas that require improvement. Supervision of financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs) was achieved to a negligible extent. The country’s authorities also need to strengthen their ability to utilize financial intelligence, conduct ML investigations, and prosecute and confiscate the proceeds of crime.

Technical Improvements Needed

Azerbaijan needs to make technical improvements in areas such as supervision, sanctions, and transparency of legal persons. The country should also enhance its understanding of ML risks, particularly in relation to:

  • Drugs smuggling
  • Hawala
  • Use of cash
  • Legal persons
  • Virtual assets (VAs)

Additionally, there is a need for more comprehensive analysis of links between TF and organized crime.

Positive Developments

Recent legislative changes have positively impacted the country’s AML/CFT regime. However, it is essential to ensure that these changes are effectively implemented to address ML/TF risks and vulnerabilities identified in national risk assessments.

Key Recommendations

  • Enhance understanding of ML risks, particularly in relation to drugs smuggling, hawala, use of cash, legal persons, and virtual assets (VAs)
  • Strengthen ability to utilize financial intelligence, conduct ML investigations, and prosecute and confiscate the proceeds of crime
  • Improve supervision of financial institutions (FIs) and designated non-financial businesses and professions (DNFBPs)
  • Enhance transparency of legal persons
  • Conduct more comprehensive analysis of links between terrorist financing (TF) and organized crime