Countries/Jurisdictions of Primary Concern - Turkey

Bureau of International Narcotics and Law Enforcement Affairs
Report

Turkey is an important regional financial center, particularly for Central Asia and the Caucasus, as well as for the Middle East and Eastern Europe. With the exception of last three years, Turkey’s economy has grown rapidly, and its GDP has quadrupled in size since 2001. This rapid growth, combined with Turkey’s commercial relationships and geographical proximity to unstable, conflict ridden areas like Iraq, Syria, and Crimea makes Turkey vulnerable to money laundering and terrorist finance risks. It continues to be a major transit route for Southwest Asian opiates moving to Europe. In addition to narcotics trafficking other significant sources of laundered funds include smuggling, invoice fraud, tax evasion, and to a lesser extent, counterfeit goods, forgery, highway robbery, and kidnapping. Terrorism financing is present, particularly in the form of cash flows across Turkey’s southern border into Syria; and terrorist organizations with suspected involvement in narcotics trafficking and other illicit activities are present in Turkey. Turkey’s nonprofit sector remains vulnerable to terrorism financing. Recent conflicts at the southern border of Turkey have increased the risks for additional sources of terrorism financing and money laundering attached to human trafficking and oil and antiquities smuggling from the region to Europe.

Money laundering takes place in banks, non-bank financial institutions, and the informal economy. According to Turkish government officials, between one-quarter and one-third of economic activity is conducted by 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.

For additional information focusing on terrorist financing, please refer to the Department of State’s Country Reports on Terrorism, which can be found at: http://www.state.gov/j/ct/rls/crt/

Do INSTITUTIONs engage in currency transactions related to international narcotics trafficking that include significant amounts of US currency; currency derived from illegal sales in the U.S.; or illegal drug sales that otherwise significantly affect the U.S.: NO

criminalizATION OF money laundering:

“All serious crimes” approach or “list” approach to predicate crimes: All serious crimes

Are legal persons covered: criminally: YES civilly: YES

Know-your-customer (KYC) rules:

Enhanced due diligence procedures for PEPs: Foreign: NO Domestic: NO

KYC covered entities: Banks; bank or credit card issuers; authorized exchange houses; money lenders; financing and factoring companies; capital markets brokerage houses, futures brokerages, portfolio management companies, and investment fund managers; investment partnerships; insurance, reinsurance, and pension companies, and insurance and reinsurance brokers; financial leasing companies; capital markets settlement and custody service providers; the Presidency of the Istanbul Gold Exchange (custody services only); General Directorate of Post and Cargo Companies; asset management companies; Islamic financial houses; dealers of precious metals, stones, and jewelry; Directorate General of the Turkish Mint (gold coin minting activities only); precious metals exchange intermediaries; buyers, sellers, and intermediaries of immovable property transactions made for trading purposes; dealers of all kinds of sea, air, and land transportation vehicles and construction equipment; dealers and auction houses dealing with historical artifacts, antiques, and art; lottery and betting organizations, including the Turkish National Lottery Administration, the Turkish Jockey Club, and Football Pools Organization Directorate; sports clubs; notaries; lawyers; accountants; and audit institutions

REPORTING REQUIREMENTS:

Number of STRs received and time frame: 61,372: January 1 - November 21, 2015

Number of CTRs received and time frame: Not applicable

STR covered entities: Banks; bank or credit card issuers; authorized exchange houses; money lenders; financing and factoring companies; capital markets brokerage houses, futures brokerages, portfolio management companies, and investment fund managers; investment partnerships; insurance, reinsurance, and pension companies, and insurance and reinsurance brokers; financial leasing companies; capital markets settlement and custody service providers; the Presidency of the Istanbul Gold Exchange (custody services only); General Directorate of Post and Cargo Companies; asset management companies; Islamic financial houses; dealers of precious metals, stones, and jewelry; Directorate General of the Turkish Mint (gold coin minting activities only); precious metals exchange intermediaries; buyers, sellers, and intermediaries of immovable property transactions made for trading purposes; dealers of all kinds of sea, air, and land transportation vehicles and construction equipment; dealers and auction houses dealing with historical artifacts, antiques, and art; lottery and betting organizations, including the Turkish National Lottery Administration, the Turkish Jockey Club, and Football Pools Organization Directorate; sports clubs; notaries; lawyers; accountants; and audit institutions

money laundering criminal Prosecutions/convictions:

