Levent Kenez/ Stockholm
The Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, in a decision taken on October 21 stated that Turkey is still among jurisdictions under increased monitoring that need to address strategic deficiencies to counter money laundering and terrorist financing. While noting that Turkey is making progress, the global watchdog insists there are still major problems to be solved by the government of Turkish President Recep Tayyip Erdoğan.
In October 2021 FATF placed Turkey under increased monitoring, externally referred to as the “grey list,” because it found a number of strategic deficiencies in combatting money laundering and terrorist financing.
Following the annual plenary of delegates from more than 200 jurisdictions at FATF headquarters in Paris last week, FATF suggested that Turkey continue to work on implementing its action plan to address its strategic deficiencies.
Turkey must increase on-site inspections by supervisors across all sectors, commensurate with risk, and enhance the use of financial intelligence to support money laundering investigations and increase proactive dissemination by the Financial Crimes Investigation Board (MASAK).
FATF also demands that Turkey undertake more complex money laundering investigations and prosecutions as well as set out clear responsibilities and measurable performance objectives for the authorities responsible for recovering criminal assets and pursuing terrorism financing cases.
According to FATF, Turkey needs to conduct more financial investigations in terrorism cases, prioritizing terrorism financing investigations and prosecutions related to UN-designated groups and to ensure these investigations are extended to identify financing and support networks.
2.Enhanced Follow-up Report suggests that despite progress in addressing most of the technical compliance deficiencies, Turkey will remain in enhanced follow up and will report back to the FATF on progress achieved on improving the implementation of its Anti-Money Laundering(AML)/Combating the Financing of Terrorism (CFT) measures in June 2023:
One of Turkey’s most troublesome issues regarding terrorist financing is control of non-profit organizations (NPOs). According to the FATF, Turkey should properly monitor the financial movements of NPO-like terrorism-related organizations.
It is a fact that there are many Turkish NPOs, especially under the control of jihadist terrorist organizations. For instance, Nordic Monitor previously reported that a Turkish jihadist group organized in Ankara to finance the Islamic State in Iraq and Syria (ISIS) has continued to operate for several years despite the fact that the authorities have long known what they were doing. The ISIS group, established as a platform under the name of Dar’ul Erkam Fisebilillah (The House of Arqam in the Cause of Allah), was raising funds to help and free ISIS captives held by Kurdish groups in Syria. The funding network quickly expanded from Ankara to some 20 other Turkish provinces, while the group set up an operations center in Idlib, a Syrian province under the control of the Turkish Armed Forces and its affiliate armed groups.
The FATF asks Turkey to fully implement a risk-based approach to supervision of non-profit organizations to prevent their abuse for terrorist financing, taking steps to ensure that audits conducted are risk-based, that supervision does not disrupt or discourage legitimate NPO activity such as fundraising and that sanctions applied are proportionate to any violations.
However, the Erdoğan government systematically abuses the Prevention of the Financing of the Proliferation of Weapons of Mass Destruction Law (No. 7262). MASAK, the body that coordinates with the FATF, became a political tool in the hands of the ruling party after a purge of senior police chiefs and top administrators in the Interior Ministry. MASAK has been busy producing reports that help the Erdoğan government confiscate the assets of legitimate businesspeople, journalists, and human rights activists under the pretext of battling terrorism.
Most recently, on December 21, 2021, the assets of 770 people, including journalists and purged civil servants, were confiscated on the grounds of financing terrorism. Many of these people are living in exile since they are opponents of Erdoğan. The Erdoğan government intends to create the perception that dissidents are engaged in acts of terrorism by publishing their names together with those of members of UN-designated terrorist groups.
Turkey, which wants to improve its record on money laundering, is in contrast with its obligations to the FATF with the opportunities it provides to Russian companies that were sanctioned after Russia invaded Ukraine in February. It is no secret that Erdoğan apparently saw the opportunity to make a profit by offering Russians a lifeline to help overcome the restrictions and beat the sanctions. It is estimated that a large number of Russian oligarchs brought some of their assets to Turkey after Turkey announced that it would not take part in US/EU-sponsored sanctions on Russia.
In March President Erdoğan made a controversial statement concerning Russian oligarchs to pro-government journalists on the way back from the NATO summit in Brussels, saying: “… if there are certain capital groups that want to come to our country and ‘park’ their facilities with us, of course, we won’t keep our doors closed to them. Our door is open to them as well.”
“With the Ukraine crisis, our country has become a rising star in sectors such as finance and tourism. By God’s will, we will fulfill our promise to make our country one of the world’s top 10 economies by making the best use of opportunities,” Erdoğan said on March 21 while addressing former lawmakers from his ruling Justice and Development Party (AKP).
With a last-minute amendment in August, the application process for Turkey’s Wealth Amnesty Law, which ended on June 30, was extended until March 31, 2023. The law covers the import of foreign assets such as gold and foreign currency into Turkey through a bank or intermediary institution as well as the physical movement of currency notes. Beneficiaries do not pay taxes on the assets they report. In its previous reports, the FATF had warned Turkey that intermediary financial institutions are largely used in money laundering.
The wealth amnesty bill rushed through the Turkish parliament by the government:
There is also no citizenship requirement for benefiting from the Wealth Amnesty Law. Customs documents are sufficient for cash brought into Turkey. For this reason, it is estimated that Russian and Iranian businessmen brought a significant amount of assets into Turkey. Previous FATF reports underline that this money brought to Turkey was mostly used for real estate, company or gold purchases.
A Bloomberg article in September pointed out that mysterious flows of money into Turkey have risen to new record highs, increasing by $5.5 billion for July alone, bringing the total for the first seven months of 2022 to $24.4 billion.
