Garayev Alikhan Aminagha,
Master’s student, Tax Law specialty, Faculty of Law, Baku State University
E-mail: [email protected]
Enhanced Customer Due Diligence is a series of processes that financial institutions use to thoroughly assess risk with customers, especially where there is a high risk of money laundering or terrorist financing [3]. It is more than proper procedure identification but it involves obtaining additional documentation, understanding the nature of the clients’ business activities and their sources of funds as well as the intended use of an account. Also, it involves an assessment of risk factors such as origin, pattern of transactions, and business relationships. How are these payments calculated? To determine taxable amount of levied tax it is required to define some its inherent components, i.e., taxpayer, tax object, base, and its rate.
EDD becomes more critical in a case where a country is at high risk or when there are large or economically irrational transactions. It also involves increased ongoing monitoring to detect any deviation from the expected patterns for the purpose of detecting suspicious activities. Such rigorous account analysis reduces the risk of financial risks and helps institutions comply with regulatory requirements as they aim to curb financial crimes.
In the Republic of Azerbaijan, the Law of the Republic of Azerbaijan on the Prevention of the Legalization of Property Acquired by Criminal Means and Financing of Terrorism specifies the cases in which enhanced customer due diligence measures should be applied.
According to Article 4.13 of the Law of the Republic of Azerbaijan on the Prevention of the Legalization of Property Acquired by Criminal Means and Financing of Terrorism [1]:
“4.13. In the framework of enhanced customer due diligence measures, obligated persons must take the following actions:
4.13.1. Apply enhanced customer due diligence measures proportionate to the identified risks in cases where there is a high risk of legalization of property acquired by criminal means and financing of terrorism, and increase the intensity of monitoring business relationships.
4.13.2. For life insurance policies, assess the risk level of the beneficiary to determine the application of enhanced customer due diligence measures. If the beneficiary, being a legal entity or a foreign legal structure, is determined to be high-risk, then enhanced customer due diligence measures should also be implemented with respect to the beneficiary and any beneficial owners.”