Financial Intelligence Unit

Sevinj Novruzova
Senior Legal Adviser
Financial Monitoring Service (Central Bank)
 CONTENTS
Introduction
Definition
Types
Main Tasks
Organizational Structure
FATF’s Recommendation 26
Azerbaijani Law on AML/CFT [Article 17]
The Statute of the Financial Monitoring Service under
the Central Bank of the Republic of Azerbaijan
 Introduction
 From the beginning of previous century the term of money laundering has
been acquired more and more significance.
 Its creation was connected with increasing public awareness of
ineffectiveness of the “traditional” punishments and public (both social and
financial) losses caused by criminals.
 One of the main criminal aims is to make a profit and opportunity for its
use. Because of that activities of authorities responsible for fighting against
crimes have been oriented to tracing financial suspicious transactions.
 This orientation enables first of all to round out or create grid of
relationships between suspicious entities and to identify destination of
illegal profits.
 To facilitate and improve financial proceedings the idea of the financial
intelligence unit (FIU) was introduced.
 Definition
The term of financial intelligence unit was formed to describe
national central institution responsible for counteracting money
laundering (ML) and terrorist financing (TF).
According to the definition included in the FATF Recommendation
26 the FIU is “a national centre for the receiving (and, as
permitted, requesting), analysis and dissemination of STR and
other information regarding potential money laundering or
terrorist financing”.
All the databases including financial, administrative and law
enforcement information should be made available to FIU
especially to enable this unit to effectively analyse suspicious
transactions.
 Definition
Similarly, but not at the same level of generality FIU was described
in the Council of Europe Convention on Laundering, Search,
Seizure and Confiscation of the Proceeds from Crime and on the
Financing of Terrorism, signed on 16 May 2005.
The definition was located the Article 1, section f and completed in
the Article 12, section 2 of the Convention.
Although it is very similar to the FATF Recommendation 26, there
are additional words indicating needs to disclose and disseminate
financial information by FIU to “the competent authorities”.
It is safe to assume that “the competent authorities” denote first of
all law enforcement authorities entitled to conducting criminal
proceedings.
 Definition
According to the definition from the Convention the
FIU should closely work with the other law
enforcement agencies.
It is of course very rational concerning fight against
crimes.
On the one hand FIU should have access to the
criminal information of the Police and other law
enforcement agencies, on the other hand law
enforcement agencies ought to have possibility to
obtain information from FIU.
 Definition
The information exchange between them allows to
coordinate initiated activities of these entities:
 It prevents an overlap between FIU and law
enforcement agencies (LEAs) as for conducted
financial proceedings.
 It gives the opportunity to complete information on
conducted cases from the sources – databases covering
types of information different than own ones.
 Definition
 The third definition of the FIU is provided in the Directive 2005/60/EC of the
European Parliament and of the Council of 26 October 2005 on the prevention of
the use of the financial system for the purpose of money laundering and terrorist
financing (the Article 21, section 2).
 As well as in the previous acts the definition focuses on the central position of the
unit in the country.
 Besides among the tasks of the FIU there are disclosures of information and its
dissemination to the competent authorities pointed out and among the powers there
is access to the data bases of the financial, administrative and criminal information.
 It is worth underlining that according to the Directive the access should be “on a
timely basis” what means that information should be provided to the FIU without
delay.
 Thus obliged institutions and public authorities should ensure dissemination of their
information so fast that FIU can fulfil its duties in appropriate time. It is a matter of
utmost importance especially in case of freezing money stemming from crimes or
designed for terrorist purposes.
 Definition
The one phrase of the Directive is but very interesting in the
context of the FIU description.
According to it the unit should be equipped with “adequate
resources in order to fulfil its tasks”.
It means that each member-country should equip FIU with
staff and assets in appropriate number as well as quality for
realisation of its duties.
It is worth underlining that even if the country possesses a
good law on counteracting money and terrorist financing
and it creates an appropriate central unit for these purposes,
the results will be insignificant without adequate resources.
 Types
There are four types of FIU:
Law-enforcement type FIU
Judicial or prosecutorial-type FIU
Administrative-type FIU
Hybrid or mixed FIU
 Law-enforcement type FIU
Sometimes it is called the police FIU as well.
In this case, being a part of the Police - has opportunities
to hang together with other police units more strictly than
the administrative FIU.
It has certainly access to more criminal information for
example easier access to the operational information. On
the other hand there could be limitations on access to the
financial and fiscal information based on bank and tax
confidentiality.
Law-enforcement type FIU
In some countries, the emphasis on the law-enforcement
aspects of the FIU led to the creation of the FIU as part
of a law-enforcement agency, since this was the easiest
way to establish a body with appropriate law-
enforcement powers without having to design from
scratch a new entity and a new legal and administrative
framework.
Operationally, under this arrangement, the FIU will be
close to other law-enforcement units, such as a financial
crimes unit, and will benefit from their expertise and
sources of information.
Law-enforcement type FIU
 In return, information received by the FIU can be
accessed more easily by law-enforcement agencies and
can be used in any investigation, thus increasing its
usefulness.
Exchange of information may also be expedited
through the use of existing national and international
criminal information exchange networks.
 Law-enforcement type FIU
ADVANTAGES

