Supplier verification is a crucial safety condition for transactions. Economic intelligence offers many methods to check a company. However, the further the company is located outside of Poland’s borders, especially beyond the EU borders, the more challenging it becomes to conduct a reliable verification. How to check a company from Azerbaijan?
Exercising due diligence in contractor verification
In today’s times, setting up a company is effortless. In many countries, it can be done without leaving one’s home, via the Internet. Therefore, one can never be certain about the true identity behind the created name and entry in the register until it is verified. Verification involves commonly used actions in economic intelligence, primarily focusing on checking the credibility and currency of the contractor’s documentation, such as National Court Register (KRS), Tax Identification Number (NIP), National Business Registry Number (REGON), as well as permits and certificates required for specific types of business operations.
Verification can be performed by obtaining information from relevant individuals and institutions, such as register courts, Social Insurance Institution (ZUS), tax offices, or national and international chambers of commerce. It is worthwhile to delve into the history of the company and its owners, including opinions about the company, by searching the internet, consulting other entrepreneurs, or the company’s business partners, and even directly asking the company itself. It is crucial to remember that failure to exercise due diligence in choosing a contractor can result in legal consequences, such as accusations of knowing involvement in irregularities, leading to further tax and legal sanctions.
National and EU Sanctions
For over a year, Polish companies have been even more cautious about cooperating with foreign, including Azerbaijani, business partners due to the Russian military aggression against Ukraine. By the end of 2022, the European Union had already imposed 9 sets of sanctions on Russia. Poland has also applied additional sanctions, including against key individuals and companies from Russia and Belarus. Trading goods and services with Russian and Belarusian companies is prohibited, and Polish entrepreneurs face financial penalties of up to 20 million PLN and up to 15 years of imprisonment for violating this ban. However, Russian and Belarusian entrepreneurs have learned to circumvent international restrictions by utilizing complex holding structures established in other countries, making it difficult to detect the true ownership structure. Being located at the crossroads of Europe and Asia, Azerbaijan, a former constituent republic of the Soviet Union, may be susceptible to the migration of Russian companies attempting to bypass EU sanctions. Consequently, confirming the ownership structure and true beneficiary of a business entity in Azerbaijan may be more challenging.
Economic Cooperation with Azerbaijan
According to data from the Ministry of Development and Technology, at the end of November 2021, Polish-Azerbaijani trade reached $96.8 million. Azerbaijani exports to Poland saw a significant increase, with a 20% jump compared to the same 11-month period of the previous year, amounting to $7.5 million. Despite a 15% decrease, Poland still exports considerably more goods to Azerbaijan, with our exports reaching a value of $89.3 million during the same period. The most promising areas for bilateral cooperation include infrastructure and logistics, construction, agriculture and agri-food processing, the pharmaceutical sector, hydropower, and new technologies. Azerbaijan is rich in natural gas and oil, attracting Polish companies with opportunities for development in the Alat Free Economic Zone near the Baku seaport.
Poland’s economic cooperation with Azerbaijan is primarily governed by the Agreement between the Government of the Republic of Poland and the Government of the Republic of Azerbaijan on Economic Cooperation, signed in Warsaw on March 30, 2005, as well as the Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital, signed on August 26, 1997. Since May 1, 2004, when Poland joined the European Union, economic relations between Poland and Azerbaijan have been regulated by the Partnership and Cooperation Agreement between the EU and Azerbaijan, signed in Luxembourg on April 22, 1996 (entered into force on June 22, 1999). On November 14, 2016, the European Council adopted a negotiating mandate for a new comprehensive cooperation agreement with Azerbaijan.
In Azerbaijan, it is possible to register a company through a one-stop-shop process and electronically online. While this is very advantageous for entrepreneurs, it also necessitates vigilance when establishing partnerships with entities registered in such a simplified manner.
National and EU information sources
Detailed information about the types of economic transactions prohibited with Belarus and Russia by the EU can be found on the European Council’s website: https://www.consilium.europa.eu/. The list of individuals and entities subject to sanctions can be found in the Official Journal of the EU at the following address: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721. The Polish Ministry of Internal Affairs and Administration also maintains an updated registry of entities subject to sanctions, where you can check a contractor, their affiliations, reasons for inclusion in the registry, and applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
The first step in verifying a company from Azerbaijan is to check whether it appears in any of the aforementioned registries. Additionally, useful information can be obtained from Regulation (EU) 2022/576 of April 8, 2022, regarding measures limiting actions of Russia destabilizing the situation in Ukraine.
Economic intelligence: How to check a contractor from Azerbaijan?
The verification of a contractor can be entrusted to a professional economic intelligence agency specializing in such inquiries. A private detective in Warsaw, Poznan, Wroclaw, or other cities will know how to obtain the necessary information to verify the current or future contractor.
The most important method of verifying a contractor and their potential connections to Belarus or Russia is to determine the entity that is the actual beneficiary and then check if they are listed in the aforementioned sanctions list maintained by the Ministry of Internal Affairs and Administration. This information can be obtained from the Central Register of Ultimate Beneficial Owners, maintained by the Minister of Finance: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj
Direct inquiry to the contractor
In case there are difficulties in determining the ownership structure of a business partner through available registers, another method of verifying them through economic intelligence is to directly inquire with the contractor to confirm the identity of their ultimate beneficiary. To substantiate the given response, it is possible to request Azerbaijani entrepreneurs to provide documents confirming their declarations.
Environmental intelligence
A publicly accessible method of gathering information about the contractor is to search online resources. Verifying a company, checking if it has a website, and exploring opinions about it may lead to finding publications related to the company. It is possible to request references from other companies that have dealt with the contractor.
If for certainty, one does not wish to conduct this research themselves, they can assign the task to a research agency specializing in professional economic intelligence. There are more sources of information than just the internet, as Polish-Azerbaijani chambers of commerce or the Embassy of the Republic of Poland in Baku can also provide valuable data.
Polish and EU registries
In the Bulletin of Public Information of the Ministry of Entrepreneurship and Technology, as the competent minister for the economy, a registry of representations of foreign entrepreneurs is maintained. If we find the contractor’s representation in this registry, we can assume that they are still in existence and conducting business.
Another registry to check a contractor is the European VAT taxpayer registry and the EORI registry. Companies and individuals wishing to conduct commercial activities within the European Union must use the EORI number as their identification number in all customs procedures. The VIES (VAT Information Exchange System), a search engine maintained by the European Commission, allows verifying whether a particular entity is registered as conducting intra-community transactions. This is necessary, among other things, to apply a 0% VAT rate to a given transaction. If VIES does not confirm the contractor’s registration, verification can be requested from the tax office of the country where they are based. It is also essential to check if the company has the necessary permits and certificates required in the specific country.
The Insolvent Debtors Register allows checking whether a given contractor is listed. There are also economic information bureaus that hold detailed information about business activities. BIK, the Credit Information Bureau, established by the Polish Bank Association, gathers data on the credit history of bank and non-bank customers, including loan companies.
Azerbaijani business registries
The Tax Ministry of the Republic of Azerbaijan maintains an online database as a state registry where information about economic entities can be searched. The search must be conducted using the company’s registration number and name in the registry (https://www.e-taxes.gov.az/ebyn/commersialChecker.jsp). The website is also available in English.
Infoclipper is a commercial registry that allows searching for any company from Azerbaijan and provides information and documents to verify registration, financial results, credit rating, as well as identifying directors and board members (https://www.info-clipper.com/en/company/search/azerbaijan.az.html). Access to information is subject to a fee. The website is also available in English and French.
The National Depository Center (Azərbaycan Respublikasının Milli Depozit Mərkəzi – MDM) deals with the organization and coordination of the depository system, which involves the storage of securities, maintenance of ownership registers, and registration of transactions on securities (https://mdm.gov.az). The website is also available in English.
It is worth thoroughly checking the contractor
Before conducting a transaction or entering into cooperation with a contractor from Azerbaijan, it is essential to conduct economic intelligence and thoroughly verify them, especially regarding any connections with Belarus or Russia. Violation of the imposed sanctions on transactions with these countries may result in financial penalties of up to 20 million PLN and imprisonment from 3 to 15 years. Apart from that, trade prudence, buyer prudence, and exercising due diligence in selecting a contractor are always required. These obligations apply to entrepreneurs every day, regardless of the current situation in Eastern Europe, and are imposed by the law on companies as professional entities in business transactions, failure to comply with which results in specific sanctions.
Do you already know how to check a company from Azerbaijan? If not, or if you need to find more detailed information, we can help. Contact us.
