Publication Date 01 January 2010

Money Laundering, Asset Forfeiture and Recovery and Compliance Country Report: Turkey in the year 2012

Turkey, even restructured its banking sector several times, has still not made sufficient progress in money laundering and compliance legislation for improvement of the inspection obligations. In particular due to its location bridging Europe to Asia attracts the foreign criminal organizations of migrant smuggling, terrorism and narcotics. Turkey hosted many brass plate companies in the past set for the purpose of placement, layering and integration of laundering transactions by 1990s.

The first systematic drug trafficking and money laundering dates to the 1960s during Turkish immigration to Germany. Between the years of 1980s-1990s, due to the increase in illicit production and shadow economy and the lack of regulated financial institutions and effective laws, usury, in a form of typical business as a laundering method was very common.

The effects of globalization, increase in financial institutions and transnational business operations after 1990s required to regulate the financial market and to handle the matter of laundering both in domestic and international standards. For that purpose, Turkey enacted its first regulation, law no 4802 in 1996. Even it is still defined as high risk jurisdiction in 2011 it came a long way to prevent laundering acts. Especially after 1988, the criminal organizations launched intensive anti-money laundering activities through off shore banking and almost none of these money laundering activities have been charged due to the lack of regulations.

Turkish National Police has divulged the 180 methods of laundering in 2004 that some of are as follows; to enter the privatization tenders, lotteries and games of chance and to reach people who win the lottery to buy their ticket, beach services, establishment a touristic resort, expensive ship / yacht trading, owning a car, buying precious metals, to go to the capital increase in companies, art and historical artifacts, enter the financial markets, opening shopping centers, to use false or inflated invoices, to open a casino and betting businesses in Turkish Republic of Northern Cyprus, the tax exemption from the countries.

In today’s Turkey, in parallel with the developments of financial tools and diversity of financial systems, professionals such of financial, legal advisors, insurance companies or private bankers are used for laundering. When compared with recent years, since the volume of the money especially in terrorist financing has been increased and the increase in terrorist organizations to involve ordinary crimes to provide financial, the largest portion of laundering consists of speculation, smuggling, racketeering, aggravated fraud and bankruptcy, forgery on documents, producing and using counterfeit documents organ smuggling, kidnapping, arms trafficking, historical artifact smuggling, loan-backs, snatching and brass plate companies.

Besides, the hidden local-foreign partnerships shown as “investor” in capital markets and private equities choose smurfing through speculations and fraud investments. Such transactions have been reported by banks and financial institutions mostly with suspicion of unbalanced financial status and the volume of the transaction (22%), unreasonable transactions (20,6%) and suspicious cash flows (14,5%).

Turkey has also regulated its free trade zones and liaison office regulations in 2012 to prevent laundering through business organizations of transit trade. The new regulations lifted the effectiveness of inspections by central and local government authorities. However, especially due to the lack of inspection in eastern part of the country, there is still a potential risk of Syrian, Iranian, Iraqi drug traffickers and terrorist financing.

Turkey’s Compliance with the 40 FATF Recommendations and Nine Special Recommendations

The Financial Action Task Force (“FATF”) is an inter-governmental body founded in 1989 by the G7. FATF was developed to combat money laundering and terrorist financing. FATF outlines 40 recommendations and nine special recommendations in order for compliant countries to curb the growth of money laundering and terrorist financing.

Turkey is a member of FATF since 1991 and observer to EAG, the Euroasian Group of FATF. The FATF last released a mutual evaluation report in the February of 2007 and public statement for compliance for Turkey in the June of 2011.

1) 40 Recommendations

The FATF outlines 40 recommendations in order for countries to comply with to deter money laundering. Of the 40 recommendations, Turkey is compliant with three, largely compliant with eleven, partially compliant with fifteen, and non-compliant with ten of the recommendations (5, 6, 7, 9, 11, 12, 16, 21, 22, and 24). Since trusts do not exist under Turkish law, recommendation 34 in this regard is not applicable. In February of 2012, The FATF Standards have been revised to strengthen global safeguards and further protect the integrity of the financial system by providing governments with stronger tools to take action against financial crime. At the same time, these new standards will address new priority areas such as corruption and tax crimes.

a) Recommendation Five

Recommendation Five requires that financial institutions have adequate controls and procedures to recognize the new and existing customers and record keeping.

