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The Council of Europe’s anti-money laundering Committee (MONEYVAL) calls on Azerbaijan to intensify efforts to improve its anti-money laundering and counter-terrorist financing (ML/FT) system, by addressing the identified deficiencies and taking effective measures in the field, the report published on CoE website reads.

“Azerbaijan’s strategic position is attractive for criminals and organized crime groups, this being strengthened by the existing transportation infrastructure. The main risks presented by the location of the country are connected above all with drug trafficking (mostly originating from Afghanistan with the destination in Europe or Russia) and human smuggling (where Azerbaijan figures both as a transit country and the country of origin),” the report reads. It is also noted that the most common offences for money laundering are tax evasion, counting for more than 75%, followed by corruption (almost 10%), embezzlement, fraud, drug crimes and cybercrime.

It is also highlighted that terrorist attacks in Azerbaijan occur relatively frequently, as in the past few years the authorities handled several cases of either undertaken attacks or attempted attacks.

In September 2013, there were 43 banks operating in Azerbaijan, with the majority being relatively small. The exception is the only state-owned bank, the International Bank of Azerbaijan (IBA), which accounts for about 34% of banking sector assets. The weak implementation of the rule of law and democratic principles in Azerbaijan might have an impact on the IBA, as a state-owned bank, making it vulnerable to misuse for ML/FT purposes, CoE experts note.

It is also stated in the report that criminal liability for money laundering and the financing of terrorism has not been extended to legal persons, which has an impact in limiting prosecutions for money laundering and the financing of terrorism. It is also noted that although financial institutions appear to have a good understanding of the requirements about customer due diligence and identification of politically exposed persons, they still establish business relationships in circumstances where a foreign legal person who is a beneficial owner is not identified.

Studying the corresponding legislation CoE experts concluded that sanctions available for infringements of the AML/CFT preventive regime are not effective, and very few sanctions had been applied in practice, with no sanctions at all being applied to senior management. The AML/CFT Law provides an exemption from a number of controls for smaller businesses. This exemption could increase the vulnerability of small businesses to the risk of being used for the purposes of money laundering and the financing of terrorism.

As regards terrorist financing, it is highlighted in the report that statistics provided by the authorities show a very low number of TF investigations carried out during the period 2008-2013. This comes to a certain extent in contradiction with the overall terrorist threat in Azerbaijan and also with the fact that public information is available on attempted terrorist acts prevented by the Azerbaijani authorities. Also, on-site interviews with representatives of Ministry of National Security highlighted the fact that a series of convictions for terrorism have been passed by the criminal courts in Azerbaijan. This raises for the evaluation team the question of how the people involved in those cases were funded and whether sufficient focus is placed by the competent authorities on financial flows related to terrorism.

Related:

MONEYVAL: There are gaps in laws of Azerbaijan aimed at combating money laundering and terrorist financing

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