Built on an existing infrastructure, so there is no need to set up a

new agency;
Maximum law-enforcement use can be made of financial
disclosure information;
Quicker law-enforcement reaction to indications of money
laundering and other serious crimes;
Information can be exchanged using the extensive network of
international criminal information exchange network (such as
INTERPOL);
Easy access to criminal intelligence and to the intelligence
community at large.
 Law-enforcement type FIU
DISADVANTAGES
Tends to be more focused on investigations than on
prevention measures;
Law-enforcement agencies are not a natural interlocutor
for financial institutions; mutual must be established,
which may take some time, and law-enforcement agencies
may lack the financial expertise required to carry out such
a dialogue;
The FIU usually does not receive data on currency
transactions above a fixed amount;
Law-enforcement type FIU
DISADVANTAGES
Gaining access to the financial organizations’ data (other
than the reported transactions) usually requires the
launching of a formal investigation;
Reporting institutions may be reluctant to disclose
information to law enforcement if they know it could be
used in the investigation of any crime (not just money
laundering and the financing of terrorism); and
Reporting institutions may be reluctant to disclose
information to law enforcement on transactions that are no
more than “suspicious.”
Examples include:
Austria
Estonia
Germany
Guemsey
Hungary
Iceland
Ireland
Jersey
Slovakia
Sweden
UK
Judicial or prosecutorial-type FIU

This type of FIU is established within the judicial branch of the

state and most frequently under the prosecutor’s jurisdiction.
Instances of such an arrangement are found in countries with a
continental law tradition, where the public prosecutors are part
of the judicial system and have authority over the investigatory
bodies, allowing the former to direct and supervise criminal
investigations.
Disclosures of suspicious financial activity are usually received
by the prosecutor’s office, which may open an investigation if
suspicion is confirmed by the first inquiries carried out under
its supervision.
Judicial or prosecutorial-type FIU
The judiciary’s powers (e.g., seizing funds, freezing accounts, conducting
interrogations, detaining suspects, and conducting searches) can then be
brought into play without delay.
Judicial and prosecutorial FIUs can work well in countries where banking
secrecy laws are so strong that a direct link with the judicial or prosecutorial
authorities is needed to ensure the cooperation of financial institutions.
It may be noted that the choice of the prosecutor’s office as the location of an
FIU does not exclude the possibility of establishing a police service with
special responsibility for financial investigations. Also, in many countries,
the independence of the judiciary inspires confidence in financial circles.
The principal feature of this type of arrangement is that disclosed information
is passed from the financial sector directly to an agency located in the
judiciary for analysis and processing.
Judicial or Prosecutorial-type FIU
ADVANTAGES
usually have a higher degree of independence from
political interference;
disclosure information is brought directly to the agency
autorized to investigate or prosecute; and
allows the judiciary’s powers (e.g., seizing funds, freezing
accounts, conducting interrogations, detaining people,
conducting searches) to immediately be brought into play.
Judicial or Prosecutorial-type FIU
DISADVANTAGES
See the subheading «Disadvantages of Law-
enforcement type FIU»
Examples for this type of FIU are Cyprus and
Luxembourg
Administrative-type FIU
 Administrative-type FIU is usually part of the structure, or under the
supervision of an administration or an agency other than the law enforcement
or judicial authorities.
This type of FIU constitutes a separate agency placed under the substantive
supervision of a ministry or administration («autonomous» FIU) or not placed
under such supervision («independent» FIU).
The main rationale for such an arrangement is to establish a «buffer» between
the financial sector (and, more generally, entities and professionals subject to
reporting obligations) and the law enforcement authorities in charge of
financial crime investigations and prosecutions.
Often, financial institutions facing a problematic transaction or relationship do
not have hard evidence of the fact that such a transaction involves criminal
activity or that the customer involved is part of a criminal operation or
organization.
They will therefore be reluctant to disclose it directly to a
law-enforcement agency, out of a concern that their
suspician may become an accusation that could be based
on a wrong interpretation of facts.
The role of the FIU is then to substantiate the suspician
and send the case to the authorities in charge of criminal
investigations and prosecutions only if the suspician is
substantiated.
Actual location of Administrative-type FIU
The actual administrative location of such FIUs varies: the
most frequent arrangements are to establish the FIU

in the ministry of finance,

the central bank, or
a regulatory agency.
A few have been established as separate structures,
independent of any ministry (in Belgium, for example)
The hybrid unit consisting of two parts:
civil analytical section focused on gathering,
processing and analyzing STRs and connected with
some administrative authority,
police section acting operationally and having typical
rights of the Police within the scope of tracing and
catching criminals,
can have because of that more possibilities to cooperate
with the law enforcement agencies as well as the
administrative authorities.
 Types

