Fight against organized crime and money laundering
ANTI-TRAFFICKING AND GOVERNMENT POLICIES
As a transit point at the intersection of Europe and Asia, Azerbaijan is particularly exposed to transnational trafficking practices.
Furthermore, the occupation of 20% of the Azerbaijani territories by Armenian military forces that resulted in 132 km of the southern state border not being controlled by the Government of Azerbaijan, constitutes a major impediment for achieving progress in the fight against trafficking not only in Azerbaijan but also in the entire region, since this border area, the so-called "criminal black hole", is used as an attractive trafficking channel.
Therefore, challenges stand high for the Government to strengthen its efforts in order to efficiently tackle this problem on the domestic level as well as contribute to international endeavours through its involvement in multilateral and bilateral cooperation to combat international terrorism, transnational organized crime, money-laundering, trafficking and other illegal activities.
INTERNATIONAL COOPERATION IN COMBATING TRAFFICKING
Adoption of relevant legal instruments to combat all types of trafficking provided for the establishment of the legislative domestic framework necessary to efficiently address this problem. Meanwhile, fostering international cooperation in this field is extremely important.
In December 2000, Azerbaijan signed the United Nations Convention against Transnational Organized Crime and its Protocols to Prevent, Suppress and Punish Trafficking in Persons and against the Smuggling of Migrants.
Azerbaijan actively cooperates with the Interpol Bureau in Baku. Action was undertaken with the United Nations Development Program (UNDP) as part of the project of comprehensive counter-narcotics assistance for 1997 to 1999.
In 2001 Parliament ratified the European Convention on Mutual Legal Assistance in Criminal Matters. On June 29, 2001 the Law on Legal Assistance in Criminal Matters was adopted. Provisions of this law are invoked in case no agreement has been concluded between Azerbaijan and the requesting state on provision of mutual legal assistance.
To date, Azerbaijan has concluded agreements on mutual legal assistance with CIS member states, Turkey, Iran, Bulgaria etc. Besides, Azerbaijan has acceded to the European Convention on Extradition and its two protocols. On May 15, 2001 the Law on Extradition was adopted.
Azerbaijan is a party to the following agreements:
- Intergovernmental agreement between the Republic of Azerbaijan and Georgia on cooperation to combat smuggling and violations of customs rules (May 7, 1995);
- Intergovernmental agreement between the Republic of Azerbaijan and the Republic of Uzbekistan on cooperation to combat crime (July 25, 2000);
- Intergovernmental agreement between the Republic of Azerbaijan and the Republic of Turkey on border issues and settlement of incidents (May 5, 1997);
- Joint Memorandum on Drug Control and Combating Money Laundering between Azerbaijan, Georgia, Iran and the United Nations Program on International Drug Control (July 5, 2000)
- Memorandum on Cooperation between the Ministry of National Security of the Republic of Azerbaijan and the Ministry of Internal Affairs of Iran in border issues, combat against smuggling drugs, psychotropic and other substances (January 22, 2002);
- Agreement between the State Customs Committee of the Republic of Azerbaijan and the Ministry of Revenues of the Republic of Kazakhstan on cooperation to combat smuggling and the violation of customs rules, illicit trade in arms, munitions, explosives and precursors (April 7, 2000);
- Agreement between the State Customs Committee of the Republic of Azerbaijan and the State Customs Committee of the Republic of Uzbekistan on cooperation to combat smuggling and the violation of customs rules, signed in Baku on 25 July 2000.
ANTI-MONEY LAUNDERING INITIATIVES
Azerbaijan has acceded to the European Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime of 1990, the European Convention on the Suppression of Terrorism of 1977.
Following the ratification of the International Convention for the Suppression of the Financing of Terrorism, necessary amendments to the Criminal Code and introduction of a specific provision (Art. 214-1 of the Criminal Code) on terrorist financing were made. Furthermore, legalization of assets and property that are proceeds of trafficking in drugs and psychotropic substances has been criminalized (Art. 241-1 of the Criminal Code).
Azerbaijan closely cooperates with the Council of Europe Select Committee of Experts on the Evaluation of Anti-money Laundering Measures (MoneyVal). The visit of the CoE mission to Azerbaijan to conduct the first round evaluation of the country's legislation and practices against the laundering of criminal proceeds is expected later this month.
Azerbaijan applies the universally recognized 40+8 FATF Recommendations throughout its financial system.
The joint OSCE-UNODC National Workshop on Combating Money Laundering and Financing of Terrorism held in Baku on March 27-28, 2003 gave an additional impetus to development of anti-money laundering policy agenda with envisaged establishment of the Interagency Governmental Working Group against Money Laundering and Financing Terrorism being one of its priorities.
Furthermore, a roundtable discussion on creating anti-money laundering and combating financing of terrorism legal framework and a workshop on pre-trial investigation and adjudication of drug-related cases are scheduled to be held in Baku in near future.
