VZCZCXYZ0002
RR RUEHWEB

DE RUEHKB #0931/01 3351241
ZNR UUUUU ZZH
R 011241Z DEC 09
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 2096
INFO RUCNCIS/CIS COLLECTIVE
RHEHNSC/NSC WASHDC
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/CDR USEUCOM VAIHINGEN GE
RUEHAK/AMEMBASSY ANKARA 3692

UNCLAS BAKU 000931 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EUR/CARC, INL 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM PTER SNAR AJ
SUBJECT: AZERBAIJAN: 2009-2010 INCSR PART 2, MONEY LAUNDERING AND 
FINANCIAL CRIMES 
 
¶I. Summary 
 
Embassy Baku submits the following short responses for the money 
laundering and financial crimes section of the 2009-2010 
International Narcotics Control Strategy Report (INCSR). 
 
GENERAL QUESTIONS 
 
IS THE JURISDICTION CONSIDERED AN IMPORTANT REGIONAL FINANCIAL 
CENTER?  WHAT IS ITS SIGNIFICANCE IN TERMS OF MONEY LAUNDERING? 
At the crossroads of Europe and Central Asia and with vast amounts 
of natural resources, Azerbaijan is a rapidly growing economy.   The 
strong economic growth is fueled by oil and natural gas resources. 
International trade increased since independence, as had foreign 
investment.  Much of the international trade and foreign investments 
took place in the energy sector.  All other sectors lag energy in 
growth and sophistication, to include the financial sector.  As a 
result, Azerbaijan is not an important financial center in global 
terms, nor a major location where foreign entities look to conduct 
money laundering/terrorist financing transactions. Azerbaijan, 
however, is not without such transactions and Azerbaijani 
authorities believe that money laundering and terrorist financing 
operates largely through the banking sector. 
 
TO THE EXTENT IT IS KNOWN, IS MONEY LAUNDERING/TERRORIST FINANCING 
PRIMARILY RELATED TO PROCEEDS FROM NARCOTICS, PSYCHOTROPIC 
SUBSTANCES AND CHEMICAL PRECURSORS.  IF NOT, WHAT IS/ARE THE MAJOR 
SOURCES OF THE PROCEEDS?  TO WHAT EXTENT KNOWN, DO THE CRIMINAL 
PROCEEDS LAUNDERED IN THE JURISDICTION DERIVE PRIMARILY FROM 
DOMESTIC OR FOREIGN CRIMINAL ACTIVITY?  ARE THE MONEY LAUNDERING 
PROCEEDS CONTROLLED BY DRUG-TRAFFICKING ORGANIZATIONS, ORGANIZED 
CRIME, OR TERRORIST GROUPS OPERATING LOCALLY?  WHAT IS THE EXTENT 
THAT PUBLIC CORRUPTION CONTRIBUTED TO MONEY LAUNDERING/TERRORIST 
FINANCING IN THE HOST COUNTRY? 
The major source of criminal proceeds in Azerbaijan is from the 
white collar crime of public corruption.  As with many other similar 
rapidly developing economies around the globe, corruption is 
endemic.  As a result, the majority of money laundering is related 
to this activity and Embassy has little insight into it, but rather 
antidotal evidence.  This corruption occurs in all sectors and at 
all levels, but stems from huge oil and gas revenues.  It is 
unlikely that these proceeds would ever be used for funding 
terrorism or other criminal offenses, but rather used to increase 
personal wealth. 
 
There are several other sources of criminal proceeds.  As a transit 
country for the Afghan drug trade, Azerbaijani authorities suspect 
that the illicit drug trade also generates a significant amount of 
illicit funds.  Other generators of illicit funds include robbery, 
tax evasion, smuggling, trafficking, and organized crime. 
 
IS THERE A BLACK MARKET FOR SMUGGLED GOODS IN THE COUNTRY?  IF SO, 
IS THERE EVIDENCE TO SUGGEST THAT IT IS SIGNIFICANTLY FUNDED BY 
NARCOTIC PROCEEDS OR OTHER ILLICIT PROCEEDS?  DOES CONTRABAND 
SMUGGLED GENERATE FUNDS THAT ARE LAUNDERED THROUGH THE FINANCIAL 
SYSTEM? 
There is a significant black market for smuggled goods in 
Azerbaijan, and Azerbaijan serves as a transit country for illicit 
goodsn.   As previously mentioned, Azerbaijan is located on the 
Afghanistan drug transit route; drugs are regularly smuggled into 
and out of Azerbaijan.  Additionally, according to recent data, the 
amount of drug users in Azerbaijan increased in the last years. 
Azerbaijani authorities believe that illicit funds generated through 
the transit of narcotics and sales of drugs may be laundered through 
the financial system. 
 
DOES MONEY LAUNDERING/TERRORSIT FINANCING OCCUR IN THE FORMAL 
FINANCIAL CENTER, WITHIN AN OFFSHORT FINANCIAL CENTER OR FREE TRADE 
ZONE OR NON-BANK FINANCIAL SYSTEM OR VIA ALTERNATIVE REMITTANCE 
SYSTEMS? 
Money laundering likely occurs in the formal financial sector, 
non-bank financial systems, and alternative remittance systems. 
 
