provisions specified by the Preventive Law, the Cabinet of Ministers of Azerbaijan Republic has adopted the following decisions:

Transcription

1 REPORT of the Financial Monitoring Service under the Central Bank of the Republic of Azerbaijan on execution of The Action Plan for implementation of the National Strategy for Combatting Corruption and Increasing Transparency 1. on implementation of Paragraph 1 of the Action Plan: Article 14 of the UN Convention against Corruption, the Convention against Transnational Organized Crime, Council of Europe Convention on Laundering, Detection, Seizure and Confiscation of Criminally Obtained Proceeds and Criminal Law Convention on Corruption have determined commitments of the countries in regard to taking measures aimed at developing a system to combat money laundering. Since 2009, Azerbaijan Republic has been carrying out comprehensive reforms aimed at formation and development of a system to combat legalization of criminally obtained funds or other property and the financing terrorism (AML/CFT) in accordance with international standards (see: information on implementation of paragraphs 2, 43 and 44 of the Action Plan). 2. on implementation of Paragraph 2 of the Action Plan: Determination of criminal responsibility of legal entities is included in a project prepared by the Criminal Code Reform Working Group. The Financial Monitoring Service under the Central Bank of Azerbaijan Republic (FMS) has joined the initiatives to reform national legislation in compliance with international standards and presented its proposals to the Presidential Administration regarding the project s parts related to criminal liability of legal entities and special seizure institutions. Proposals were prepared in line with the Council of Europe Convention on Laundering, Detection, Seizure and Confiscation of Criminally Obtained Proceeds and the Financing of Terrorism that is considered as the highest international standard in the AML/CFT field. In connection with the preparation of the proposals regarding the draft law on combating legalization of criminally obtained funds or other property and the financing of terrorism, we hereby declare that comprehensive reforms have been carried out in this area in the country since Based on international best practices, the legal framework has been formed after adopting of Law of the Republic of Azerbaijan 767-III of on Combating legalization of criminally obtained funds or other property and the financing of terrorism (preventive Law). In order to bring national legislation into line with the preventive law, Law of the Republic of Azerbaijan 856-IIIQD of on Making changes and amendments to some legislative acts of the Republic of Azerbaijan has been adopted with a view of applying Law of Azerbaijan Republic on Combating legalization of criminally obtained funds or other property and the financing of terrorism. Overall more than 150 changes and amendments have been made to 4 codes, 15 laws and 6 decrees. Measures to bring national AML/CFT legislation into line with international standards were also taken in Thus, Azerbaijan has adopted Law 973-IIIQD of on Making changes and amendments to some legislative acts of the Republic of Azerbaijan to strengthen combating legalization of criminally obtained funds or other property and the financing of terrorism. During this period, necessary measures have been taken to develop a legal and regulatory framework to combat ML/FT. In order to create mechanisms for implementation of the

