The most recent MONEYVAL evaluation report on Azerbaijan notes changes in rating related to the nonprofit sector. MONEYVAL, the Council of Europe's anti-money laundering body, is tasked with enforcing global anti-money-laundering and counter-terrorism financing standards. While the body evaluates the compliance of states with a multitude of standards, the one most relevant to civil society is Financial Action Task Force (FATF) Recommendation 8 (R8), which covers the regulation of nonprofit organisations (NPOs) to prevent terrorist financing abuse.
It includes six key criteria: taking a risk-based approach (8.1), meaning measures are taken in a targeted manner based on the evaluation of risk, rather than a blanket approach covering all NPOs; sustained outreach concerning terrorist financing issues (8.2), targeted risk-based supervision or monitoring of NPOs (8.3, 8.4), effective information gathering and investigation (8.5), and effective capacity to respond to international requests for information about an NPO of concern (8.6).
Azerbaijan was previously rated "C" (compliant) with Recommendation 8; however, the recent report indicates a downgrade to "PC" (partially compliant). The report, adopted on February 12th, states that while Azerbaijan has taken some steps towards meeting the requirements of R8, there are areas that need improvement.
For instance, according to the report, the country has conducted a risk assessment of the NPO sector and mandated this assessment annually to enhance NPO accountability. However, this risk assessment failed to identify any specific NPOs or categories of NPOs at risk of being exploited for terrorist financing. Furthermore, no measures have been suggested to address identified vulnerabilities. Azerbaijani legislation differentiates between Non-Government al Organisations (NGOs) and religious organisations.
While some measures promote accountability, there are no policies to enhance public confidence or protect NPOs from TF abuse. Azerbaijan applies a uniform approach to supervising NPOs, lacks risk-based measures and only financial reporting requirements are enforced with sanctions available, but deemed ineffective. While regular cooperation among relevant authorities regarding NPO activities happens, there are gaps in information sharing, international cooperation, and response to suspicions of TF involvement. Further, Azerbaijan relies on existing legal frameworks for international cooperation but lacks specific procedures for responding to international requests regarding NPOs.
Although Azerbaijan encourages NPOs to use regulated financial channels, notable deficiencies remain, including:
- the absence of risk-based supervision;
- policies to bolster public trust in NPO management; and
- limited educational programmes to increase awareness of terrorist financing issues among NPOs and donors.
MONEYVAL calls on the authorities to swiftly apply preventive, targeted, and proportionate risk mitigation measures, all while being careful to ensure that legitimate NPO activities are not being disrupted or discouraged.