Approved by board decision of National Bank of the Azerbaijan Republic of November 3, 2006 No. 34

Methodological management about prevention of legalization through banks of money or other property received in the criminal way

1. General provisions

Present Methodological Manual is prepared based on the Laws of the Azerbaijan Republic "About National Bank of the Azerbaijan Republic", "About banks", requirements of international conventions which participant is the Azerbaijan Republic, recommendations of FATF - the Working group on financial measures, the principles of Basel Committee on Banking Supervision.

Present Methodological Manual covers recommendations about legal mechanism of counteraction (this legal mechanism belongs also to counteraction of banks to financing to terrorism) legalizations of money or other property received in the criminal way in the commercial banks operating in the Azerbaijan Republic, their branches, departments, local branches of foreign banks (further - in banks).

The recommendations established in present Methodological Manual cover the minimum activities against legalization of money or other property received in the criminal way, and banks can provide implementation of additional actions within internal control system.

2. Concepts

The concepts used in present Methodological Manual have the following values:

* money or other property received in the criminal way - received directly or indirectly as a result of making of the crimes fixed by the Criminal Code of the Azerbaijan Republic, any money, personal or real, material or non-material estate, legal documents confirming the property rights;

* legalization of money or other property received in the criminal way - implementation of financial transactions or other transactions with use of money or other property received in the criminal way for the purpose of giving to such money or property of the legal status, concealment of the valid source of their obtaining;

* transactions with money or another imushchestvompolucheniye, use or change of the civil laws as a result of transactions with money or other property;

* internal control system - the complex actions of internal control recommended for preparation and implementation by banks. The celebrated actions cover exact identification, documentation, ensuring privacy, training programs, criteria of identification of the transactions requiring special attention, mechanisms of internal audit, appointment of responsible persons, and also other mechanisms and rules;

* politically significant person - the persons who are holding important public positions in any foreign state or earlier holding similar positions (statesmen, members of the government, the highest judicial and military ranks, persons, replacement executive positions in the companies which are in state-owned property, top of political parties), their close relatives (the spouse, parents, grandfathers, grandmothers, children, the adopted persons, brothers from the sister), persons acting from their name;

* the client - person using any services of banks capable to come to the end with the transactions connected with money or other property;

* the beneficiary - the final physical person or legal entity acquiring economic or any other benefit as a result of transactions with money or other property.

3. Internal control system of banks on counteraction of legalization of money or other property received in the criminal way

3.1. The internal control system of banks directed against legalization of money or other property received in the criminal way shall include the following at least:

3.1.1. creation of the internal centralized archive giving the chance to identify clients, persons for benefit of whom operations, persons acting on behalf of the third party, beneficiaries, transaction are performed;

3.1.2. adoption of rules of documentation of data and ensuring privacy;

3.1.3. permanent training of employees in counteraction of legalization of money or other property received in the criminal way;

3.1.4. criteria of identification of the transactions requiring special attention;

3.1.5. measures in the direction of the problem resolution, able to take place in case of refusal from accomplishment of transactions;

3.1.6. the mechanism of internal audit checking efficiency of use of the mechanisms recommended by present Methodological Manual;

3.1.7. appointment at the level of management, and also management of structural divisions of person or the group responsible for control over counteraction of legalization of money or other property received in the criminal way, carrying out permanent monitoring of transactions, clients and beneficiaries;

3.1.8. availability at the responsible person or group of powers of exit to any data connected with all transactions of bank;

3.1.9. acceptance of other mechanisms and rules on identification, prevention of any transactions which healthy nature causes suspicion, including also special measures of identification concerning politically significant persons irrespective of features of their activities, mechanisms acceptances for permanent job and checks of workers.

3.2. Accountability of present Methodological Manual of the responsible person or group specified in Item 3.1.7 directly is recommended to the top management (To board, the Director, etc.).

4. Identification of clients and beneficiaries on categories of risk

4.1. Banks establish categories of risks of the clients that matters in counteraction of legalization of money or other property received in the criminal way. Division of clients into categories of risk can be based at least on the following criteria:

4.1.1. clients of high risk - person registered in the states or in the territories which list is established by National Bank of the Azerbaijan Republic (further - National Bank), politically significant person, person ordering execution of the transactions answering to the criteria noted in Items 6 and 7 of present Methodological Manual, person concerning whom there is doubt that it is effective on its own behalf or on behalf of the third party, person concerning whom there is suspicion about availability of any connection of the transaction performed by it with legalization of money or other property received in the criminal way, and terrorism financing;

4.1.2. clients of average risk - the legal entities performing the main transactions by cash; person using service of bank on the amount exceeding fifteen thousand conventional financial units (further "limit"), by means of the international money transfer systems; person performing regularly repeating transactions, which total amount less than fifteen thousand conventional financial units; the lawyers, accountants and brokers acting on behalf of the third party;

4.1.3. clients of low risk - the banks, the state and municipal authorities, persons who deserved serious trust in the local and foreign markets, other faces which are not referred to category of clients of high and average risk.

4.2. Banks can precisely identify clients and beneficiaries of low risk in the following procedure:

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