DO THE JURISDICTION'S FINANCIAL INSITUTIONS ENGAGE IN CURRENCY 
TRANSACTIONS INVOLVING INTERNATIONAL NARCOTICS TRAFFICKING PROCEEDS 
THAT INCLUDE SIGNIFICANT AMOUNT OF US CURRENCY OR CURRENCY DERIVED 
FROM ILLEGAL DRUG SALES IN THE US OR THAT OTHERWISE SIGNIFICANTLY 
AFFECT THE US? 
To the post's knowledge, Azerbaijan's financial institutions do not 
engage in currency transactions involving international narcotics 
trafficking proceeds that include significant amounts of U.S. 
currency or currency derived from illegal drug sales in the United 
States or that otherwise significantly affect the United States. 
Because Azerbaijan is located on the Afghanistan opiate trade route, 
most of the opiate trade transits Azerbaijan and ends up in Europe. 
 
As a result, it has a negligible direct impact on the US. 
 
IS THERE ANY INDICATION THAT TRADE-BASED MONEY-LAUNDERING OCCURS IN 
THE POSTS JURISDICTION? 
Post assesses that the corruption level is high in Azerbaijan. 
Trade-based money-laundering likely occurs frequently within many of 
the economic sectors, for example construction and infrastructure 
development. 
 
OFFSHORE FINANCIAL CENTERS 
 
IS THE COUNTRY CONSIDERED AN OFFSHORE FINANCIAL CENTER? 
Azerbaijan is not considered an offshore financial center. 
 
ARE THERE OFFSHORE BANKS, INTERNATIONAL BUSINESS COMPANIES OR OTHER 
FORMS OF EXEMPT OR SHELL COMPANIES OR TRUSTS PERMITTED?  IF SO, HOW 
DO OFFSHORE REGULATIONS DIFFER FROM ONSHORE? 
N/A.  Azerbaijan is not an offshore financial center. 
 
PLEASE PROVIDE THE NUMBER OF OFFSHORE CASINOS OR INTERNET GAMING 
SITES.  DOES THE JURISDICTION LICENSE AND REGULATE THESE SITES? 
N/A.  Azerbaijan is not an offshore financial center. 
In addition, gambling is illegal in Azerbaijan.  As such, there are 
no licensed casinos or internet gaming sites permitted in 
Azerbaijan. 
 
IS THERE A SEPARATE REGULATORY AGENCY FOR THE OFFSHORE SECTOR, OR IS 
THE OFFSHORE FINANCIAL SECTOR REGULATED BY AN ONSHORE REGULATOR? 
N/A.  Azerbaijan is not an offshore financial center, and as such, 
does not regulate offshore businesses. 
 
FREE TRADE ZONES 
 
ARE THERE FREE TRADE ZONES IN THE JURISDICTION? 
There are no free trade zones in Azerbaijan. 
 
IS THERE ANY INDICATION THAT THESE FTZS ARE BEING USED IN 
TRADE-BASED MONEY LAUNDERING SCHEMES OR BY THE FINANCIERS OF 
TERRORISM? 
N/A - There are no free trade zones in Azerbaijan. 
 
WHAT TYPES OF SUPERVISORY PROGRAMS AND/OR DUE DILIGENCE PROCEDURES 
ARE IN PLACE TO MONITOR ACTIVITIES IN THE FTZ?  ARE THERE 
IDENTIFICATION REQUIREMENTS FOR COMPANIES AND INDIVIDUALS WHO USE 
THE ZONE? 
N/A - There are no free trade zones in Azerbaijan. 
 
LEGAL FOUNDATION OF AML REGIME 
 
WHAT LAWS AND REGULATIONS EXIST IN RELATION TO AML/CTF? 
With regards to Anti-Money Laundering/Counter-Terrorist Financing 
(AML/CTF), the Government of Azerbaijan (GOAJ) has two laws.  In 
February 2009, the long-awaited law on "Preventing Legalization of 
Money and Property Obtained in Criminal Ways and Financing of 
Terrorism" was passed.  In 2002, the GOAJ passed "Legalization of 
money proceeds or other property obtained through criminal acts", 
which is the criminal law on money laundering. 
 
In an effort to strengthen the code, the GOAJ recently drafted new 
changes and amendments to the AML/CTF laws, hoping that Parliament 
would pass them by end of December 2009.  GOAJ provided Post a draft 
copy of the amendments and asked for USG comments.  Post forwarded 
the changes to DOJ and are awaiting DOJ's comments.  It is view of 
post that the amendments will address many key USG concerns. 
 
IS MONEY LAUNDERING A CRIMINAL OFFENSE IN THIS JURISDICTION? 
Money laundering is a criminal offense in the jurisdiction. 
 
DOES THE LAW APPLY ONLY TO DRUG RELATED MONEY LAUNDERING? 
The law on "Preventing Legalization of Money and Property Obtained 
in Criminal Ways and Financing of Terrorism" defines criminally 
obtained funds as funds of every kind, property, whether movable or 
immovable, corporeal or incorporeal, tangible or intangible, legal 
documents evidencing the title to such property, obtained directly 
or indirectly through the commission of a criminal offense.  As 
such, the law is wide in scope, and applies to a many methods of 
obtaining criminally obtained funds, not only drug related. 
 
