Counterterrorism Blog

Last September a special FATF-sponsored team of financial experts undertook an evaluation of Turkey’s Anti-money laundering and counter-terrorism financing programs. The evaluation was undertaken with the cooperation of the Turkish Government, and involved extensive discussions with both government officials and representatives of the private sector. The experts reviewed the institutional framework, the relevant AML/CFT laws, regulations, guidelines and other requirements, and the regulatory and other systems Turkey has in place to deter money laundering (ML) and terrorist financing. The results have just been published on the FATF website. The following observations are drawn from the Evaluators' observations.

The Turkish Government was slow, after 9/11, to enact new AML/CTF laws and regulations and is now in the process of playing “catch up.” A new money laundering offence was introduced in June 2005, and a stand-alone terrorist financing offence was enacted in July 2006. But, this new law continues to fall short when it comes to complete implementation of obligations contained in the International Convention on the Suppression of the Financing of Terrorism (1999), to which Turkey is a party. The new Terrorism Financing offence only applies in relation to terrorism against Turkey and its interests and it only applies to funding for the actual commission or attempted commission of specific terrorist acts.

Turkey’s Counter-terrorism financing program has so far been directed principally at the PKK/KONGRA-GEL terrorist organization. The Evaluation notes that the PKK/KONGRA-GEL has been quite active in organizing campaigns through auxiliary organisations in Europe to increase its financial resources and has forcibly collected funds from Turkish citizens living in those countries. It also reportedly engages in organised criminal activity. This has included increasing involvement in drug smuggling, arms and people smuggling and money laundering to finance its endeavours. The money obtained from drug smuggling represents a large share of the total revenues of the organisation and provides resources for the purchase of weapons, ammunition and equipment. While Turkey has been particularly active in investigating and prosecuting cases dealing with the PKK, the evaluation team noted what it called a serious “lack of awareness” of Turkey’s AML/CTF policies on the part of Turkey’s prosecution and judicial authorities and a “disproportionate level of acquittals” when it comes to other AML/CTF matters.

Penal sanctions for money laundering or terrorism financing apply only to natural persons, and not to legal entities or charities. Such entities are subject only to administrative penalties such as licence cancellation or property confiscation. These new measures have not yet produced any substantial results, leading the evaluation team to conclude that Turkey continues to have “weak systems {in place} for implementation of {UN} S/RES/1267(1999) and S/RES/1373(2001) {obligations}”

The focal point of Turkey’s new AML/CTF effort is its newly re-enforced Financial intelligence Unit and new STR requirements on banks and certain other bank-like institutions. While the number of suspicious transaction reports (STRs) has increased substantially in recent months, the level still remains quite low. Very few AML/CTF violations have been reported or uncovered, and no substantial penalties have yet been imposed. The STR process is still limited in scope to the banking sector, leaving large segments of Turkey’s financial and quasi-financial sectors outside the structure of control.

Turkey has a large non-profit sector, primarily comprising associations and foundations. These Non Profits are closely regulated, but there is still a significant lack of oversight when it comes to the handling or distribution of funds. The evaluation team indicated that it had not received any information which demonstrates that Turkey periodically reviews the sector in order to assess TF or ML vulnerabilities. In addition, there is no outreach program for raising the awareness of the non-profit sector about the risk of abuse by money launderers or the financiers of terrorism. The number of associations inspected in recent years is quite low leading the Evaluation Team to conclude that Turkey's domestic and international cooperation in this area remains particularly weak.

Despite these shortcomings, the Evaluators concluded that Turkey is now, more than ever, committed to carrying out its anti-money laundering and counter-terrorism financing responsibilities. Let us hope that Turkish authorities take the Evaluators' constructive criticisms and observations seriously, and use the report to stimulate the adoption of new measures and procedures to correct the noted deficiencies. Turkey’s recent moves to reportedly enforce UN designation measures againsts identified Al Qaeda financier Yasin Al Qadi is an important step in the right direction.