However, regardless of a location of FIU, there can be generally two categories of
objects surrounding the unit distinguished: obliged institutions and cooperating units.
Among cooperating units following main types should be distinguished at the national
level:
law enforcement agencies and judiciary;
tax and tax control offices along with customs;
authorities supervising obliged institutions;
other public authorities (inter alia immigration authorities, different government
departments, local governments).
At the global level, the environment of FIU includes also the foreign FIUs and
international organizations dealing exclusively or partially with counteracting money
laundering and terrorist financing (i.e. EGMONT GROUP, FATF and its regional bodies,
INTERPOL, EUROPOL).
All the bodies have or can have information which can be useful for FIU. Sometimes
they can justify or deny suspicion of money laundering or terrorist financing.
 Types
 The second category of objects in the environment of FIU is
created by obliged institutions it means institutions what can
possess information on financial transactions or activities and have
obligation to inform FIU of them (on suspicious, untypical,
threshold or currency transactions). According to the Directive
2005/60/EC (the Article 2, section 1) following institutions belong
to the obliged institutions:
 credit and financial institutions (inter alia: banks, brokerage
houses, investment funds, insurance companies);
 legal and freelance professions (inter alia: auditors, tax advisors,
notaries and other independent legal professionals, real estate
agents);
 others (inter alia: casinos, trust or company service providers).
 Types
 Although - on the force of law - obliged institutions have obligation to provide information to
FIU, it is necessary to ensure appropriate flow of trainings and feedback to them. The obliged
institutions should not only know its duties but also possess knowledge of how to fulfil them. It
is necessary to point out that in connection with the law obligations there are sometimes groups
of tasks which should be executed. For example allegedly easy task of registration of
suspicious transactions can be complicated thing to do. To register such transactions obliged
institution should know inter alia:
 what types of transaction should be registered (it can be significant by registration of threshold
and currency transactions);
 which elements of transactions should be registered;
 what it should focus on to identify transaction which should be registered (i.e. which elements
can be taken into account to identify suspicious transactions);
 which obliged institution should register transaction when the duty of registering can be carried
out by two or more obliged institutions;
 in which moment of performing transaction it should be registered.
 For that reason FIU should ensure appropriate flow of knowledge to obliged institutions. It can
be provided by appropriate trainings (inter alia by e-learning - it means e-training platform
available on the secure web site), as results of controls and by answers to direct questions.
 Main Tasks
 If we like to precise one general task of the FIU, there would be analysing
gathered information aimed at recognition of connection with ML and TF
in cooperation with obliged institutions and cooperating units. This task is
associated with four types of detailed duties:
1. Duties directly connected with storing information
 obtaining information (“automatically” and on demand - wide variety of
information from obliged institutions and cooperating units);
 gathering information (it means storing information to use them at the
right time);
 processing obtained information (information should be verified and
then linked as well as grouped to obtain in this way credible and easy
material to analysis);
 analysing information.
 Main Tasks
2. Tasks referring to confirmation of suspicion of ML
and TF suspicion
dissemination reports on suspicions of ML and TF to
LEAs (especially to the public prosecutors);
freezing money stemming from illicit activities;
co-ordinating activities conducted by obliged
institutions and cooperating units.
 Main Tasks
3. Duties within the scope of cooperation with public
and international authorities and organisations
information exchange with cooperating units;
cooperation with other central units created to fight
against crime (e.g. anti-corruption bureau, anti-
terrorism centre);
information exchange with foreign FIUs;
cooperation with international organisations.
 Main Tasks
4. Tasks concerning relationships with obliged
institutions
training obliged institutions and cooperating units
(it means increasing awareness and knowledge so
that the system functions efficiently, obtained data
are suitable and credible and disseminated
information is correctly used);
controlling obliged institutions (in cooperation
with supervision bodies).
 Main Tasks
5. Other administrative and information and
research tasks
 Main Tasks
 The first and the last task above mentioned in the point 1 are both included
- on the pattern of FATF Recommendation of 26 - in the majority of FIU
definitions (e.g. included in Directive 2005/60/EC, Council of Europe
Convention).
 First of all FIU should receive and analyze suspicious transactions’ reports
(STR) and other information regarding potential ML or TF. It means FIU
should work with information on financial transactions and other
information which could confirm connection of transactions with ML or TF
- simply FIU should monitor financial transactions and other activities
which can be used to commit crime.
 Both above mentioned tasks are connected with other duties.
 Received information should be gathered in a way which ensures
appropriate access to them and protects against unauthorized changes.
 Moreover they should be processed to validate and give them suitable form
which enables them to be analysed.
 Main Tasks
 Results of analyses shouldn’t remain in FIU, especially if they justify suspicion
of committing crime. For that reason there are separated tasks in the second
group.
 Firstly FIU should provide its suspicion and justifying information to the
appropriate authorities – LEAs (usually to the public prosecutors) in order that
they initiate investigations.
 Similarly it should be in case of money freezing (blockade of account and