2 provisions specified by the Preventive Law, the Cabinet of Ministers of Azerbaijan Republic has adopted the following decisions: Ordinance 112 of July 28, 2009 of the Cabinet of Ministers approving the form of the compiling of information on transportation of the currency values into or out of the Republic of Azerbaijan, submitted to the Financial Monitoring Service under the Central Bank of Azerbaijan Republic; Ordinance 160 of October 1, 2009 of the Cabinet of Ministers of the Republic of Azerbaijan on making changes and amendments to the Instruction on the procedures for performance of notarial actions in Azerbaijan Republic approved by Decree 167 of September 11, 2000 of the Cabinet of Ministers of Azerbaijan Republic; Ordinance 123 of June 25, 2010 of the Cabinet of Ministers of the Republic of Azerbaijan approving the Regulation for determination of the list of countries (territories) that are suspected in either legalization of criminally obtained funds or other property, financing of terrorism, support of the dangerous trends of transnational organized crime, armed separatism, extremism and mercenary, participation in illegal drug or other psychotropic substances circulation, or the countries (territories) that do not require disclosing identification information when conducting financial transactions; Ordinance No. 124 of June 25, 2010 of the Cabinet of Ministers of the Republic of Azerbaijan approving the Regulation on approval of the General List of individuals or legal entities designated pursuant to relevant United Nations Security Council resolutions as well as legislation of the Republic of Azerbaijan and international instruments on counter terrorist financing to which the Republic of Azerbaijan is a party. Furthermore, the following normative acts adopted by the FMS underwent state registration at the Ministry of Justice of the Republic of Azerbaijan: Guidelines on submission of information by participants and other persons involved in the monitoring process to the Financial Monitoring Service under the Central Bank of the Republic of Azerbaijan; Requirements for professional qualifications and experience of persons responsible for organization of an internal control system established by monitoring entities and other legal persons involved in monitoring which are legal persons; Guidelines on exercising control over implementing commitments under the preventive Law by pawnshops and individuals and legal entities providing intermediary services for purchase and sale of real estate; Requirements for establishment of internal control systems by monitoring entities and other legal persons involved in monitoring which are legal persons to prevent legalization of criminally obtained funds or other property and the financing of terrorism. A form for submission of statistical information on offences related to legalization of criminally obtained funds or other property and the financing of terrorism to the FMS. 3. on implementation of Paragraph 12 of the Action Plan: The annual report on activities carried out by the FMS in 2010 has been prepared and published in Azerbaijan and English languages. Besides being disclosed to the public through the FMS s

3 official website, the printed version of the annual report was has been submitted to relevant government bodies. 4. on implementation of Paragraph 14 of the Action Plan: In order to keep the public constantly informed about the FMS s activities in the AML/CFT field and to establish transparent relationships with the public, the official website ( has been developed and launched as an important tool to exchange information with the public. Relevant sections of the website are being updated on a regular basis. 5. on implementation of Paragraph 15 of the Action Plan: The FMS has introduced a credit card system for relevant payments as one of the important tools to increase transparency in the organization s financial management. In this regard, the FMS has established procedures in compliance with the Regulations for Using Corporate Debit Cards and other regulations. At present, all employees salaries, pensions and other social payments, as well as business travel, household and stationery expenses are made via plastic cards. 6. on implementation of Paragraph 15 of the Action Plan: The FMS has adopted the Public Relations Strategy in accordance with the requirements for establishment of contacts between any state agency in Azerbaijan Republic and the public in a transparent and consistent manner and the formation of favorable public opinion toward the state policy in relevant areas. The strategy envisages that the FMS takes on a mission to ensure public awareness on the activity in the AML/CFT field. In order to effectively carry out the mission, an implementation schedule of public relations activities has been developed for the period of During this period, 86 reports on state policy on AML/CFT and activities of the FMS were disclosed to the public. To ensure efficiency of public relations, the FMS has established a hotline and informed about it on its website. 7. on implementation of Paragraph 19 of the Action Plan: On , the Principles of Ethical Conduct for Employees of the Financial Monitoring Service under the Central Bank was approved. This document has identified the following core principles underlying on and off-duty behavior: i) to protect human rights and freedoms, legal interests and business reputation, to prohibit any kind of discrimination; ii) to avoid conflicts of interest and to prevent corruption; iii) to conform to generally accepted social norms; iv) to ensure the effectiveness of activities; v) to ensure information security to protect banking and commercial secrecy. Besides setting the corporate standards adopted by the FMS, the Principles of Ethical Conduct is aimed at ensuring efficient and transparent activity and increasing public confidence. In this regard, the FMS held a comprehensive presentation with the participation of its staff and experts from international organizations. Trainings on the Principles of Ethical Conduct are held biannually for all employees. The Principles of Ethical Conduct has been uploaded to etika.az portal developed by the Azerbaijan Lawyers Confederation with the support of the Anti-Corruption Commission of the Republic of Azerbaijan and to the FMS's official website.

