Countries/Jurisdictions of Primary Concern - Azerbaijan
Azerbaijan is a rapidly growing economy, at the crossroads of Europe and central Asia, with vast amounts of natural resources. As in previous years, the majority of international trade and foreign investment took place in the energy sector. All other sectors lagged energy in growth and sophistication, including the financial sector. Azerbaijan’s traditional ties, long-standing trade relationships, and common border with Iran, make Azerbaijan’s financial institutions vulnerable to being used by foreign entities looking to conduct money laundering/terrorism financing transactions. The major source of criminal proceeds in Azerbaijan is endemic public corruption, which cuts across all sectors. International reports identify Azerbaijan as a transit country for the Afghan drug trade; Azerbaijani authorities suspect this illicit drug trade generates a significant amount of illicit funds. It is likely the current Iranian sanctions regime also has forced illicit funding and trade into and out of Azerbaijan. Other generators of illicit funds include robbery, tax evasion, smuggling, the non-profit sector, fraud, and organized crime. Money laundering likely occurs in the formal financial sector, non-bank financial systems, and alternative remittance systems. There is a significant black market for smuggled goods in Azerbaijan, which serves as a transit country for illicit goods.
For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/
DO FINANCIAL INSTITUTIONS ENGAGE IN CURRENCY TRANSACTIONS RELATED TO INTERNATIONAL NARCOTICS TRAFFICKING THAT INCLUDE SIGNIFICANT AMOUNTS OF US CURRENCY; CURRENCY DERIVED FROM ILLEGAL SALES IN THE U.S.; OR ILLEGAL DRUG SALES THAT OTHERWISE SIGNIFICANTLY AFFECT THE U.S.: NO
CRIMINALIZATION OF MONEY LAUNDERING:
“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes
Are legal persons covered: criminally: YES civilly: YES
KNOW-YOUR-CUSTOMER (KYC) RULES:
Enhanced due diligence procedures for PEPs: Foreign: YES Domestic: NO
KYC covered entities: Banks; insurance and reinsurance companies and intermediaries; notaries, lawyers, and auditors; company formation agents and asset managers; real estate brokers and agents; pawnshops; securities brokers and investment funds; lotteries; the National Post; and non-governmental organizations (NGOs)
Number of STRs received and time frame: 400: January 1 - November 1, 2013
Number of CTRs received and time frame: 242,417: January 1 - November 1, 2013
STR covered entities: Banks and money remitters; insurance and reinsurance companies and intermediaries; securities brokers and investment funds; leasing companies; company formation agents and asset managers; lawyers and auditors; real estate brokers and agents; lotteries; pawnshops; and NGOs
MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:
Prosecutions: 1: January 1 - June 25, 2013
Convictions: 1 in 2013
RECORDS EXCHANGE MECHANISM:
With U.S.: MLAT: NO Other mechanism: YES
With other governments/jurisdictions: YES
Azerbaijan is a member of the Council of Europe Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism (MONEYVAL), a FATF-style regional body. Its most recent mutual evaluation can be found at: http://www.coe.int/t/dghl/monitoring/moneyval/Evaluations/round3/MONEYVAL(2008)27Rep-AZE3_en.pdf
ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:
The Government of Azerbaijan has made efforts to address financial institution vulnerability by bolstering the capabilities of its Financial Monitoring Service (FMS), implementing regulations in line with international standards, and working with donor support to implement systems to improve financial reporting. The FMS, Azerbaijan’s financial intelligence unit (FIU) under the Central Bank of the Republic of Azerbaijan, has worked to improve data collection, storage, and analysis. However, the lack of interagency cooperation and inadequate training significantly diminish its analytic and investigative abilities.
The anti-money laundering law excludes from the list of covered entities dealers of arts, antiques, and other high-value consumer goods; entities dealing with jewelry and precious metals; travel agencies; and auto dealers. These entities are not required to maintain customer information or report suspicious activity. The shortcomings should be addressed.
The small number of prosecutions and convictions demonstrate, in part, that there is too much emphasis on initiating money laundering investigations via the filing of suspicious transaction reports (STRs). Public corruption is also a concern. Azerbaijan law enforcement and customs authorities should be trained to recognize money laundering at the street level and in the ports. They should emphasize border enforcement and counter-smuggling techniques. Concerned enforcement agencies also should examine regional trade-based money laundering and value transfer networks, and the link to tax evasion and underground financial systems.