suspension of transaction) on the basis of well justified suspicions connected
with information on transactions which may be carried out or information on a
hiding place of “dirty” money.
 We ought to underline that the role of FIU doesn’t end along with the
dissemination reports on suspicion.
 It is often necessary to continue cooperation with LEA - especially by gathering
additional information which can justify suspicion - and coordinate activities
conducted by obliged institutions and LEA (for example when there is a need to
monitor transactions performed by suspicious persons and entities).
 Main Tasks
 The third group of FIU tasks is closely connected with the previous one.
They concern cooperation with other public authorities (inter alia law
enforcement agencies).
 At some stage of investigation the suspicion of money laundering often
appears as an additional one apart from suspicion of other crimes
generating profits. It is similar with terrorist financing.
 Because of that LEAs need to cooperate with FIU in order to confirm such
direction of investigations.
 Especially information exchange serves for that purpose. LEA - on the basis
of information from FIU - can substantiate theses put forward during
investigations.
 FIU in turn - on the basis of criminal data – is able to link untypical or even
suspicious elements of transactions with person conducting transactions and
reach justification of suspicion of ML or TF in this way.
 Main Tasks
 Above mentioned arguments have also raison d’être when considering
cooperation with other central units created – similarly to FIU - to
counteract particularly important types of crimes (e.g. organized crimes,
corruption, terrorism).
 However, it is worth underlining that within the scope of such cooperation
based first of all on information exchange the possibilities and entitlements
of FIU (especially concerning access to financial information) shouldn’t be
abused by LEAs for scrutiny of unjustified theories or administrative
objectives (gaining time by suspension of investigation to a moment of
obtaining answer from FIU).
 We should also point out that FIU shouldn’t be indicated as a unique public
authority responsible for dealing with counteracting of ML and TF.
 Such task ought to come under jurisdiction of LEAs which have been
created for combating all crimes, especially financial and economic ones.
 Main Tasks
 In the third group of tasks there is also cooperation with foreign
FIUs and international organizations mentioned.
 Nowadays financial transactions have more often international
character.
 Among them there are cross-border transactions, internal
transactions carried out by foreigners, transactions performed on
behalf on foreign owners of money or wire transfers performed by
means of correspondent banks.
 For that reason FIU can not cooperate only at the national level.
 It is necessary to establish close relationships with other FIUs as
well as international organizations dealing with counteracting ML
and TF especially within the scope of information and experience
exchange.
 Main Tasks
Tasks from the fourth group don’t belong to the
priorities of all FIUs, but it does not mean they are not
important.
Knowledge and experience in the area of ML and TF
deepen and develop in time.
FIU has the best view as a central unit cooperating
with all institutions and authorities dealing with fight
against ML and TF.
Because of that it is crucial that FIU trains employees
of both obliged institutions and cooperating units.
 Main Tasks
Itis a good idea to issue a manual for the obliged institutions
including information on legal obligations, technical
standards of information and its sending, typologies of
suspicious elements to which obliged institutions should pay
attention, recognized methods of money laundering and
terrorist financing with case studies, procedures of conduct in
case of money freezing etc.
The manual can be also useful for cooperating units,
especially concerning recognized methods of ML and TF,
powers of FIU and information which can be exchanged with
FIU.
 Main Tasks
 FIU should also control obliged institutions or at least
cooperate in this scope with suitable supervisory bodies (e.g.
by providing expert knowledge). In this way it can be
examined whether the obliged institutions fulfil duties imposed
by law and whether they are used, intentionally or not, to
money laundering or terrorist financing. Control should
concern first of all the following aspects:
 fulfilling duties in general;
 correctness of identification and registration of transactions
(e.g. by checking concrete as well as random transactions);
 procedures of freezing “dirty” money;
 protection of data.
 Main Tasks
The last group of FIU tasks includes all the remaining duties
especially connected with typical logistic support. Besides,
there is also the research task mentioned. In the basis of
analyses FIU should also scrutinize and synthesize gathered
information (e.g. by means of statistical methods) to identify
new ways of ML and TF as well as new risk areas in the
financial market which can be used first of all to commit
above mentioned crimes.
well as grouped to obtain in this way credible and easy
material to analysis);
analysing information.
 Main Tasks
6. Tasks referring to confirmation of suspicion of
ML and TF suspicion
dissemination reports on suspicions of ML and TF
to LEAs (especially to the public prosecutors);
freezing money stemming from illicit activities;
co-ordinating activities conducted by obliged
institutions and cooperating units.
 Main Tasks
7. Duties within the scope of cooperation with
public and international authorities and
organisations
information exchange with cooperating units;
cooperation with other central units created to
fight against crime (e.g. anti-corruption bureau,
anti-terrorism centre);
information exchange with foreign FIUs
cooperation with international organisations.
 Main Tasks
8. Tasks concerning relationships with obliged
institutions
training obliged institutions and cooperating units
(it means increasing awareness and knowledge so
that the system functions efficiently, obtained data
are suitable and credible and disseminated
information is correctly used);
controlling obliged institutions (in cooperation
with supervision bodies).
 Main Tasks
9. Other administrative and information and
research tasks
 Organizational Structure