The only explicit customer due diligence (CDD) requirement is customer identification in Turkey and it is not specified whether identification must be conducted for linked transactions below the TRY 12,000 threshold. Customer verification of natural persons only partially complies with international standards however there are no verification requirements for legal persons, associations, and foundations.

Besides, documents authorizing a natural person to conduct transactions on behalf of a legal person are required as part of customer identification in accordance with primary or secondary law for legal persons registered in Trade Registry, but not for foundations or associations.

There is only a very limited provision, which is not yet implemented in supporting regulation, requiring the identification of the beneficial owner, and financial institutions are not required to take reasonable steps to understand the layers of ownership and control of legal persons which are their customers.

Measures for collection of information on the purpose and nature of the relationship for legal persons are only contained in unenforceable guidelines. There is no provision applicable for insurance.

Measures for enhanced CDD for sensitive countries, sensitive business and higher risk customers, are only contained in non-mandatory and unenforceable guidelines and this is largely undefined.

There are no clear CDD requirements for the financial sector other than those for banks.

The exemption of requirements for identification for transactions carried out with central and local public administrations, state economic enterprises, quasi-public institutions, banks and participation banks are overly broad.

There are no clear requirements to conduct ongoing CDD

b) Recommendation Six

Recommendation Six requires that financial institutions have appropriate risk management systems in place to determine whether the customer is a politically exposed person (“PEP”), obtain senior management approval for PEPs, take reasonable measures to established the source of wealth and source of funds for a PEP, and conduct enhanced ongoing monitoring of the business relationship with a PEP.

Turkey has not implemented anti-money laundering (AML) / counter-terrorist financing (CFT) measures concerning establishment of customer relationships with PEPs.

c) Recommendation Seven

Recommendation Seven is related with the targeted financial sanctions related to proliferation aimed at ensuring consistent and effective implementation of targeted financial sanctions when these are called for by the UN Security Council. Recommendation 7 is applicable to all current Security Council resolutions applying targeted financial sanctions relating to the financing of proliferation of weapons of mass destruction, any future successor resolutions, and any future Security Council resolutions which impose targeted financial sanctions in the context of the financing of proliferation of weapons of mass destruction. At the time of issuance of this Recommendation, (February 2012), the Security Council resolutions applying targeted financial sanctions relating to the financing of proliferation of weapons of mass destruction are: resolutions 1718 (2006), 1737 (2006), 1747 (2007), 1803 (2008), 1874 (2009), and 1929 (2010).

Turkey is non-compliant with recommendation seven for the following reasons:

i) Turkey does not address correspondent banking in law or regulation.
ii) Turkey has not implemented Recommendation 7. Again, the TBA has issued guidance on this issue, but that guidance is unenforceable and it is only issued to banks. While TBA guidance is implemented in fact by many banks in Turkey it does not deal with payable through accounts or the share of responsibilities between the institutions involved in the transaction are dealt. In practice, the Turkish authorities and representatives of the private sector indicated that Turkish banks have no correspondent banking relationship with foreign banks, nor payable through accounts relationships.
d) Recommendation Nine

Recommendation nine outlines the criteria for countries should ensure that financial institution secrecy laws. Accordingly, Financial institutions should, in relation to cross-border correspondent banking and other similar relationships, gather sufficient information about a respondent institution and assess the respondent institution's anti-money laundering and terrorist financing controls.

Turkey is non-compliant with this recommendation for the following reason:

i) There is no law, regulation or enforceable guidance, outside of the securities’ sector, on the use of third parties to perform CDD under Turkish law.
e) Recommendation Eleven

Recommendation eleven requires financial institutions to maintain all necessary records on transactions, both domestic and international, to enable them to comply swiftly with information requests from the competent authorities.

