FATF Status

Azerbaijan is not on the FATF List of Countries that have been identified as having strategic AML deficiencies

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Azerbaijan was undertaken in 2023. According to that Evaluation, Azerbaijan was deemed Compliant for 7 and Largely Compliant for 22 of the FATF 40 Recommendations. It was deemed Highly Effective for 0 and Substantially Effective for 2 of the Effectiveness ratings.

Corruption remains a significant barrier to foreign investment in Azerbaijan, despite government efforts to address the issue through various initiatives, including the establishment of ASAN service centers aimed at reducing opportunities for bribery. While Azerbaijan has made some progress with its National Action Plan to combat corruption and has a legal framework in place, the enforcement of anti-corruption laws is inconsistent, and businesses continue to face challenges related to political corruption, particularly in the oil sector. The government acknowledges the problem but needs to enhance its commitment to effectively implement reforms and improve transparency to attract private investment.

Azerbaijan's economy is heavily reliant on oil and gas, which constitute approximately 90% of its export revenue and over half of the state budget. In 2023, the economy grew by 1.1%, while inflation reached 8.8% year-on-year, with forecasts suggesting a decrease to 5.3% in 2024. The government is actively pursuing economic diversification by targeting non-oil sectors such as agriculture, tourism, and renewable energy.

The investment climate in Azerbaijan is challenging, primarily due to its heavy reliance on the oil and gas sector, which constitutes about 90 percent of export revenue. Although the government has introduced reforms to attract foreign investment and diversify the economy, issues such as corruption, slow structural reforms, and a lack of judicial transparency continue to hinder progress. Despite these challenges, Azerbaijan offers legal protections for foreign investments and has targeted non-oil sectors like agriculture, tourism, and renewable energy for development.