To perform all tasks FIU should consist of different parts

responsible for separate groups of them.
Organization charts of FIUs can be different in details,
taking into consideration vide variety of elements of
national law systems and environment in which FIU acts.
 However when we consider only the above mentioned
tasks we can indicate one common and general scheme.
 This scheme should surely include such parts as IT
infrastructure, analytical sections and widely defined
support units.
 IT infrastructure
 First of all to fulfil duties connected with storing information and
its analysing, two types of sections should be created:
 section responsible for administration of databases and IT tools;
 section responsible for research.
 The first section should deal with receiving, gathering and
processing information from obliged institutions.
 When we talk about receiving information we mean obtaining data
which are sent directly on the basis of legal regulations without
previous demands of the authority.
 Because of their enormous amount, they ought to be forwarded
digitally by the obliged institutions to FIU (e.g. by using secure web
side and software for data encryption).
 IT infrastructure
The FIU should possess its own database which allows to process
and store obtained information. Such database requires of course
special services including administration of hardware and software.
Besides IT sections ought to develop IT tools used by analysts in
cooperation with them or supervise their development by external
entities.
Obtained information should also be validated.
To ensure that information which will be analysed is correct, one
should check whether its form and content are accurate and proper.
Obviously such checking can be done by IT programs which are
only supervised by employees of sections for research.
 IT infrastructure
 Additionally, this section should be responsible for the content of data
dictionaries especially within the scope of the typologies and data kinds.
 This section could also put forward proposals of the change and the
development of the database and the IT tools destined for the data scrutiny.
 Other duty of the second section can be to build and test models of
analytical inquiries to database of FIU, of course in cooperation with
analysts.
 Moreover – on the basis of analytical experience – it can prepare models to
distinguish untypical transactions probably connected with ML or TF from
the mass of currency or threshold transactions sent by obliged institutions.
 Besides, such section can deal with statistical analysis of stored
information. Its results could form the basis for proposals of new risk areas
concerning ML and TF.
 Analytical sections
The main core of FIU is the analytical unit which can be
further divided into several sections connected with each
other.
The first task of analytical unit is to analyse obtained
information, especially reports on suspicious and untypical
transactions and activities and then - on the grounds of
produced results - to undertake further actions (e.g. to
disseminate reports of reasonably justified suspicion to LEAs
and to freeze money).
Such analyses can be carried out in different ways, on which
the organisation of analytical section depends.
 Analytical sections
For instance analytical section can be divided
according to:
stage of analysis;
kinds of obliged institutions or cooperating units
which send information;
types of analysed information;
typology of transactions or cases initiated on the basis
of obtained information;
kinds of suspicion.
 Analytical sections
 The division according to the first criterion seems to be the easiest to do. It doesn’t
depend on content of information and quantity of each type of information
(information mean first of all reports on suspicious or untypical or threshold or
currency transaction which can be the bases of initiation of cases).
 Concerning stages of analysis we can distinguish initial and complex analysis and
on that basis FIU can divide analytical unit in section of initial analysis and section
of complex analysis.
 In the first one work would focus on classification of obtained information or rather
cases initiated on their grounds. In turn, the classification would consist in
assessments of each element of case and checking in directly accessible databases.
 On this basis, case could be assigned to concrete group. The groups could be for
instance:
 “developmental” cases which should be further analysed because of well justified
suspicion;
 “suspended” cases with minimal justification of ML or TF suspicion;
 “closed” cases which aren’t connected with ML or TF suspicion.
 Analytical sections
Case could be suspended if there is no possibility
to confirm suspicion (e.g. source of money is
abroad in the country with which FIU doesn’t
exchange information). It could be assigned to
other group if additional information connected
with the case appears, for example information
confirming suspicion of ML or TF.
 Analytical sections
The analytical unit could be divided into sections dealing
with different kinds of information. For instance there
could be following ones created:
 section for analysis of reports obtaining from credit
institutions;
 section for analysis of reports received from financial
institutions;
 section for analysis of reports from remaining obliged
institutions;
 section for analysis of information from cooperating units
and foreign FIUs.
 Analytical sections
 Such the division has yet some disadvantages. It is based only on types of
information sources.
 It doesn’t refer to the issue of type and content of information or quality of
justification of suspicion.
 It is necessary to underline that according to current experience the majority of
STRs sent by obliged institutions comes from credit institutions.
 Thus such division could be the reason for unequal work distribution among
sections.
 The other way of division is related to types of analysed information. The pieces of
information obtained by FIU especially from obliged institutions, but also from