4 8. on implementation of Paragraph 23 of the Action Plan: In order to establish fair and transparent procedures for employee performance evaluation and motivation in accordance with existing legislation, the FMS has prepared and adopted the Regulations on the employee performance evaluation system in the Financial Monitoring Service under the Central Bank of the Republic of Azerbaijan and the Regulations on the motivation system of the Financial Monitoring Service under the Central Bank of the Republic of Azerbaijan. Furthermore, based on the functions of the FMS s relevant structural units, clear and classified job descriptions comprising duties and professional requirements specified for each position have been developed and adopted. 9. on implementation of Paragraph 40 of the Action Plan: The FMS has established the Procurement Commission in order to solve the relevant legal and organizational issues with regard to enhancing transparency and compliance with existing legislation in the process of obtaining goods and services. The Commission ensures efficient and effective use of funds during procurement processes and creation of equal competitive environment for all consignors on the basis of competition and publicity. To this end, all the tenders and procurement ads have been published both in official media outlets founded by public authorities and on the FMS s official website. During the period of , the Procurement Committee carried out 2 tenders and 18 procurements to satisfy the FMS's needs in goods and services in accordance with the requirements of existing legislation and with having ensured equal competitive environment for all consignors. 10. on implementation of Paragraph 43 of the Action Plan: Pursuant to Decree No.66 of the President of the Republic of Azerbaijan issued on , a new institution the Financial Monitoring Service under the Central Bank of the Republic of Azerbaijan has been founded to implement state policy on AML / CFT as well as to coordinate activities of relevant state agencies and to perform functions with regard to establishment of international cooperation. The Statute of the Financial Monitoring Service under the Central Bank of the Republic of Azerbaijan was approved by Decree 122 of the President of the Republic of Azerbaijan issued on Pursuant to the preventive Law and Decree of , other relevant government agencies involved in the fight against AML/CFT have been identified: the Central Bank, Ministry of Justice, Ministry of Communications and Information Technologies, Ministry of Finance, Ministry of Taxes, Ministry of National Security, the State Committee for Securities, the State Customs Committee, the State Committee for Work with Religious Organizations, the Bar Association, the Chamber of Auditors and prosecutors' offices. On , the President of the Republic of Azerbaijan has signed Decree 320 On changes and amendments to some decrees issued by the President of the Republic of Azerbaijan in connection with the implementation of the Law of the Republic of Azerbaijan On changes and amendments to some legislative acts of the Republic of Azerbaijan to strengthen the fight

5 against legalization of criminally obtained funds or other property and the financing of terrorism. This Decree has authorized the relevant public authorities identified as AML/CFT supervisory bodies to consider cases on administrative offenses as well as has identified the Ministry of Taxes as a public authority overseeing compliance of other persons providing legal services with the requirements of AML/CFT legislation. To ensure cooperation and exchange of information among the bodies involved in the fight against legalization of criminally obtained funds or other property Domestic cooperation. One of the requisite conditions for the formation of the effective AML/ CFT system is coordination of activity covering different spheres and effective cooperation among relevant public authorities. The FMS has signed Memoranda of Understanding on bilateral cooperation with relevant public authorities to develop practical mechanisms for cooperation among public authorities carrying out activities in the AML/CFT field. The Memoranda envisage cooperation in the following directions: (i) exchange of information; (ii) joint use of databases; (iii) responding to legal assistance requests; (iv) conduction of joint researches, preparation of analytical and methodological materials; (v) joint development of normative acts; (vi) taking measures to organize conferences, seminars and trainings. During this period, the Ministry of National Security, Ministry of Justice, Ministry of Internal Affairs, Ministry of Taxes, Anti-Corruption Department under the Prosecutor-General, State Border Service and State Real Estate Register Service carried out effective exchange of information on AML/CFT measures. In , the amount of information mutually exchanged between the FMS and relevant authorities was 424. In order to execute duties and functions, which were legally assigned to the FMS, regularly and on the basis of specific plans, a medium-term plan has been formulated to set out a sequence of works to be done in the AML/CFT field, and strategic objectives focused on development of this field have been defined. The FMS s Strategic Plan for approved after relevant talks with authorities concerned in December 2009 envisages the following key strategic objectives i) to ensure absolute compliance of national legislation with international standards in the AML/CFT field, ii) to strengthen the institutional and functional capacity, iii) to develop potential of monitoring entities in the AML/CFT field and iv) to enhance domestic and international cooperation in the AML/CFT field. International cooperation. The expansion of international cooperation is one of the priorities in terms of bringing Azerbaijan Republic's AML/CFT system in line with international standards and continuous improvement of the country s international reputation in this field. During this period, the FMS has taken necessary to ensure multilateral and bilateral cooperation as authorized by law. The FMS's multilateral cooperation can be divided into two directions: i) Cooperation with international organizations specialized in the AML/CFT field: currently, the FMS cooperates with the following specialized organizations from this group MONEYVAL, FATF and the specialized agency of financial intelligence unit (Egmont Group); ii) Cooperation with international organizations supporting AML/CFT: currently, the FMS cooperates with the following international organizations from this group the UN Office on Drugs and Crime (UNODC), International Monetary Fund, the Organization for Security and Cooperation in Europe (OSCE), United States Agency for International Development (USAID) and others.

