Financial Action Task Force (”FATF”) which observing the fight against international money laundering and the financing of terrorism and has 39 member states and the one of the working group within Organisation for Economic Co-operation and Development (”OECD”) which Turkey is a member of its, submits recommendations to its member states that are not legally binding but which it expects to implement, and regularly checks whether the states are implementing these recommendations. If the member states do not comply with these recommendations of the FATF, they are added to the “List of Non-Cooperative Countries or Territories” (or the FATF blacklist), which causes the states to be excluded from international trade.
The FATF takes into account the various differences between member states and thus, the difficulties that all of its members may encounter in implementing all the recommendations of the FATF. Therefore, it determines the minimum areas of action that can provide a certain degree of flexibility for its members. The basic standard, which emerged with the determination of minimum action areas, includes all kinds of actions that a member state should take in the legislative and judicial systems and preventive measures for the private and public sectors. Similarly, FATF demands transparency from them and treats the non-profit organizations’ actions as a recommendation tittle in its evaluation reports in order to protect non-profit organizations from money laundering and financing terrorism.
In the report of assessments on Turkey(Anti-money laundering and counter-terrorist financing measures – Turkey) published by FATF in December 2019, Turkey’s level of compliance with the FATF 40 Recommendations and the prevention of money laundering, and the level of effectiveness of the system of financing the fight against terrorism has addressed. Also, suggestions on how existing systems can be strengthened made on in the report. Accordingly, the priority actions in terms of Turkey are as follows:
- Turkey should prioritize the use of financial intelligence related to money laundering, and develop a national strategy for the investigating and prosecuting of money laundering offenses in different types in parallel with the risks identified in the National Risk Assessment dated 2018.
- Turkey should develop a national strategy for confiscating the proceeds and instrumentalities of crime, outlining clear priorities as well as the roles and responsibilities for the relevant administrative and judicial units.
- Turkey should address the gaps in its legal framework to fully meets its obligations concerning targeted financial sanctions related to terrorism.
- Turkey should address deficiencies in its timely transposition of the United Nations Security Council’s decision numbered 1718 to domestic law and immediately establish a legal basis to implement United Nations Security Council’s resolutions numbered 2231 and its successor resolutions, including the establishment of effective, proportionate and dissuasive sanctions and requirements for corresponding supervision and preventive measures in the financial sector.
- Turkey should implement focused and proportionate measures to non-profit organizations identified as at risk of financing of terrorism. A targeted risk-based approach and outreach on how to identify, prevent and report financing of terrorism, with a focus on non-profits organisations assessed as higher risk for potential financing terrorism abuse would help avoid restricting and disrupting non-profit organizations’ legitimate activities.
- Turkey should increase the number of parallel financial investigations in terrorism cases with the objective of identifying terrorist financiers, financing of terrorism trends and methods, and financing networks.
- The supervisory approach of the authorities to Designated Non-Financial Businesses and Professions sectors, in particular, for precious metals and stones and real estate sectors should be developed and these sectors should be subject to the rules of anti-money laundering and terrorism financing in proportion to the risks of these sectors.
It is expected to take the required steps, taking into account the FATF recommendations from Turkey until the end of 2021. Otherwise, Turkey may be on the FATF’s gray list.
It should be noted that the FATF has two lists for the fight against money laundering and terrorism financing, in order to force states to comply with its recommendations: the gray list and the blacklist. Being blacklisted by the FATF has serious consequences for a government:
- Being subject to economic sanctions prohibiting the exchange of goods and services with other states;
- Withdrawal of credit and financial support from global institutions such as the International Monetary Fund and the World Bank and other countries;
- Encounter with worldwide trade embargoes that make it impossible to export goods and services;
- Exclusion from the international community, breaking off relations with states and international organizations.
In our next blog, we will evaluate the importance of the “Law No. 7262 on Preventing the Proliferation of Financing Weapons of Mass Destruction” entered into force and published in the Official Gazette dated December 31, 2020 in terms of the fulfillment of the requirements of FATF recommendations to Turkey.