cooperating units can be following:
 reports on suspicious transactions sent by obliged institutions;
 reports on suspicious activities received from cooperating units;
 currency and threshold transaction coming from obliged institutions;
 information on suspicious transactions or activities obtained from foreign FIUs;
 other sources (e.g. the mass media, denunciations).
 Analytical sections
Similarly to the previous kind of division this one doesn’t refer
to issue of content of information or quality of justification of
suspicion.
There is also risk that analysts would specialise in analyses of
concrete type of information narrowing in this way their
mental horizons.
The division of the analytical unit according to the typology of
transactions or cases initiated on the basis of obtained
information seems to be also connected with a risk of narrow
specialisations of analysts with reference to suspicious
characters of transactions or cases.
 Analytical sections
The possible way of its usage is to connect it with the division according to
the stages of analyses. Then, the section responsible for complex analysis
could be divided into parts dealing with cases in which different risk areas
are dominating.
The other easy way of division is based on different kinds of suspicion.
First of all the analytical unit could be divided into section dealing with
cases concerning the suspicion of terrorist financing and section dealing
with cases related with suspicion of money laundering.
Besides, the division could be based on the suspicion of different predicate
offences.
But it is necessary to point out that at the level of FIU it is not always
possible to indicate suspicion of predicate offence.
It seems that police FIU has the best possibilities in this respect.
 Support sections
The realisation of the main tasks is related to other
additional duties, especially those mentioned in point 3, 4
and 5 in chapter 1.3. Taking these duties into
consideration, one could distinguish following support
sections:
1. section for national cooperation,
2. section for international cooperation,
3. control section,
4. training section,
5. administrative section,
6. legal section.
 Support sections
The first two sections could deal with information exchange
and widely defined cooperation with other bodies and
organisation counteracting ML and TF. Obviously, the
information exchange could be assigned to the analytical
sections as the task directly connected with analysis. But it
seems to be optimal if these tasks are performed by separate
sections, inter alia to manage them completely.
The control and training tasks, as they are indirectly
connected with analyses, should be surely assigned to
separate sections, which should deal with cooperation with
obliged institution and cooperating units as well.
 Support sections
The administrative and legal sections should fulfil duties related to typical
logistic support based on performing inter alia such tasks as:
 staff administration;
 supervision of office space security;
 giving opinions on new drafts of the legal regulations or preparing the ones;
 conducting or participation in public tenders as for orders of the FIU;
 preparing reports on activities of the FIU;
 answers to questions unconnected with direct cooperation with obliged
institutions or cooperating units (e.g. the parliamentary questions, questions
from the media)
However, the above mentioned tasks aren’t the main ones, they shouldn’t be
omitted. Their realisation allows FIU to act continuously without obstacles
and intervention from outside.
FATF’s Recommendation 26
Countries should establish a FIU that serves as a
national centre for the receiving (and, as permitted,
requesting), analysis and dissemination of STR and
other information regarding potential money
laundering or terrorist financing. The FIU should have
access, directly or indirectly, on a timely basis to the
financial, administrative and law enforcement
information that it requires to properly undertake its
functions, including the analysis of STR.
Azerbaijani Law on AML/CFT [Article 17]
 Article17 is titled “Financial Monitoring Organ”.
The state authority carries out powers of the
financial monitoring organ is defined by the relevant
executive authority.
The said organ is defined the Financial Monitoring
Service under the Central Bank of the Republic of
Azerbaijan by the Decree No 66, dated 23.02.2009
of the President of the Republic of Azerbaijan
Azerbaijani Law on AML/CFT [Article 17]
 The financial monitoring organ shall gather and analyze the
information submitted by the monitoring entities, other persons
involved in monitoring, supervision authorities and by the
State Customs Committee of the Republic of Azerbaijan.
 Functions
Upon receiving information from the known sources on
transaction which is subject to monitoring, the financial
monitoring organ may request monitoring entities, other
persons involved in monitoring, supervision authorities and
the State Customs Committee of the Republic of
Azerbaijan to submit information defined in the article 11.1
of this Law for the purposes of inquiry, also within the
framework of analysis and its own authority the financial
monitoring organ may obtain from mentioned bodies or
other state authorities additional information needed to
properly undertake its functions.
 Functions
Where the financial monitoring organ, within the
framework of analysis 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 or other property shall be
submitted to the General Prosecutor Office, and the
information on the financing of terrorism shall be
submitted to the relevant executive authority.
Confidentiality of Information
Information held by the Financial Monitoring Service
shall be securely protected and used solely for the
goals of this Law;
Also the Financial Monitoring Service shall create an
information protection system.
Non-Compliance of Information
Where the Financial Monitoring Service, in course of