6 Given the compatibility of Azerbaijan Republic s AML/CFT system, including national legislation and the FMS s activities with international standards, the FMS has been accepted as a full member of the Egmont Group at its plenary meeting held in July This membership is our country s important achievement in terms of rapid integration in the global AML/CFT system, strengthening its position as an active member of this system and ensuring the smooth and secure exchange of information. The FMS has also established experience in cooperation with the relevant authorities of other countries. Thus, in , the FMS carried out 33 information exchanges with financial monitoring bodies of such countries as Canada, Pakistan, Moldova, Czech Republic, Ukraine, Luxembourg, the United States, Turkey, Russia and the UK. In connection with the FMS s membership in the Egmont Group, international exchange of information in the AML/CFT field will intensify due to joining the system for exchange of information carried out through the Egmont Secure Web system. Improvement of the mechanisms for registration of financial transactions Since it has started performing functions, the FMS began to form a system for reception, processing and analysis of information submitted by monitoring entities. The information submitted by the subjects of the first period, the monitoring took place only by means of paper carriers, since the third quarter of 2010, the transmission and reception of electronic data began to be applied. The first data submitted by monitoring entities was processed only in paper while since the third quarter of 2010 the FMS has started implementing an electronic system for transmitting and receiving information. Currently, the FMS uses the goaml analytical software developed by UNODC for receiving, processing and analyzing data submitted by monitoring entities to the FMS. During the period from December 2009 to January 1, 2012, the FMS received information about thousand transactions from monitoring entities thousands (88%) of the submitted reports are current transactions while 26.3 thousands (12%) are suspicious ones. After examining the data submitted during the reporting period, the FMS has reported on four suspected money laundering cases to the Anti-Corruption Department under General Prosecutor's Office and on 16 suspected terrorism financing cases to the Ministry of National Security. 11. on implementation of Paragraph 44 of the Action Plan: In order to develop the AML/CFT system in Azerbaijan Republic in accordance with international standards, one direction of the activities performed is aimed at educating employees of relevant government agencies and financial institutions in this area and involving them in trainings. instructing employees in government agencies on measures against legalization of criminally obtained funds or other property Being a body pursuing the state AML/CFT policy, the FMS has given special attention to measures to increase the professional level of its employees. During , 10 training sessions have been conducted domestically for employees with the involvement of international experts. During this period, the staff participated in 32 training sessions and workshops on current AML/CFT issues held by the World Bank, OSCE, UNODC, MONEYVAL and other international organizations in foreign countries. During this period, four of the FMS s employees have successfully passed an exam held by the Association of Certified Anti-Money Laundering Specialists (ACAMS) and achieved status of an internationally recognized certified expert on AMLCFT. Furthermore, five employees have been certified as a MONEYVAL evaluator. At present, the FMS s employees are invited as experts to