DOES THE JURISDICTION LIST SPECIFIC CRIMES AS PREDICATE OFFENCES OR 
TAKE AN "ALL SERIOUS CRIMES" APPROACH?   IN SOME JURISDICTIONS, 
ANTI-MONEY LAUNDERING LAWS ARE APPLICABLE TO PREDICATE OFFENSES 
DEFINED AS "ALL SERIOUS CRIMES", CRIMES THAT CARRY A THRESHOLD 
MINIMUM SENTENCE IN THE PENAL CODE.  WHAT IS THAT THRESHOLD?  IF THE 
COUNTRY HAS A LIST APPROACH, WHAT OFFENSES ARE COVERED? 
The Financial Monitoring Organ (FMO) collects specific information 
 
on all suspicious transactions that include: 
 
-  Any transaction of 20,000 AZN or greater 
-  Situations that cause suspicions or reasonable grounds for 
suspicions that the funds or other property are the proceeds of 
criminal activity or are related to terrorist financing 
-  Any transaction with the funds or other property associated with 
a the citizens of a particular country, which the GOAJ deems 
suspicious 
-  Any transactions from bank accounts of politically exposed 
persons of a foreign country 
-  Transfer of funds from anonymous accounts that are out of the 
jurisdiction of GOAJ, as well as transfer of funds to anonymous 
accounts outside the GOAJ 
-  The list of countries that are suspected in either legalization 
of criminally obtained funds or other property, financing of 
terrorism, support of dangerous trends of organized crime, armed 
separatism, extremism, mercenary, participation in illegal narcotic 
drug dealing and narcotic production 
Once the information is collected, the FMO analyzes the information 
submitted.  When the FMO determines that the executed transaction is 
related to the legalization of criminally obtained funds or other 
property and the financing of terrorism, the information on the 
legalization of criminally obtained funds would be submitted to the 
General Prosecutor's Office for review. 
 
After review by the Prosecutor's office, if the Prosecutor General 
finds that a specific transaction was full or partial, direct or 
indirect reference of money resources or other property for 
commitment of terrorism or accumulation of money resources or other 
property in the same purposes the individual would be punished by 
imprisonment for the term from eight up to twelve years with 
confiscation of property. 
 
In addition, should the Prosecutor General find that an individual 
was attempting to legalize money resources or other property, 
acquired from illegal circulation of narcotics or psychotropic 
substances, the individual may be punished by the penalty at a rate 
from two up to five thousand of nominal financial unit, or 
corrective works for the term up to two years, or imprisonment for 
the term up to four years.   If the same act is committed 
repeatedly, the individual could be imprisoned for a term from four 
to eight years with confiscation of property.  If such transactions 
were found to be organized by a group, they would be punishable from 
seven to twelve years with or without confiscation of property. 
 
As previously discussed, the GOAJ has begun the process to amend 
many of its statutes related to AML/CTF.  In the amendments, the 
GOAJ is proposing changes to many of the statutes related to these 
issues including the minimum sentence. 
 
HAS THE COUNTRY ENACTED SECRECY LAWS THAT PREVENT DISCLOSURE OF 
CLIENT AND OWNERSHIP INFORMATION BY DOMESTIC AND OFFSHORE FINANCIAL 
SERVICES COMPANIES TO BANK SUPERVISORS AND LAW ENFORCEMENT 
AUTHORITIES? 
Article 16 of the law on "Preventing Legalization of Money and 
Property Obtained in Criminal Ways and Financing of Terrorism" 
stipulates that banking or other legally protected secrecy regimes 
would be required to provide the appropriate documentations to the 
authorities despite their status. 
With regards to this law, Azerbaijan does not have secrecy laws that 
prevent the disclosure of client and ownership information to bank 
supervisors and law enforcement authorities. 
 
FINANCIAL SECTOR 
 
ARE BEARER SHARES PERMITTED FOR BANKS AND OR COMPANIES? 
 Bearer shares are not permitted for banks and companies. 
 
WHICH ENTITIES SUPERVISE AND EXAMINE FINANCIAL INSTITUTIONS FOR 
COMPLIANCE WITH AML/CTF REGULATIONS? 
The February 2009 AML/CTF law applies to: 
-  Credit Institutions 
-  Insurers, reinsurers, insurance intermediaries 
-  Brokers 
-  Credit institutions and other organizations that transfer funds 
-  Pawnshops 
-  Investment vehicles 
-  Legal persons engaged in buying or selling of precious stones, 
precious metals, as we as jewelry or other goods made of precious 
stones and precious metals 
-  Non-governmental organizations or religious organizations parts 
of activities of which consist of receiving, collecting, delivering 
or transferring the funds 
-  Lottery organizers 
 
-  Legal persons providing intermediary services on the buying and 
selling of real estate 
 
The supervision authorities are the following: 
-  Central Bank of Azerbaijan for credit institutions and the ones 
providing leasing services 
-  A relevant executive authority carrying out supervision over the 
securities markets - for brokers, who are professional participants 
of the securities market, those who professionally operate in the 
management of securities, lottery organizers and investment funds 
-  A relevant executive authority - for insurers, reinsurers and 
insurance intermediaries, legal persons engaged in buying and 
selling of precious stones, precious metals, as well as jewelry or 
other goods made of precious stones or precious metals 
-  A relevant authority that supervises over the institutions 
proving post services - for the relevant post services 
-  The relevant executive authorities- for the non-governmental or 
religious organizations 
-  The relevant executive authorities- for the notaries and other 
persons providing legal services 
-  The bar of lawyers within the framework of competence- for 
lawyers 
-  The Chamber of Auditors within the framework of competence - for 
the persons providing audit services 
-  If a supervision authority is not envisaged for any monitoring 
entity and other persons involved in monitoring, the supervision 
over the compliance with the requirements should be carried out by 
the Financial Monitoring Organ (FMO). 
 
