BAKU, Azerbaijan, October 20. An effective
compliance system is essential for protecting financial
institutions from sanctions, legal and reputational risks, Azer
Abbasov, Deputy Chairman of the Board of the Financial Monitoring
Service of Azerbaijan, said at the Sustainable Business, Corporate
Governance, Risk and Compliance (GRC) Conference in Baku on
Tuesday, Trend's
correspondent reports.
He said that establishing and implementing regulatory standards
should not be limited to the work of government agencies, but
should also involve cooperation between the public and private
sectors.
According to Abbasov, compliance is particularly widely used in
combating money laundering and the financing of terrorism.
Preventive approaches and the early identification of risks are
among the key priorities of international standards in this
area.
"The state is interested in building a strong and sustainable
economy, while businesses seek to ensure profitability and the
sustainability of their operations. One of the state's main
objectives is also to ensure the economy's competitiveness and the
sustainable development of businesses through appropriate
regulatory mechanisms," he noted.
The official emphasized that preventive mechanisms for combating
money laundering and terrorist financing have specific features
that distinguish them from those in other areas. In particular,
private-sector representatives are involved in carrying out certain
functions traditionally performed by the state.
According to him, businesses must not only comply with standards
and rules established by the state but also develop their own
internal procedures and ensure their implementation.
Abbasov said that banks and notaries play an important role in
this system. However, their primary responsibility is not to
investigate crimes directly, but to identify risks and suspicious
activity during financial transactions and take appropriate
measures in accordance with legal requirements.
He noted that one of the Financial Monitoring Service's main
priorities is to continuously monitor and analyze developments in
this area and communicate relevant information to the parties
concerned.
"Today's financial system no longer operates within the borders
of individual countries alone; it has become global. The speed of
money transfers and the expansion of financial ties place greater
demands on countries to safeguard the security and stability of
their financial systems," he said.
According to the official, compliance systems must be
comprehensive and robust, protecting financial institutions from
sanctions, legal and reputational risks. Failure to meet these
requirements can result in significant losses for financial
institutions.
He pointed out that banks' failure to comply with requirements
could lead to legal liability and financial losses in cases such as
loans being fraudulently issued in someone's name as a result of
cybercrime. Timely risk identification and the implementation of
appropriate control mechanisms are therefore particularly
important.
Abbasov emphasized that international sanctions regimes and
compliance standards are evolving, with requirements becoming
increasingly stringent.
"A compliance system may not generate direct revenue for a bank,
but it prevents potential losses. Amid rising sanctions and
increasing legal risks, compliance is an important safeguard for
financial institutions," he noted.
He added that updates to international standards, including the
transition to the sixth round of mutual evaluations by the
Financial Action Task Force (FATF), are introducing new
requirements for countries. Assessments of countries' compliance
risks under this process may affect the reliability of their
financial systems, investment appeal, and economic development.
According to Abbasov, assessing the institutional environment
and testing existing mechanisms are also essential. The results of
mock evaluations conducted by the Financial Monitoring Service are
discussed with relevant stakeholders and presented to the
Coordination Council.
He said such assessments help identify existing shortcomings,
strengthen interagency cooperation and improve compliance with
international standards.