Prosecutions: Not available

Convictions: Not available

Records exchange mechanism:

With U.S.: MLAT: YES Other mechanism: YES

With other governments/jurisdictions: YES

Turkey is a member of the FATF. Its most recent mutual evaluation can be found at: http://www.fatf-gafi.org/countries/s-t/turkey/

Enforcement and implementation issues and comments:

Although Turkey’s legislative and regulatory framework for addressing money laundering has improved, Turkey’s investigative powers, interagency cooperation, law enforcement capability, oversight, and outreach are weak and lacking in many of the necessary tools and expertise to effectively counter this threat through a comprehensive approach; these areas need to be strengthened.

The Coordination Board for Combating Financial Crimes assigned the Financial Crimes Investigation Board (MASAK), Turkey’s financial intelligence unit, to coordinate the national risk assessment in Turkey. To this end, MASAK determined contact points from relevant institutions, organized a study visit to Spain in 2014, and continues interagency consultations and studies in order to draft an assessment document.

With the entry into force, on March 30, 2015, of the Regulation on Principles and Procedures for MASAK’s Electronic Notification to Obliged Parties, MASAK will be able to communicate with covered entities in a timely manner and implementation of the mechanism for freezing assets without delay will be accelerated. Moreover, in February 2015, MASAK introduced a guidance circular, Guidance on Suspicious Transaction Reporting for Factoring and Leasing Companies, that improved its capacity for oversight. MASAK has improved its capacity to collect and analyze financial information by further investing in IT infrastructure and human capital. MASAK continues to increase education efforts for financial institutions. A new Efficiency in Anti-Money Laundering and Combating Financing of Terrorism project officially started in March 2015, with donor assistance.

Turkey’s nonprofit sector is not audited on a regular basis for terrorism financing activity and does not receive adequate AML/CFT outreach or guidance from the government. The General Director of Foundations issues licenses for and oversees charitable foundations. However, there are an insufficient number of auditors to cover more than 70,000 institutions.

Other significant weaknesses exist in Turkey’s AML/CFT regime that should be addressed. These include: making politically exposed persons (PEPs) subject to enhanced due diligence; ensuring cross-border wire transfers and cash transfers are recorded in accordance with international standards; ensuring designated non-financial businesses and professions are scrutinized and are subject to reporting requirements; continuing to increase the capacity of MASAK to engage in greater data collection and analysis; and improving interagency cooperation to assure a comprehensive implementation of existing laws and regulations. To improve the deficiencies in its AML/CFT framework and implementation, Turkey will need to invest additional resources.

Turkey has not kept adequate statistics on prosecutions and convictions since 2009. Subsequently, Turkey’s record of official investigations, prosecutions, and convictions is unclear. No data was available for 2014. In 2015, MASAK referred to public prosecutors 387 individuals based upon a suspicion of money laundering and 61 individuals based upon a suspicion of terrorism. Turkey has no civil asset forfeiture procedures and its criminal procedures and practices are primitive.

Turkey should provide the necessary resources and capacity to adequately supervise its non-profit sector. The government should introduce more transparency and accountability in its AML/CFT regime by resuming its retention and reporting of statistics related to prosecutions and convictions. Turkey also should continue to take steps to implement its legal framework for identifying and freezing terrorist assets under UNSCRs 1267 and 1373, to prevent terrorist groups in Iraq and Syria from benefiting from trade in oil, antiquities, and hostages, and from receiving donations under UNSCR 2199.