As a result, it is the Central Bank that is responsible for 
monitoring financial institutions.  After the February 2009 law 
passed, the GOAJ decided that the Financial Monitoring Organ (FMO) 
would be located within the Central Bank.  After several months of 
working on budget issues, amendments and an action plan, the Central 
Bank appointed the Director of the FMO, Adishirin Gasimov and the 
Deputy Head of the FIU, Anar Salmanov. 
 
In addition, the GOAJ decided on the budget for the unit and 
staffing.  Within the budget, the GOAJ allocated that the staffing 
of the FMO would consist of 37 staff members, accounting for 15% of 
the Central Bank.  With regards to financial resources, the GOAJ 
allocated 5 million AZN to the FMO in the 2010 budget.  Of which, 1 
million AZN was allocated to the creation of an IT system. 
 
WHAT IS THEIR CAPACITY TO CONDUCT COMPLIANCE INVESTIGATIONS (ARE 
THEY ADEQUATELY STAFFED AND TRAINED)? 
Because the law was so recently passed, the FMO only began to 
operate in 2009.  As a result, it is difficult to evaluate the FMO's 
capacity to conduct compliance investigations.  With that said, on 
21 October 2009, Azerbaijani President Ilham Aliyev approved a 
Decree that provided an action plan on improvement of the AML/CTF 
procedures.  During July 2009, the USG conducted trainings for the 
Prosecutor General's office.  Within the action plan, the GOAJ 
highlighted the need to conduct trainings and seminars for 
supervision authorities.  In addition, according to the Action Plan, 
as of December 2009, the FMO planned to be fully staffed. 
 
ARE BANKS AND OTHER FINANCIAL INSTITUTIONS REQUIRED TO KNOW, RECORD, 
AND REPORT THE IDENTITIY OF CUSTOMERS ENGAGING IN SIGNIFICANT 
TRANSACTIONS, INCLUDING THE RECORDING OF LARGE CURRENCY TRANSACTIONS 
AT THRESHOLDS APPROPRIATE TO THE COUNTRY'S ECONOMIC SITUATION?  WHAT 
IS THE STATUTORY THRESHOLD? 
The law on "Preventing Legalization of Money and Property Obtained 
in Criminal Ways and Financing of Terrorism" detailed the know your 
client requirements.  All banks and other financial institutions 
shall identify their customers and beneficial owners when: 
-  Before establishing business relations 
-  Before carrying out occasional transactions above the 20,000 AZN 
threshold 
-  Before carrying out wire transfers 
 
The 20,000 AZN requirements is a decent threshold for the country. 
However, because this relates to all transactions, not just cash 
transactions, post's only concern is that this might become 
cumbersome for the GOAJ and banks to keep track of and fulfill the 
requirement.  The law is too new to comment on its effectiveness 
related to implementation. 
 
ARE BANKS AND OTHER FINANCIAL INSITUTIONS REQUIRED TO MAINTAIN FOR 
AN ADEQUATE TIME RECORDS NECESSARY TO RECONSTRUCT SIGNIFICANT 
TRANSACTIONS THROUGH FINANCIAL INSITUTIONS IN ORDER TO BE ABLE TO 
RESPOND QUICKLY TO INFORMATION REQUESTS FROM APPORPRIATE GOVERNMENT 
AUTHORITIES IN NARCOTICS RELATED OR OTHER MONEY LAUNDERING OR 
TERRORIST FINANCE CASES? FOR HOW LONG? 
Banks and other financial institutions are required to maintain for 
 
an adequate time records necessary to reconstruct significant 
transactions through financial institutions in order to be able to 
respond quickly to information requests from appropriate government 
authorities in narcotics related and other money laundering or 
terrorist finance cases.  The identification documents of a 
customer, beneficial owner or authorized representative must be kept 
for 5 years after the customer's account is closed or termination of 
legal relations with the customer.  Documents on specific 
transactions (i.e. account files, business correspondence, and other 
relevant documents) must be kept for at least 5 years following the 
completion of the transaction. 
 
Although this law is in place, the education process has just begun. 
 Because of this, the FMO recognizes that part of their job in the 
upcoming time period is to educate the banks and other financial 
institutions on proper bank recording.  The FMO requested technical 
assistance from the USG, which included a request for assistance in 
educating the interested parties. 
 
DO FINANCIAL INSITUTIONS REPORT SUSPICIOUS TRANSACTIONS?  WHICH 
ONES? IS SUCH REPORTING MANDATORY OR VOLUNTARY? IS REPORTING 
REQUIRED FOR ALL SUSPICIOUS TRANSACTIONS, OR IS THERE A THRESHOLD 
AMOUNT BELOW WHICH SUSPICIOUS TRASACTION REPORTS ARE NOT REQUIRED? 
According to the February 2009 law, all financial institutions are 
required by law to report suspicious transactions.   Reporting is 
mandatory. There is no occasion that a suspicious transaction does 
not need to be reported. 
 
The Financial Monitoring Organ (FMO) collects specific information 
on all suspicious transactions that include: 
-  Any transaction of 20,000 AZN or greater 
-  Situations that cause suspicions or reasonable grounds for 
suspicions that the funds or other property are the proceeds of 
criminal activity or are related to terrorist financing 
-  Any transaction with the funds or other property associated with 
a the citizens of a particular country, which the GOAJ deems 
suspicious 
-  Any transactions from bank accounts of politically exposed 
persons of a foreign country 
-  Transfer of funds from anonymous accounts that are out of the 
jurisdiction of GOAJ, as well as transfer of funds to anonymous 
accounts outside the GOAJ 
-  The list of countries that are suspected in either legalization 
of criminally obtained funds or other property, financing of 
terrorism, support of dangerous trends of organized crime, armed 
separatism, extremism, mercenary, participation in illegal narcotic 
drug dealing and narcotic production. 
 
ARE REPORTINGING INDIVIDUALS PROTECTED BY LAW WITH RESPECT TO THEIR 
COOPERATION WITH LAW ENFORCEMENT ENTITIES? 
Reporting individuals are protected by law in respect to their 
cooperation with law enforcement. 
 
INFORMAL FINANCIAL SECTOR AND NONFINANCIAL BUSINESSES AND 
PROFESSIONS 
 
ARE THE AML/CTF CONTROLS AS DESCRIBED IN THE PRECCEDING QUESTIONS 
APPLIED TO NON-BANK FINANCIAL INSITUTIONS AND DESIGNATED 
NON-FINANCIAL BUSINESSES AND PROFESSIONS?  WHICH ARE SUBJECT TO THE 
REQUIREMENTS TO REPORT SUSPICIOUS TRANSACTIONS AND/OR LARGE 
TRANSACTIONS?  WHICH ENTITIES HAVE ACTUALLY FILLED SUCH REPORTS? 
WHICH AUTHORITY SUPERVISES SUCH ENTITIES FOR COMPLAINCE? 
The AML/CTF controls as described in the preceding questions are 
also applied to non-bank financial institutions (NBFIs) and 
designated non-financial businesses and professions (DNFBPs), such 
as exchange houses, stock brokerages, cash couriers, dealers in 
jewels and precious metals, insurance companies, pawn shops, 
realtors, high-worth dealers in art and to intermediaries, such as 
accountants, notaries, and brokers.  The AML/CTF law is fairly wide 
sweeping and the only two areas that post identifies as areas that 
are missed are car dealers and lawyers. They are all (except car 
dealers/lawyers) required to report suspicious transactions and 
large transactions. To date, no entities have actually filed reports 
because the law has just begun the implementation process. The FMO 
is the governmental body which all businesses must report suspicious 
transactions.  In addition, the FMO conducts the analysis to 
determine if a transaction may need further investigation by the 
Prosecutor General's office. 
 
FINANCIAL INTELLIGENCE UNIT 
 
DO CURRENT LAWS PROVIDE FOR THE ESTABLISHMENT AND FUNDING OF A 
FINANCIAL INTELLIGENCE UNIT? 
The February 2009 law provided for the establishment and funding of 
the Financial Monitoring Organ (FMO).  As previously mentioned the 
 
budget for 2010 for the FIU was 5 million AZN. 
HAS THE COUNTRY ESTABLISHED AN FIU?  IS IT OPERATIONAL?  IS IT 
ADEQUATELY STAFFED?  TO WHAT DEGREE DOES IT HAVE OPERATIONAL AND 
BUDGETARY INDEPENDENCE?  WHERE IN THE GOVERNMENT IS IT HOUSED? 
The GOAJ has established an FMO which has been operational since 
circa October 2009.  The plan is to staff the FMO with approximately 
37 staff members.  When fully staffed, post believes that the FMO 
will be adequately staffed.  The FMO has adequate operational and 
budgetary independence. It is housed within the Central Bank of 
Azerbaijan. 
 
DESCRIBE THE AUTHORITIES AND FUNCTIONS OF THE FIU.  IS IT AN 
ADMINISTRATIVE BODY THAT PERFORMS ANALYTICAL DUTIES?  DOES IT HAVE 
CRIMINAL INVESTIGATIVE AND/OR REGULATORY RESPONSIBILITIES? 
 The FIU is an administrative body that performs analytical duties. 
It does not have criminal investigative or regulatory 
responsibilities.  The GOAJ has given the prosecutor general's 
office the responsibility to investigate financial crimes. 
 
DOES THE FIU HAVE ACCESS TO RECORDS OR DATABASES OF OTHER GOVERNMENT 
ENTITIES OR FINANCIAL INSTITUTIONS?  DOES IT HAVE FORMAL MECHANISMS 
IN PLACE TO SHARE INFORMATION DOMESTICALLY OR INTERNATIONALLY WITH 
OTHER FIUS? 
The FMO has access to the records and databases of other government 
entities and financial institutions. It has formal mechanisms in 
place to share information domestically (with law 
enforcement/prosecutors) and internationally with other FMOs. 
 
HOW MANY SUSPICIOUS TRANSACTION REPORTS WERE RECEIVED IN 2009?  HOW 
MANY WERE THE SUBJECT OF INVESTIGATION OR RESULTED IN REFERRALS TO 
LAW ENFORCEMENT FOR INVESTIGATION? 
Because the law was passed in Feb 2009, and it took several months 
to get the FMO established, to date no suspicious transactions 
reports were received in 2009.  The FMO is still in the process of 
educating the banks, prosecutors, etc on the law. 
 
WHICH GOVERNMENT BODIES ARE RESPONSIBLE FOR INVESTIGATING FINANCIAL 
CRIMES, INCLUDING MONEY LAUNDERING AND TERRORIST FINANCING?  ARE 
THEY ADEQUATELY STAFFED AND TRAINED? 
The Prosecutor General's Office is responsible for investigating 
financial crimes, including money laundering and terrorist 
financing. They are adequately staffed and trained.  The USG 
provided training this year to the Prosecutor General's office 
regarding AML/CTF investigations. 
 
