On January 31, new legislative acts were adopted in the field of anti-money laundering. Thus, the law of the Republic of Azerbaijan "On the fight against the legalization of money or other property obtained through crime and the financing of terrorism" has been terminated, and 2 new laws - with the entry into force on February 1, 2023 - Laws of the Republic of Azerbaijan on " Legalization of property obtained through crime and the fight against financing of terrorism " and "On targeted financial sanctions" have been adopted. Additions and changes have been made to some other laws to regulate a number of issues related to the implementation of the adopted new regulations. Below we provide the summary of the main issues:
By consisting of 25 Articles in total, new Anti-Money Laundering Law of Azerbaijan regulates the relations related to detection and prevention of the legalization of property obtained through crime and the financing of terrorism, and the creation of conditions that exclude the possibility of using the country's economic system for illegal purposes, in this direction, the fulfillment of the obligations arising from the international agreements that the Republic of Azerbaijan is a party, as well as the implementation of effective domestic and international cooperation in order to protect the interests of the state and society.
The Azerbaijani AML Law also brought many new regulations in terms of the scope of the subject, as this law applies not only to financial institutions and organizations, but also to non-financial institutions and professionals (according to Article 1.1.9 of the law, realtors as non-financial institutions and professionals, advocates, notaries, independent persons providing legal, accounting and tax consulting services, as well as branches and representative offices of such foreign legal entities in the Republic of Azerbaijan), as well as regulated group companies, applied in the cases specified in Article 3.1 of this law.
By this Anti Money Laundering Law of Azerbaijan, financial institutions and organizations (organizations that attract/manage deposits and/or grant loans, including banks, non-bank credit organizations, credit unions, trust companies, as well as insurance companies, pension funds, brokers, underwriters, investment companies) and also, in a number of cases, non-financial institutions and professionals are required to take the following preventive measures:
• To implement customer compliance measures;
• To carry out measures to identify the beneficiary client;
• To take enhanced customer compliance measures in more risky situations;
• To implement a risk management system for transactions with political influential persons or other persons related to them;
• To take reasonable steps to identify the property and other source of income provided
The law also stipulates that the above-mentioned entities must have internal rules and procedures for regulating business relations, products and transactions created through new technologies or involving their application, including an electronic control system.
Regulated persons should also have internal rules and procedures within the framework of the law of AR "On the fight against the legalization of property obtained through crime and the financing of terrorism" and must approve and apply them, appoint a person responsible for relevant measures and operations, organize an independent and effective system in this field, ensure the requirements of high professionalism and civil integrity in the recruitment process, must approve and apply inspection procedures, involve employees in continuous training, and in addition, organize an independent audit mechanism that evaluates the efficiency of the existing system based on internal audit standards.
Amendments were made to the Code of Administrative Offenses of the Republic of Azerbaijan in order to regulate the issues of responsibility for the violation of the mentioned law. Thus, for violation of the requirements of the legislation on the legalization of property obtained through crime and the fight against the financing of terrorism, financial institutions-officials from two thousand to four thousand manats, legal entities from twenty thousand to thirty thousand manats, non-financial institutions and professional owners-officials individuals from eight hundred to fifteen hundred manats, and legal entities from eight thousand to fifteen thousand manats will be fined.
In addition, for the violation of the requirements established by the Law of the Republic of Azerbaijan "On legalization of property obtained through crime and fight against the financing of terrorism" regarding the submission of information and documents on transactions that should be monitored by financial institutions, officials will be fined from two thousand manats to four for each transaction. up to one thousand manats, and legal entities face a fine from twenty thousand to thirty thousand manats. In case of violation of the same requirements by non-financial institutions and professionals, officials will be fined from eight hundred to fifteen hundred manats, and legal entities from eight thousand to fifteen thousand manats.
The aforementioned law, consisting of 5 chapters and 14 articles, defines the legal basis and procedure for the application of targeted financial sanctions in order to prevent terrorism, terrorist financing, the proliferation of weapons of mass destruction, and the financing of the proliferation of weapons of mass destruction in accordance with the relevant resolutions of the United Nations Security Council.
The Sanctions Law of Azerbaijan reflects the criteria for individuals and institutions to be sanctioned, targeted financial sanctions and their types, assets to which they are applied, rules of application, application to domestic and international lists of sanctioned persons, and other issues.