7 take part in working groups established by international organizations, training sessions and evaluation of other countries. awareness of international standards endorsed by financial institutions and relevant government agencies and involvement in trainings In order to strengthen the AML/CFT capacity of monitoring entities as well as relevant government agencies, the FMS organized training sessions, seminars and round tables. In 2010, the FMS along with relevant regulatory authorities, the Scientific-Education Center of the General Prosecutor's Office, Azerpost LLC and Bank Training Center have approved the 4th Training Plan, and 53 training sessions and workshops have been held as part of implementation of these Training Plans. In particular, four of these training sessions and workshops have been held in regions while 15 of them were held with the participation of international experts. More than 3,000 local specialists have been involved in these training sessions and seminars. Events aimed at strengthening the professional capacity of monitoring entities in terms of accountability in the AML/CFT field continued in Relevant trainings on procedures and methods for detecting AML/CFT schemes were held as part of the 2011 Training Plan of the Financial Monitoring Service under the Central Bank of the Republic of Azerbaijan for officers in charge from monitoring entities and employees of control and law enforcement authorities. 28 training sessions conducted in 2011 involved about 600 people. Taking measures to implement recommendations of the Financial Action Task Force (FATF) The country s international reputation has been substantially improved due to reforms conducted in accordance with the FATF Recommendations and aimed at development of the AML/CFT system, including the creation of national legislation in line with international standards and ensuring activity of the FMS as a state institution pursuing the state AML/CFT policy. At the 28th plenary meeting held by the MONEYVAL Committee in December 2008, MONEYVAL involved our country in the follow-up process because of the legal and institutional gaps existing in the AML/CFT field. But at the 31st plenary meeting held by MONEYVAL in December 2009, the annual progress report on Azerbaijan Republic was discussed, and Azerbaijan was fully removed from the MONEYVAL follow-up process as a result of these discussions. A report on Azerbaijan was also made during the discussion of the issue on involvement of a number of countries in a special follow-up process at the 33rd plenary meeting held by MONEYVAL on September 27, As a result, the plenary meeting decided that there was no necessity to involve Azerbaijan in the MONEYVAL follow-up process. Moreover, the Secretariat of MONEYVAL suggested other countries to adopt Azerbaijan s model for development of the AML/CFT framework. The second progress report on Azerbaijan Republic was discussed at the 37th plenary meeting held by the MONEYVAL Committee in December 2011, and following the discussions, it was stated that significant progress has been made in the AML/CFT field in Azerbaijan, and reforms aimed at bringing legal and institutional mechanisms in line with international standards were in progress during the two-year reporting period. The 22nd Plenary of the Financial Action Task Force (FATF) of the Organization for Economic Cooperation and Development decided at its October 2010 meeting that Azerbaijan could be removed from the FATF follow-up process. Azerbaijan was one of only two countries removed from the FATF list that included 31 countries. The FATF made this decision after considering achievements that Azerbaijan made in the AML/CFT field in a short period of time. 12. on implementation of Paragraph 55 of the Action Plan:

8 In February of 2011, the FMS with its international partners organized the 1st Baku Regional Conference on combating legalization of criminally obtained funds and other property and the financing of terrorism. This conference brought together delegations of senior employees representing financial monitoring bodies from 20 countries as well as the MONEYVAL s Executive Secretary, UNODC's Senior Advisor and Executive Director of the Basel Institute of Governance and other 40 foreign participants. In order to raise public awareness in the AML/CFT field, the FMS started issuing the Financial Monitoring Information Bulletin. During this period, three editions of the bulletin have been issued and then presented to relevant government authorities and monitoring entities as well as uploaded to the FMS s official website.