Rapid growth in a financial institution’s transactions will trigger a reassessment of its risk profile. On 30 October, Azerbaijan’s parliament approved amendments to the law on the Central Bank in a third reading.
The amendments provide for a fresh assessment when the frequency or value of transactions rises by 40% or more compared with the previous calendar year. The review concerns money-laundering, terrorist-financing and related compliance risks.
Other triggers for a risk review
Transaction growth is not the only trigger. The list also includes reorganisation, changes in beneficial ownership, business activities, customer groups and the geographical scope of a financial institution or group.
The Central Bank of Azerbaijan will be able to request documents and information for supervisory purposes. Institutions will have to provide them within the deadline specified in a written request. The frequency and intensity of supervision are to reflect the risks identified, internal controls and the characteristics of market participants.
Supervision will cover financial groups
The amendments provide for consolidated supervision of financial groups that include banks and insurance and investment-market participants. This allows connected operations to be assessed at group level.
The 40% threshold is a trigger for further assessment, not a cap on business growth. Reaching it does not, by itself, establish a breach. For rapidly expanding institutions, the practical considerations include keeping customer and ownership information up to date and ensuring that internal controls match the scale of operations.
Approval in a third reading marks the parliamentary stage. The report does not specify when the amendments will take effect.