ASSET FORFEITURE AND SEIZURE LEGISLATION 
 
HAVE THERE BEEN ARRESTS, PROSECUTIONS, AND CONVICTIONS FOR MONEY 
LAUNDERING OR TERRORIST FINANCING SINCE JAN 1 2009?  HOW MANY? 
PLEASE PROVIDE DETAILS. 
One person has been arrested for money laundering since January 1, 
¶2009.  This individual was a high ranking government official 
accused of embezzling and laundering $100,000.  The case is 
currently being investigated. 
 
HAS THE COUNTRY ENACTED LAWS AND ESTABLISHED SYSTEMS FOR 
IDENTIFYING, TRACING, FREEZING, SEIZING, AND FORFEITING NARCOTICS 
RELATED ASSETS AS WELL AS OTHER ASSETS DERIVED FROM, OR INTENDED 
FOR, TERRORIST FINANCING AND OTHER SERIOUS CRIMES? 
GOAJ has enacted laws and established systems for identifying, 
tracing, freezing, seizing, and forfeiting narcotics-related assets 
as well as assets derived from, or intended for, terrorist financing 
and other serious crimes.  The authority is judicial. New 
legislation was introduced in October 2009. 
 
WHAT ARE THE OBSTACLES OR DISINCENTIVES TO ENACTING SUCH LAWS, 
REGULATIONS, AND OTHER AUTHORITIES? 
None - The laws were enacted this year. 
 
WHAT ARE THE MAJOR PROVISIONS IN CURRENT AND OR PROPOSED 
LEGISLATION? 
Any asset can be seized, including instruments of crime such as 
conveyances used to transport narcotics, property on which illicit 
crops are grown, or are used to support terrorist activity, and 
intangible assets such as bank accounts.  Substitute assets can also 
be seized.  Legitimate businesses can be seized if used to launder 
drug money, support terrorist activity, or are otherwise related to 
other criminal proceeds. 
 
WHAT GOVERNMENT ENTITIES ARE RESPONSIBLE FOR TRACING, SEIZING ASSETS 
AND FREEZING ASSETS?  IS THERE A PERIOD OF TIME ASCRIBED TO THE 
ACTION OF FREEZING, AFTER WHICH THE ASSETS ARE RELEASED?  ARE FROZEN 
ASSETS CONFISCATED?  IF YES, BY WHAT GOVERNMENT ENTITY?  IS THERE AN 
ASSET FORFEITURE FUND? WHAT ENTITY RECEIVES PROCEEDS FROM ASSET 
SEIZURES AND FORFEITURES?  WHICH AGENCIES MANAGE AND HAVE 
 
RESPONSIBILITY FOR SEIZED ASSETS?  WHAT IS THEIR CAPACITY TO MANAGE 
SEIZED ASSETS? 
The Prosecutor General's Office is responsible for tracing, seizing 
assets and freezing assets. There is a period of time ascribed to 
the action of freezing, after which the assets are released. There 
is not an asset forfeiture fund. The Prosecutor General's Office 
manages and has responsibility for seized assets. Their capacity to 
managed seized assets is adequate. 
 
DOES THE BANKING COMMUNITY COOPERATE WITH ENFORCEMENT EFFORTS TO 
TRACE FUNDS AND SEIZE/FREEZE BANK ACCOUNTS? 
It is still too early to comment on the success or failure of the 
implementation of the AML/CTF laws. 
 
DOES THE GOVERNMENT ENFORCE EXISTING ASSET SEIZURE AND FORFEITURE 
LAWS?  DOES THE JURISDICTION HAVE ADEQUATE POLICE POWERS AND 
RESOURCES TO TRACE, SEIZE AND FREEZE ASSETS?  IF SO, CAN THE 
JURISDICTION FREEZE ASSETS WITHOUT UNDUE DELAY? 
The government enforces existing asset seizure and forfeiture laws, 
though some would argue that prosecution is selective, inconsistent 
and incluenced by politics.  The jurisdiction has adequate police 
powers and resources to trace, seize and freeze assets. The 
jurisdiction can freeze assets without undue delay. 
 
DOES THE GOVERNMENT HAVE AN INDEPENDENT NATIONAL SYSTEM AND 
MECHANISM FOR FREEZING TERRORIST ASSETS? 
The government does not have an independent national system and 
mechanism for freezing terrorist assets. 
 
WHAT WAS THE DOLLAR AMOUNT OF NARCOTICS RELATED OR TERRORIST RELATED 
AND OTHER CRIMINAL RELATED ASSETS FROZEN, SEIZED AND/OR FORFEITED IN 
THE PST YEAR?  HOW DOES THIS AMOUNT COMPARE TO AMOUNTS 
SEIZED/FORFEITED/FROZED IN THE PREVIOUS YEARS? 
The AML/CTF procedures were just established in 2009.  As such, the 
amount increased since 2008.  In 2009, $100,000 was frozen, compared 
to 2008 when no assets were frozen. 
 
HAS THE COUNTRY ENACTED LAWS FOR THE SHARING OF SEIZED ASSETS WITH 
OTHER GOVERNMENTS?  IS THE GOVERNMENT ENGAGED IN BILATERAL OR 
MULTILATERAL NEGOTIATIONS WITH OTHER GOVERNMENTS TO ENHANCE ASSET 
TRACING, FREEZING AND SEIZURE? 
The country does not have laws for the sharing of seized assets with 
other governments.  At this time, the government is actively engaged 
in bilateral and multilateral negotiations with other governments to 
enhance asset tracing, freezing and seizure. 
 
TERRORIST FINANCING 
 
HAS THE JURISDICTION CRIMINALIZED THE FINANCING OF TERRORISM AS 
REQUIRED BY THE UNITED NATIONS COUNCIL RESOLUTION 1373? 
Yes, money laundering is a crime and has been since an addition to 
the criminal code in 2002.  Pursuant to the draft amendments to the 
law, financing of terrorism would also be added to the law. 
 
HAS THE JURISDICTION CIRCULATED TO ITS FINANCIAL INSITUTIONS THE 
LIST OF INDIVIDUALS AND ENTITIES THAT HAVE BEEN INCLUDED ON THE UN 
1267 SANCTION'S COMMITTEE'S CONSOLIDATED LIST AS BEING LINKED TO BIN 
LADEN, MEMBERS OF AL QA'IDA OR THE TALIBAN?  DOES THE JURISDICTION 
CIRCULATE THE LIST OF TERRORIST ORGAINZATIONS/FINANCIERS THAT THE 
USG OR THE EUROPEAN UNION HAVE DESIGNATED UNDER RELEVANT 
AUTHORITIES?  DID THE JURISDICTION IDENTIFY, FREEZE, SEIZE AND/OR 
FORFEIT RELATED ASSETS IN 2009? 
Azerbaijan has circulated to its financial institutions the list of 
individuals and entities that have been included on the UN 1267 
sanctions committee's consolidation list as being linked to Usama 
bin Ladin, members of the Al Qa'ida organization and Taliban. 
Azerbaijan circulates a list of terrorist organizations/financiers 
that the USG and the European Union have designated under relevant 
authorities.  Azerbaijan did not identify, freeze, seize, or forfeit 
related assets in 2009. 
 
DOES THE JURISDICTION ACKNOWLEDGE THE EXISTENCE AND USE OF VALUE 
TRANSFER SYSTEMS OUTSIDE THE FORMAL FINANCIAL SYSTEM?  DESCRIBE 
STEPS TAKEN REGARDING REGULATING ALTERNATIVE REMITTANCE SYSTEMS? 
Azerbaijan acknowledges the existence and use of value transfer 
systems outside of the formal financial system.  As a result, the 
law that was enacted in 2009, effect all transactions whether in or 
outside the formal financial system (for example, sales of 
jewelry). 
 
DISCUSS THE EFFORTS THE JURISDICTION HAS TAKEN TO THWART THE MISUSE 
OF CHARITABLE AND OR NON-PROFIT ENTITIES THAT CAN BE USED AS 
CONDUITS FOR THE FINANCING OF TERRORISM. 
Azerbaijan acknowledges the existence and misuse of charitable and 
or non-profit entities that could be used as conduits for the 
 
financing of terrorism.  As a result, the GOAJ enacted the February 
2009 law which effects all transactions, including those conducted 
by religious or non-governmental organizations. 
 
CROSS BORDER TRANSPORTIATION OF CURRENCY AND NEGOTIABLE INSTRUMENTS 
 
ARE THERE STATUTORY REQUIREMENTS FOR LIMITING OR MONITORING THE 
CROSS-BORDER TRANSPORTATION OF CURRENCY AND MONETARY INSTRUMENTS? 
The GOAJ has statutory requirements for limiting and monitoring the 
cross-border transportation of currency and monetary instruments. 
The currency reporting requirement for both inbound and outbound is 
5,000 manat. Mandatory declaration forms are used at border 
crossings. 
 
IS CASH DECLARATION OR SMUGGLING REPORTS ENTERED INTO A DATABASE? 
IS SUCH DATA SHARED BETWEEN HOST GOVERNMENT AGENCIES, IN PARTICULAR 
WITH THE FIU? 
Cash declarations or smuggling reports are not entered into a 
database. 
 
INTERNATIONAL COOPERATION 
 
HAS THE COUNTRY ADOPTED LAWS OR REGULATIONS THAT ALLOW FOR THE 
EXCHANGE OF RECORDS WITH THE US ON INVESTIGATIONS AND PROCEEDINGS 
RELATED TO NARCOTICS, MONEY-LAUNDERING, TERRORISM AND TERRORIST 
FINANCING?  HAS THE JURISDICTION REACHED AN AGREEMENT WITH THE US 
AUTHORITIES ON A MECHANISM FOR EXCHANGE OF RECORDS IN CONNECTION 
WITH SUCH INVESTIGATIONS AND PROCEEDINGS?  IF NOT, IS THE COUNTRY 
NEGOTIATNG IN GOOD FAITH WITH THE US TO ESTABLISH AN EXCHANGE 
MECHANISM?  DOES THE JURISDICTION HAVE SIMILAR ARRANGEMENTS WITH 
OTHER JURISDICTIONS? 
The GOAJ has not adopted laws or regulations that allow for the 
exchange of records with the United States on investigations and 
proceedings related to narcotics, all-source money laundering, 
terrorism, and terrorist financing on a bilateral basis. Azerbaijan 
has not reached an agreement with the United States authorities on a 
mechanism for exchange of records in connection with such 
investigations and proceedings.  The United States, however, 
utilizes agreements with multi-lateral organizations for the 
exchange of records.  The GOAJ has expressed its interest in 
creating a bilateral relationship; however the USG has not begun 
negotiations.  With that said, if the USG began negotiations, it is 
likely that the GOAJ would welcome it and negotiate in good faith. 
 
