Central Bank switched semi-administrative, semi-threat methods

***

- Akram bey, is there a legal basis for the Central Bank's decision to tighten the rules for the purchase of foreign currency by the population? In general, does the Central Bank have such authority?

- The Central Bank determines the rules for conducting foreign exchange transactions by banks. But it cannot set limits. Limits can be set by law. These rules of the Central Bank should be adopted as a normative act and approved by the Ministry of Justice. However, there is no official information about the existence of such a document.

Therefore, I think that, in fact, the Central Bank just sent a letter of recommendation to the banks. Of course, anyone can recommend anything to anyone. But such recommendations of the Central Bank are, of course, accepted by banks as a mandatory requirement.

In other words, since there is no legal document, it cannot be said that the Central Bank has exceeded its powers.

- True, this decision has not yet been approved or refuted. But we have seen this practice applied several times in Azerbaijan. Prohibition of buying or selling dollars, application of limits, etc. Now it is the turn of foreign currency changers to report. Do you think this is the right step? Do people have a duty to disclose this? Do banks have the right to request this document?

- In general, the bank is encouraged to recognize its customers around the world within the framework of legislation on combating money laundering and terrorist financing. In this context, the bank may request any information from the customer, including the origin of funds. But in reality, banks are naturally reluctant to ask such questions. Because they can lose customers. For example, does anyone ask a customer, who has deposited in a bank, the source of the money? No!

In other words, it is clear that just asking the source of money from the recipient of dollars is not, in fact, aimed at combating money laundering and terrorist financing. If so, why don't they ask the buyer of land, house, car, etc.? The goal is to intimidate those who just want to buy dollars. That is: look, we will investigate how you earned this money!

In fact, just as a bank has the right to collect information from a customer, a customer has the right to give any answers. For example, just as Eldar Mahmudov's bloodline said, "It is inherited by my grandfather!" can be said. Or the customer may say that it is money that I have saved for many years. It is already impossible to check them. How can ordinary citizens be checked in Azerbaijan when no officials are required to file income and expenditure declarations? But of course, average Azerbaijani is afraid of such questions. Because he/she is generally afraid of the state.

The most important thing is that the bank can ask any question and get answers but can not limit the customer's purchase of dollars. At the furthest, the bank can transmit information to the Financial Monitoring Service, and the latter can take control of a citizen. But it is impossible not to sell as many dollars to the citizen as the latter wants! There is no such law!

As I said, in fact, the goal is to sell fewer dollars to citizens. That’s it!

- Usually, such cases indicate some situations. For example, the previous steps of devaluation. Even now, some experts say that step is a preparation for devaluation. Do you think the government will take this step in a pandemic or post-pandemic period when the population's incomes are low?

- This means that the Central Bank does not want to devalue or, at best, does not want to do it now. But at the same time, it does not want to sell dollars at the stated rate. It does not want to spend its foreign exchange reserves. Just because the market instruments are exhausted, it has switched to such semi-administrative, semi-threat methods. Of course, it is impossible to manage the economy in the XXI century with these methods. The exchange rate can be maintained. But at what cost? At the cost of shaking trust? And as a result, at the cost of the deepening crisis of the economy? This price is very expensive!

- Won’t the decision to tighten the rules for buying foreign currency reactivate the black market?

- Most likely it will be so. And bankers will be behind that market. They will sell dollars to the population expensively but the officials will say that our exchange rate is stable.

- Can any citizen sue any bank or the Central Bank for this requirement?

- A citizen cannot apply to the court for requiring information from him/her. But a citizen can sue if the bank sells him/her fewer dollars than he/she wanted.

- What would you suggest? If there is a demand for transparency, should this transparency apply only to citizens?

-First of all, there should be transparency requirements for officials. Then for ordinary citizens. And not just for foreign exchange purchases. But in order to do all this, first of all, a broad financial amnesty must be implemented. Ninety-nine percent of the country's wealthiest people have acquired property illegally. In this case, transparency has no effect. In all states, the initial large capital is of criminal origin. We have also passed this way. The next step must be towards civilization. Otherwise, the statehood itself may be in danger.