Targeted financial sanctions, i.e. measures such as the immediate freezing of assets and the prohibition of the use of assets, economic resources or other financial and related services, are applied to the following persons and their assets:
• Physical persons and institutions subject to sanctions - physical persons and institutions subject to sanctions according to the legislation of the Republic of Azerbaijan and the international agreements it is a party to, as well as the resolutions of the UN Security Council;
• Assets owned or controlled by these persons directly or indirectly, alone or jointly with others, as well as other assets acquired through such assets;
• Assets of individuals and organizations acting on behalf of these individuals or on their behalf;
• Assets of entities owned or controlled by these persons, directly or indirectly, alone or jointly with others.
For the application of targeted financial sanctions, first of all, after the UN publishes resolutions on the list of persons to whom sanctions are applied, this list is also integrated into the local electronic information resource and published and updated. The list of these international resolutions is also submitted to the Cabinet of Ministers of the Republic of Azerbaijan for approval by the Ministry of Foreign Affairs of the Republic of Azerbaijan. Assets of financial and non-financial institutions, professionals, as well as persons providing audit services, religious institutions, NGOs, including branches and representative offices of NGOs of foreign countries in the Republic of Azerbaijan, lists of persons which are subject to sanctions, will be frozen immediately after information is published in their reserve and inform the State Security Service about it.
The inclusion and removal of individuals from the Sanctions list of Azerbaijan takes place on the basis of a court decision, and in order to regulate this new procedure, Chapter LX" is included to the Code of Criminal Procedure of the Republic of Azerbaijan on "Procedures for the inclusion of natural persons and institutions subject to sanctions in the framework of the fight against terrorism and financing of terrorism to the domestic list". The new chapter regulates the criteria for the persons to be included in the domestic list, the content of the submission for inclusion, as well as the procedure for considering such a submission and some other issues.
Also, according to the amendments made to the Code of Administrative Offenses, for failure to take measures to freeze assets in the manner established by the Law of the Republic of Azerbaijan "On Targeted Financial Sanctions", for each individual or institution - officials will be fined in the amount of three thousand to five thousand manats, legal entities will be fined in the amount of thirty a fine in the amount of one thousand to fifty thousand manats.
With the adoption of the two new legislative acts mentioned above, appropriate additions and amendments were made to the laws of the Republic of Azerbaijan "On Banks", "On Insurance Activity", "On Investment Funds". Thus, according to the amendments made to these laws, credit organizations, insurers, reinsurers and insurance intermediaries engaged in life savings insurance are required to submit information and documents to the financial monitoring body on operations to be monitored against the legalization of property obtained through crime and the financing of terrorism, as determined by legislation in cases where the customer, beneficial owner and authorized representative are obliged to implement customer compliance measures, develop and implement their own internal control program.
According to the amendments to the Housing Code of the Republic of Azerbaijan, transactions related to the alienation of the share of the member of the housing cooperative must be notarized.
According to the amendments to the Law of the Republic of Azerbaijan "On Cashless Settlements", the following payments are included in cashless payments:
1. payments made in connection with the purchase and sale of real estate, the share fee of a member of a housing-construction cooperative, and the purchase of residential and non-residential areas from persons engaged in building construction activities;
2. payments for the purchase and sale of precious stones, precious metals, including articles made of precious stones and precious metals and cultural products, the total amount of which exceeds fifteen thousand manats;
3. payments for the purchase and sale of movable property registered in the official registers (except for the sale of automobiles) with a total amount of more than fifteen thousand manats.
Since the relevant amendments to the legislation set new and very strict regulations and provided for the application of significant amounts of fines and sanctions, there was a need to prepare and monitor the application of special legal-procedural documents for a number of subjects. For this reason, we recommend obtaining legal advice regarding the above-mentioned issues. In particular, legal support regarding innovations is necessary for the following subjects:
• organizations that attract/manage deposits and/or provide loans
• non-bank credit institutions
• credit unions
• trust companies
• insurance companies
• pension funds, brokers, underwriters
• investment companies
• independent persons providing accounting and tax advisory services
Note: Nothing in this article shall be considered as legal advice or referred to or used otherwise as such. CLC bears no liability for any use of articles posted on our official website. For advisory issues regarding Anti-Money Laundering Law of Azerbaijan as well as Azerbaijan Sanction Law and regulations, please contact us via the following means: