Turkey – Know Your Customer (KYC) Rules

 

 

 

Turkey is an important regional financial center, particularly for Central Asia and the Caucasus, as well as for the Middle East and Eastern Europe. It continues to be a major transit route for Southwest Asian opiates moving to Europe. However, narcotics trafficking is only one source of the funds laundered in Turkey. Other significant sources include invoice fraud and tax evasion, and to a lesser extent, smuggling, counterfeit goods, and forgery. Terrorist financing and terrorist organizations with suspected involvement in narcotics trafficking and other illicit activities are also present in Turkey.

Money laundering takes place in banks, non-bank financial institutions, and the underground economy. Informed observers estimate as much as half of the economic activity is derived from unregistered businesses. Money laundering methods in Turkey include: the large-scale cross-border smuggling of currency; bank transfers into and out of the country; trade fraud; and the purchase of high-value items such as real estate, gold, and luxury automobiles. Turkish-based traffickers transfer money and sometimes gold via couriers, the underground banking system, and bank transfers to pay narcotics suppliers in Pakistan or Afghanistan. Funds are often transferred to accounts in the United Arab Emirates, Pakistan, and other Middle Eastern countries.

In June 2011, the Financial Action Task Force (FATF) added Turkey to its list of “Jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies.” As such, FATF called on its members to consider the risks arising from the deficiencies associated with Turkey‘s anti-money laundering/counter-terrorist financing (AML/CFT) enforcement and implementation when conducting business within the country. Turkey was included in the FATF Public Statement for failure to adequately criminalize terrorist financing and implement an adequate legal framework to identify and freeze terrorist assets. The FATF action does not call for any countermeasures against Turkey as a result of its status.

KNOW-YOUR-CUSTOMER (KYC) RULES:

 

Enhanced due diligence procedures for PEPs:

 

PEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used interchangeably

    • Foreign PEP: NO
    • Domestic PEP: NO

Turkey – KYC covered entities

 

The following is a list of Know Your Customer entities covered by Turkish Law:

    • Banks, the Central Bank, post office banks, and money exchanges
    • Issuers of payment and credit cards
    • Lending, financial leasing, custody, settlement, and factoring companies
    • Securities brokers, investment partnerships, and fund and asset managers
    • Insurance, reinsurance and pension companies, and insurance and reinsurance brokers
    • Islamic financial houses
    • Directorate General of the Turkish Mint and precious metals exchange intermediaries
    • Auctioneers, and dealers of precious metals, stones, jewelry, all types of transportation vehicles, art and antiquities
    • Lawyers, accountants, auditors, and notaries
    • Sports clubs
    • Lottery and betting operators
    • Post and cargo companies

Turkey – Suspicious Transaction Reporting (STR) Requirements:

 

Number of STRs received and time frame: 6,500 from January – October 2011

Number of CTRs received and time frame: Not applicable

The following is a list of STR covered entities covered by Turkish Law:

    • Banks, the Central Bank, post office banks, and money exchanges
    • Issuers of payment and credit cards
    • Lending, financial leasing, custody, settlement, and factoring companies
    • Securities brokers, investment partnerships, and fund and asset managers
    • Insurance, reinsurance and pension companies, and insurance and reinsurance brokers
    • Islamic financial houses
    • Directorate General of the Turkish Mint and precious metals exchange intermediaries
    • Auctioneers, and dealers of precious metals, stones, jewelry, all types of transportation vehicles, art and antiquities
    • Lawyers, accountants, auditors, and notaries
    • Sports clubs
    • Lottery and betting operators
    • Post and cargo companies

MONEY LAUNDERING CRIMINAL PROSECUTIONS/CONVICTIONS:

Prosecutions: 15 in 2009
Convictions: Three in 2009

MASAK no longer keeps statistics on prosecutions and convictions (2009 was the last year it maintained these statistics).

 

ENFORCEMENT AND IMPLEMENTATION ISSUES AND COMMENTS:

MASAK, the Financial Crimes Investigation Board, Turkey‘s financial intelligence unit, receives, analyzes, and refers STRs for investigation. In 2010, 354 individuals were referred to the public prosecutor‘s office as a result of MASAK investigations into terrorism finance.

For the past year, a draft terrorism finance law has been under consideration by the Turkish Parliament and is scheduled to be discussed by the Parliament‘s Internal Affairs Commission in late November 2011. It is not, however, clear when or if the draft would reach the General Assembly. Concerns remain, that the draft does not sufficiently address the above enumerated deficiencies outlined by the FATF. Turkey should insure any new legislation meets the FATF standards.

The non-profit sector is vulnerable to terrorist financing. Turkey‘s investigative powers, law enforcement capability, and supervisory oversight are weak and lacking in all the necessary tools and expertise to effectively counter this threat through a comprehensive approach; all these areas need to be strengthened. The nonprofit sector is not audited on a regular basis for terrorist finance vulnerabilities and does not receive adequate AML/CFT outreach or guidance from the authorities. The General Director of Foundations issues licenses for charitable foundations and oversees them. However, there are a limited number of auditors to cover more than 70,000 institutions.