IDENTIFY ALL TREATIES, AGREEMENTS OR OTHER MECHANISMS FOR 
INFORMATION EXCHANGE THAT THE HOST COUNTRY HAS ENTERED INTO WITH THE 
USG OR OTHER COUNTRIES, INCLUDING AGREEMENTS BETWEEN THE FIU AND IT 
COUNERPARTS, AS WELL AS MEMBERSHIP IN THE EGMONT GROUP, AND THOSE 
WITH HOME COUNTRY SUPERVISORS TO FACILITATE THE EXCHANGE OF 
SUPERVISORY INFORMATION REGARDING BANKS AND TRUST COMPANIES 
OPERATING IN THE HOST COUNTRY.  DESCRIBE THE STATUS OF EFFORTS TO 
UPDATE SUCH AGREEMENTS OR ARRANGEMENTS. 
Azerbaijan is part of many international information exchanges that 
include the United Nations and MONEYVAL.  Because the GOAJ recently 
established an FMO, the GOAJ would receive its membership in the 
EGMONT group.  According to the October 2009 Action Plan, the GOAJ 
plans to become an EGMONT member by December 2010. 
 
HAS THE COUNTRY COOPERATED, WHEN REQUESTED, WITH APPROPRIATE USG LAW 
ENFORECEMENT AGENCIES AND OTHER GOVERNMETNS INVESTIGATING FINANCIAL 
CRIMES? 
Azerbaijan has cooperated with appropriate USG law enforcement 
agencies and other governments investigating financial crimes. 
Azerbaijan is currently investigating, along with the USG, a corrupt 
practice and fraud case against a U.S. business. 
 
PLEASE DETAIL ANY INSTANCES OF REFUSALS TO COOPERATE WITH THE 
FOREIGN GOVERNMENTS, AS WELL AS ACTIONS TAKEN BY THE USG AND ANY 
INTERNATIONAL ORGANIZATION TO ADDRESS SUCH OBSTACLES. 
There have been no refusals to work with foreign governments. 
 
IS THE COUNTRY A PARTY TO THE UN INTERNATIONAL CONVENTION AGAINST 
ILLICIT TRAFFIC IN NARCOTICS AND DRUGS SUBSTANCES, THE UN CONVENTION 
AGAINST TRANSNATIONAL ORGANIZED CRIME, THE UN CONVENTION AGAINST 
CORRUPTION AND THE UN INTERNATIONAL CONVENTION FOR THE SUPPRESSION 
OF THE FINANCING OF TERRORISM OR OTHER APPLICABLE AGREEMENTS AND 
CONVENTIONS?  IF THE COUNTRY RATIFIED, OR ACEDED TO THEE CONVENTIONS 
IN 2009, PLEASE PROVIDE THE DATE OF RATIFICATION. 
Azerbaijan is party to all of the above treaties and conventions. 
The date of which is as follows: 
 
-  United Nations Convention against Illicit Traffic in Narcotic 
Drugs and Psychotropic Substances: 1988 
-  Transnational Organized Crime; Protocol to Prevent, Suppress and 
Punish Trafficking in Persons, specially Women and Children, 
 
Supplementing the United Nations Convention Against Transnational 
Organized Crime: 2000 
-  United Nations Convention against Corruption: 2003 
-  United Nations Convention for the Suppression of the Financing of 
Terrorism:1999 
 
DOES THE COUNTRY ADHERE TO RELEVANT INTERNATIONAL MONEY LAUNDERING 
STANDARDS, SUCH AS THE RECOMMENDATIONS OF THE FATF?  IF SO, WHAT 
STEPS IS IT TAKING TO IMPLEMENT THE STANDARDS?  IS IT A MEMBER OF 
THE FATF-STYLE BODY?  IF NOT, WHAT STEPS IS IT TAKING TO BECOME A 
MEMBER OF A BODY OR TO IMPLEMENT AML/CTF MEASURES? 
Because the new AML/CTF law was passed in February 2009, FATF has 
not been able to comment on the law.  Previously, FATF and MONEYVAL 
criticized Azerbaijan for not having an AML/CTF law, and the GOAJ 
responded to those criticisms by creating a new law.  On several 
occasions, the GOAJ expressed concern about Azerbaijan's standing 
within the FATF organization.  In recent months, the Embassy Baku 
has noted a stark change in relationship with the GOAJ on this 
issue, where the GOAJ closely coordinated in order to mitigate some 
concerns. 
 
Evidence of the GOAJ's desire to satiate FATF's concerns, the 
employees of the FMO proactively provided the Embassy with changes 
and amendments to some of the legislation in the February 2009 law. 
Post forwarded the changes to DOJ and are awaiting DOJ's comments. 
It is view of post that the amendments will address many key USG 
concerns.   In addition, the FMO furnished the Embassy with an 
Executive Order executed on October 21 that provided an action plan 
on improvement of the AML/CTF law.  Within the action plan, the GOAJ 
planned to change the definition of "money laundering" to comply 
with US 1988 Convention against illicit traffic in Narcotic Drugs 
and Psychotropic Substances and the UN Convention against 
Transnational Organized Crime.