carrying out of its employment duties, obtains
information on non–compliance of the monitoring
entities and other persons involved in monitoring with
the requirements of this Law, it shall submit such
information to the relevant supervision authorities for
enforcement of administrative or stipulated by the
national legislation other measures to these persons.
 Powers
The powers of the Financial Monitoring Service are
defined by this Law and the Statute approved by the
President of the Republic of Azerbaijan.
Financial Monitoring Services DISTINGUISHED
RIGHT - to adopt regulation on AML/CFT
Financial monitoring organ adopts
following regulations:
on the list and minimum threshold of total
amount of transactions with funds or other
property to be submitted to the financial
monitoring organ in the order specified by
this Law;
Financial Monitoring Services DISTINGUISHED
RIGHT - to adopt regulation on AML/CFT
 on the list of country (jurisdiction) determined by the article 7.3 [The list of
countries that do not or insufficiently comply with the international standards
on prevention of the legalization of criminally obtained funds or other
property, financing of terrorism, or suspected in support of the dangerous
trends of transnational organized crime, armed separatism, extremism and
mercenary, participation in illegal narcotic drug dealership and other
psychotropic substances production or circulation thereof, or the countries
that do not require disclosing identification information when conducting
financial transactions is determined and published by the financial
monitoring organ in the order as established by the relevant executive
authority. The relevant list and the list of persons envisaged in the article
7.2.5 of this Law shall be submitted to the monitoring entities and other
persons involved in monitoring by the financial monitoring organ directly or
via supervision authorities.] of the said Law.
Financial Monitoring Services DISTINGUISHED
RIGHT - to adopt regulation on AML/CFT
and on the list of persons determined by the
article 7.2.5 [any transactions of persons the list
of which is designated in the order specified by
the relevant executive authority on the basis of
relevant United Nations Security Council
Resolutions, as well as legislation of the
Republic of Azerbaijan and international
instruments to which the Republic of Azerbaijan
is a party.] of this Law;
Financial Monitoring Services DISTINGUISHED
RIGHT - to adopt regulation on AML/CFT
 on simplified CDD measures, in accordance with the
article 6.2 [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 of this Law shall be carried out by the
financial monitoring organ] on supervision over the
compliance with the requirements of this Law,
Financial Monitoring Services DISTINGUISHED
RIGHT - to adopt regulation on AML/CFT
 on submission of information to the financial monitoring
organ, on requirements to the preparation of internal
control system, on the form of submission of statistical
information on the offences related to the legalization of
criminally obtained funds or other property and the
financing of terrorism.
The Statute of the Financial Monitoring Service under the Central Bank of the
Republic of Azerbaijan
 General Provisions
 Scope of Activity of the Financial Monitoring Service
 Functions of the Financial Monitoring Service
 Rights of the Financial Monitoring Service
Organisation of the Activity of the Financial Monitoring
Service
The Structure of the Financial Monitoring Service under
the Central Bank of the Republic of Azerbaijan
General Provisions
The Financial Monitoring Service under the Central Bank of
the Republic of Azerbaijan (hereinafter referred to as the
Financial Monitoring Service) was established by the
Decree of the President of the Republic of Azerbaijan from
February 23, 2009 # 66.
The Financial Monitoring Service is the state authority,
which implements competences stipulated by the legislation
and present Statute in the sphere of prevention of the
legalisation of criminally obtained funds or other property
and the financing of terrorism in the Republic of Azerbaijan
(hereinafter referred to as the relevant sphere).
General Provisions
The Financial Monitoring Service is guided in its
activity by the Constitution of the Republic of
Azerbaijan, international agreements to which the
Republic of Azerbaijan is a party, the Law of the
Republic of Azerbaijan «On the prevention of the
legalisation of criminally obtained funds or other
property and the financing of terrorism» and other
normative legal acts, relevant international standards,
as well as the present Statute.
General Provisions
In order to execute the functions and responsibilities, the
Financial Monitoring Service interacts with other state
authorities.
The Financial Monitoring Service builds its activity on base
of respects to human rights and fundamental freedoms, rule of
law and humanism principles.
The Financial Monitoring Service possesses an independent
balance sheet, state property being respectively under its
disposal by law, accounts in banks, seal with the State
Emblem of the Republic of Azerbaijan and its title engraved
on it, respective stamps and letterheads.
General Provisions
Maintenance and functioning of the Financial Monitoring
Service is financed by the Central Bank of the Republic of
Azerbaijan and other sources stipulated by the existing
legislation.
The Financial Monitoring Service is located in Baku city.
Scope of Activity of the Financial
Monitoring Service
Scope of activity of the Financial Monitoring Service is as
follows:
 implements state policy and ensures supervision in the relevant
sphere;
 coordinates the activity in the relevant sphere of monitoring
entities, other persons involved in monitoring, supervision
authorities and other state authorities, collects and analyses the
information received from them;
 provides application of unified information system in the
relevant sphere;
 acts in other directions stipulated by the legislation.
Functions of the Financial Monitoring Service