A program consisting of three targeted elements to combat corruption has been endorsed by the Government. As the enormous discretionary powers vested in bureaucracy could be misused for personal benefit, privatization programs of enterprises as well as state and collective farms are deemed to substantially reduce the opportunity for corruption. The second major Government action was streamlining the entire administrative apparatus. Regulatory powers have been withdrawn from state enterprises and will eventually be entrusted to independent regulatory bodies. Thirdly, a Presidential decree was issued in January 1999 to reign in extra-legal activities of some law enforcement agencies. The decree directs "all central and local executive offices including law-enforcement bodies" to stop "unsubstantiated interventions into economic activity of business people" with a view to "creation of favorable environment for expansion of entrepreneurial activity." Recent evidence from private sector feedback suggests that the hitherto excessive inspections and control activities of numerous government agencies have been reduced.
Furthermore, a draft Law on combating corruption has been elaborated in consultation with experts of the Council of Europe and submitted to Parliament for adoption. With the aim to efficiently tackle the problem of corruption, a specific chapter (Chapter 33) on combating corruption has been incorporated in the Criminal Code.
Azerbaijan also envisages signing the Civil Law Convention on Corruption and Criminal Law Convention on Corruption.
Economic diversification, creation of conducive investment conditions as well as private sector development, especially SMEs development, and related to this, implementation of a socially-oriented economic policy are increasingly recognized as essential tools to relieve the negative implications of trafficking for the society.
The current Government strategy of Azerbaijan is aimed at promoting broad-based economic development which will meet the needs of the majority of the population. Comprehensive institutional and infrastructure development aimed at achieving sustainable growth, employment creation, and poverty alleviation stands high on the domestic development agenda. The following building blocks of a medium-term development strategy have been prioritized:
- Establishing public sector institutions that are transparent, accountable and credible to promote private sector development and implementing a vigorous program against corruption;
- Creating a business environment in which incentives, policies and practices are predictable, transparent and non-discriminatory;
- Increasing the efficiency, improving the quality and delivery of basic social services; minimizing the hardship on vulnerable groups resulting from the transition and the military conflict between Armenia and Azerbaijan, and ensuring that these groups integrate fully in the society and receive a fair share of the country's future prosperity.
Structural reforms that have been implemented in the country stimulated to a large extent economic development with a particular emphasis on SMEs development.
In order to create favourable conditions for entrepreneurship development, relevant legal domestic framework has been set up in line with international standards, with Laws on entrepreneurship, enterprises, protection of foreign investment, privatization being a few in a range of measures consecutively undertaken by the Government to ensure support to SMEs development.
As a result of these activities, a comprehensive system of state support to entrepreneurs has been created; substantial decrease of the tax burden has also been safeguarded.
The following priority directions have been identified:
- Strengthening financial protection. The National Fund on Entrepreneurship Development was established in 2002 whereby a mechanism to secure preferential financing of SMEs investment projects has been improved and transparent credit granting has been introduced. The 2002 data suggest that 49 small businesses (19 urban and 30 rural) received preferential project financing from the Fund. These projects mainly focus on production and processing of agricultural and industrial goods, delivery of services, development of tourist infrastructure and mass media development.
- Setting up entrepreneurial infratructure. Research to establish techno parks and industrial cities is presently underway. This will facilitate establishment of necessary networking among various businesses to ensure better coordination and increase their overall efficiency. Creation in the regions of business centers with relevant consulting, information and training facilities will also contribute to the strengthening of this infrastructure.
- Enforcement of rights of entrepreneurs and development of government-business relations. Decree of the President to liquidate unnecessary impediments to entrepreneurship development adopted last year is recognized as a positive step to ensure a healthy investment climate in the country. Along with this, the recently established Council of Entrepreneurs that gathers representatives of both local and foreign businesses and their associations, aims to efficiently address problems that companies operating in the country are currently facing.
- Fostering SMEs development in the regions. As envisaged in the State Program on SMEs development, improvement of regional development mechanisms through accelerating the creation of a micro-credit bank to support SME development, offering improved incentive schemes, elaboration of investment maps, building regional infrastructure, will positively reshape the rural entrepreneurship architecture and provide an additional impetus to build up viable businesses in provinces.
- Providing technical assistance to entrepreneurs. Delivery of adequate information and advisory services for SMEs, especially in the emerging private farming sector is one of necessary prerequisites for ensuring consistent implementation of the country's economic development strategy. Therefore, establishment of relevant domestic agencies to provide these services and engage in a wide range of business-related activities such as business matching, drafting of business proposals, preparation of business plans, extending credit services to agro-industry, in close partnership with international experts, is of particular importance.
Entrepreneurship support measures undertaken by the Government have resulted in a positive shift in the country's economic performance, as far as SMEs development is concerned. To date, the share of private sector in the GDP equaled 69% in 2000, 71% in 2001 and 73% in 2002. Last year, small businesses accounted for 80.4% (47565) of all businesses operating in the country. Total number of new businesses with foreign participation, registered in 2001 was 29 21; the figures for 2002 suggest 3061 new companies partly or fully foreign-owned.
Over last years, the Government has embarked upon elaboration of Poverty Reduction Strategy aimed at identification of the country's macroeconomic, structural and social policies and programs to promote growth and reduce poverty. This resulted in adoption on February 20, 2003 of the State Program on Poverty Reduction and Economic Development (SPPRED) prepared through a participatory process involving civil society, international financial institutions and donor community.