MONEYVAL, urges Azerbaijan to bolster efforts in combating money laundering

In a released report today, the Council of Europe's anti-money laundering body, MONEYVAL, urges Azerbaijani authorities to bolster efforts in combating money laundering (ML), the financing of terrorism (TF), and financing of proliferation, particularly focusing on preventive measures and supervision.

The report presents a thorough evaluation of Azerbaijan's compliance with standards set by the Financial Action Task Force (FATF). Notably, since MONEYVAL's last assessment in 2014, Azerbaijan has undertaken several initiatives to fortify its legal and institutional framework for addressing money laundering and the financing of terrorism (AML/CFT), laying the groundwork for an effective AML/CTF system.

MONEYVAL acknowledges Azerbaijan's substantial progress in combating terrorist financing, highlighting the authorities' successful investigation of TF offenses, resulting in seven convictions during the assessment period. Additionally, the country's effectiveness in international cooperation is commended, with Azerbaijan demonstrating the capacity to provide and seek constructive assistance.

However, the report underscores the need for significant enhancements in investigating and prosecuting money laundering cases effectively. While law enforcement authorities utilize financial intelligence to establish evidence and trace proceeds of crime linked to money laundering and terrorism financing, greater domestic cooperation at the operational level is warranted.

Moreover, the report emphasizes the necessity for consistency in investigations and prosecutions, particularly in addressing high-threat crimes. It notes that while some money laundering cases have been pursued, there's room for improvement in targeting predicate offenses and holding legal entities accountable for money laundering.

Azerbaijan's asset confiscation policy is recognized, yet MONEYVAL urges the country to conduct parallel financial investigations systematically to trace assets linked to all proceeds-generating crimes, including terrorism financing.

In terms of implementing targeted financial sanctions, Azerbaijan's legal framework is deemed sound. However, concerns linger regarding private sector implementation and the adequacy of supervision, particularly regarding proliferation financing issues.

MONEYVAL calls for swift action to mitigate the risk of Non-Profit Organizations (NPOs) being abused for terrorism financing, ensuring that preventive measures are proportionate while safeguarding legitimate NPO activities.

Supervision of financial institutions and non-financial businesses and professions requires fundamental improvements, according to MONEYVAL. The understanding of risks among supervisors varies, and a stronger risk-based approach in supervision is advocated.

While Azerbaijan has taken strides in preventing the misuse of legal entities, more proactive measures are needed to ensure transparency. Reporting entities are urged to apply necessary identification measures for politically exposed persons and beneficial owners.

As part of follow-up procedures, Azerbaijan is expected to report progress in enhancing AML/CFT measures to MONEYVAL by December 2025.

Prime Minister Ali Asadov signed on 2 October 2023 a resolution "On the Basis of Defining High-risk Zones" in line with the Law of the Azerbaijan Republic "On Combating Money Laundering and Financing of Terrorism".  

Thus, the bases for defining high-risk zones are:

- UN Security Council, World Bank and International Monetary Fund decisions;

- published mutual evaluation or detailed reports, progress reports of the Financial Action Task Force (FATF), the Council of Europe's Committee of Experts on the Evaluation of Actions against Money Laundering and the Financing of Terrorism (MONEYVAL), regional bodies like the FATF (FSRB), other specialised international or regional organisations, as well as progress reports.