 The Financial Monitoring Service fulfils following functions in accordance with the scope of
activity set forth by this Statute:
 carries out monitoring in the relevant sphere, scrutinizes received information, conducts
examination and takes measures on the results;
 conducts efficiency analysis of the situation of combating legalisation of criminally obtained
funds or other property and financing of terrorism, examines processes, develops proposals and
recommendations;
 determines indicators for the detection of transactions subject to monitoring;
 determines regulations of submission of information stipulated by the Law of the Republic of
Azerbaijan «On the prevention of the legalisation of criminally obtained funds or other property
and the financing of terrorism» by monitoring entities and other persons involved in
monitoring;
 determines the list of countries that are suspected in either legalisation of criminally obtained
funds or other property, financing of terrorism, support of the dangerous trends of transnational
organised crime, armed separatism, extremism and mercenary, participation in illegal narcotic
drug dealership and other psychotropic substances production or circulation thereof, as well as
the list of countries that do not require disclosing identification information when conducting
financial transactions;
Functions of the Financial Monitoring Service
 determines requirements on development of internal control systems established by monitoring
entities and other persons involved in monitoring, which are legal persons, and establishes
qualification requirements (professional specialisation and experience) for persons responsible
for organisation of internal control systems;
 conducts supervision over monitoring entities and other persons involved in monitoring, when a
supervision authority is not envisaged for any of them;
 defines the form of submission of statistical information on the offences related to the
legalisation of criminally obtained funds or other property and the financing of terrorism, after
being agreed with the relevant state authorities;
 when within the framework of analysis detecting the elements of a crime in transaction, submits
information on legalisation of criminally obtained funds or other property to the General
Prosecutor Office of the Republic of Azerbaijan, and information on the financing of terrorism
to the Ministry of National Security of the Republic of Azerbaijan and gets feedback from them;
Functions of the Financial Monitoring
Service
when obtaining information on non–compliance of the monitoring entities and other persons involved in
monitoring with the requirements of the Law of the Republic of Azerbaijan «On the prevention of the
legalisation of criminally obtained funds or other property and the financing of terrorism», submits such
information to the relevant supervision authorities for enforcement to these persons of administrative or
stipulated by the national legislation other measures and gets feedback;
provides application of centralised electronic–information systems for following purposes:
1. for single collection of received information in the relevant sphere;
2. for registration of legal and natural persons in relation to whom there are data on their participation in
the legalisation of criminally obtained funds or other property and financing of terrorism;
3. for detection of cases of legalisation of criminally obtained funds or other property and financing of
terrorism based on special indicators;
 studies international experience in the relevant sphere and develops proposals on implementation of
efficient methods and facilities, participates in implementation of international agreements to which the
Republic of Azerbaijan is a party and ensures fulfilment of international obligations;
 prepares relevant statistic reports in accordance within the scope of its activity;
 publicly release periodic reports including statistics, typologies and trends as well as information
regarding its activities;
Functions of the Financial Monitoring
Service
 provides the monitoring entities and other persons involved in monitoring that are
required to submit information, with adequate and appropriate feedback;
 ensures effective usage of allocated funds, grants and other financial resources,
organizes their registration;
 securely protects information obtained as a result of its activity, as well as
establishes the information protection system;
 stores and protects archive documents;
 taking into account international experience undertakes necessary measures for
application of modern information and communication technologies in the activity
of the Financial Monitoring Service;
 takes measures guaranteeing professional development of staff, provides their
participation on necessary educational and training programmes;
 ensures timely consideration of and reply to applications of natural and legal
persons;
 within the scope of its activity to implement other functions stipulated by the
legislation.
Functions of the Financial Monitoring
Service
 The Financial Monitoring Service is entitled with the following rights for fulfilling its functions:
 to participate in the processes of improvement of legislation in the relevant sphere and develops
appropriate proposals;
 to conduct researches in the relevant sphere, develops analytical and methodical materials;
 to suspend the execution of transactions with funds or other property in the cases stipulated by the
legislation, takes imperative decisions and gives imperative orders in the relevant sphere;
 for the purposes of the Law of the Republic of Azerbaijan «On the prevention of the legalisation of
criminally obtained funds or other property and the financing of terrorism» to receive, collect and
analyse the information from monitoring entities, other persons involved in monitoring, supervision
authorities, as well as to use databases of other state authorities in accordance with the legislation of
the Republic of Azerbaijan;
 with a view of examination of received information concerned with legalisation of criminally obtained
funds or other property and financing of terrorism or when necessary to obtain from monitoring
entities, other persons involved in monitoring, supervision authorities and other state authorities by
sending relevant inquiry additional information, needed to properly undertake its functions;
 within the scope of its competence to ensure relations of the Republic of Azerbaijan with foreign states
and international organizations; to cooperate with relevant agencies of other states; in accordance with
the legislation to conclude international instruments, as well as to apply for membership in the
specialised international institutions;
Functions of the Financial Monitoring
Service
 to initiate joining of the Republic of Azerbaijan to international instruments
regarding the issues connected with the scope of activity of the Financial
Monitoring Service;
 to organise conferences, seminars, forums, trainings and other events in the
relevant sphere, takes part at such events;
 to set up interagency cooperation and consultative bodies, working groups,
involves experts and specialists in its activity, orders independent examinations;
 to publish special bulletins and other editions, to establish periodicals in
accordance with the legislation;
 in accordance with the legislation of the Republic of Azerbaijan to realize rights
on state property being at disposal;
 within the scope of its activity to implement other rights stipulated by the
legislation.
Organization the Activity of the Financial
Monitoring Service
The Financial Monitoring Service is headed by the
Director of Financial Monitoring Service is appointed and
dismissed by the President of the Republic of Azerbaijan.
The Director of Financial Monitoring Service has Deputy
is appointed and dismissed by the President of the
Republic of Azerbaijan.
The Director of Financial Monitoring Service and Deputy
Director bear responsibility for fulfilment the duties and
implementation the functions entrusted to the Financial
Monitoring Service.
Organization the Activity of the Financial
Monitoring Service
In the absence of the Director of Financial Monitoring
Service, his powers shall be delegated to the Deputy
Director of Financial Monitoring Service. In the absence
of the Deputy Director of Financial Monitoring Service,
these powers shall be implemented by another official of
the Financial Monitoring Service defined by the Director
of Financial Monitoring Service.
Organization the Activity of the Financial
Monitoring Service
The Chairman of the Central Bank approves the structure,
staff list and estimate of expenditures of the Financial
Monitoring Service.
The status of the Director of Financial Monitoring Service
shall be equivalent to the status of the first Deputy
Chairman of the Central Bank; the status of the Deputy
Director of Financial Monitoring Service shall be equivalent
to the status of the Deputy Chairman of the Central Bank;
the status of employees of the Financial Monitoring Service
shall be equivalent to the status of the employees of the
Central Bank.
New competences of FIU established by the amendments

New
Competen
Adopts ces of FIU
Legal
Base Acts

Determines
Determines thethe Hears
list
list and
and Hears
minimum
minimum administrative
administrative
threshold
threshold ofof infringements
total
total amount
amount of
of infringements
transactions
transactions cases
cases

Freeze
Freeze Defines
Defines “Black
“Black
transaction
transaction on
on list” countries
list” countries and
and
the bases of
the bases of list
list of
of “designated
“designated
foreign
foreign requests
requests persons”
persons”

Defines
Defines Defines
simplified
simplified
CDD
Supervision
CDD
guidelines
guidelines guidelines
Thank you for attention
Questions?