Turkey is non-compliant with this recommendation for the following reasons:

i) Turkey has not implemented Recommendation eleven as there is no requirement to establish the purpose and background of unusual transactions or to maintain this information in writing and keep records which will be accessible by authorities.
f) Recommendation Twelve

Recommendation twelve requires designated non-financial businesses and professions to pay attention to money laundering and terrorist financing transactions.

Turkey is non-compliant with this recommendation because of the following reasons:

i) Lawyers, accountants and other legal professionals are not obliged parties.
ii) Turkey’s general shortcomings in implementation of Recommendations 5, 6 and 8-11 also apply to designated non-financial businesses and professions.

iii) There are questions about the effectiveness of implementation of customer identification and record keeping requirements in obliged designated non-financial businesses and professions.

g) Recommendation Sixteen

Recommendation sixteen aims to provide suspicious transaction reporting (STR) by designated non-financial businesses and professions.

Turkey is non-compliant for the following reasons:

i) Accountants, lawyers and other legal professionals are not required to submit STRs and are not subject to other measures covered by Recommendations 14, 15 and 21.
ii) Designated non-financial businesses and professions are not obliged to have compliance officers or internal control programs.

iii) Designated non-financial businesses and professions are not required to conduct in-house training or screen potential employees.

iv) Limited training has been provided to designated non-financial businesses and professions.
v) Designated non-financial businesses and professions are not required to pay special attention to transactions with countries which do not or do not adequately implement the FATF Recommendations.
vi) No STRs have been submitted by designated non-financial businesses and professions, which calls into question the effectiveness of implementation of Recommendation 13 in this sector.
g) Recommendation Twenty-One

Recommendation twenty-one prohibits financial institutions, their directors, officers and employees from disclosing the fact that an STR or related information is being reported to the financial intelligence unit (FIU).

Turkey is non-compliant for not implementing the Recommendation twenty-one.

g) Recommendation Twenty-Two

Recommendation twenty-two requires financial institutions to ensure that the principles applicable to financial institutions, which are mentioned above are also applied to branches and majority owned subsidiaries located abroad, especially in countries which do not or insufficiently apply the FATF.

Turkey is non-compliant for the following reasons:

i) Article 4 of the Regulation Regarding Implementation of the Law 4208 providing for application of customer identification requirements to overseas branches and subsidiaries has not been implemented.
ii) Internal control provisions for overseas branches and subsidiaries only exist for banks, not for any other obliged parties.

iii) There is no requirement to pay particular attention where branches and subsidiaries are in countries which do not or insufficiently apply the FATF Recommendations.

iv) There is no requirement to apply the higher of the two countries’ standards.
v) There is no requirement to inform supervisors when a foreign branch or subsidiary is unable to observe appropriate AML/CFT measures due to host country restrictions.
g) Recommendation Twenty-Four

Recommendation twenty-four requires designated non-financial businesses and professions should be subject to regulatory and supervisory measures, for example Casinos should be subject to a comprehensive regulatory and supervisory regime that

ensures that they have effectively implemented the necessary anti-money laundering and terrorist-financing measures.

Turkey is non-compliant for the following reasons:

i) No systems exist for monitoring and ensuring compliance of designated non-financial businesses and professions with AML/CFT requirements.

2) Nine Special Recommendation

The FATF outlines nine special recommendations for countries to comply with to further anti-terrorist financing goals. Of the nine special recommendations, Turkey is currently largely compliant with one and partially compliant with eight special recommendations.

INCSR Rating

Every year the International Narcotics Control and Strategy Report compiles a list of countries of concern for money laundering. The list is based on the countries that are vulnerable to money laundering or terrorist financing. The International Narcotics Control and Strategy Report of 2012 placed Turkey on the list of countries/jurisdictions of primary concern for money laundering and terrorist financing.

Turkey is on the list of countries/jurisdictions of primary concern for the following reasons:

i) In “All serious crimes” approach or “list” approach to predicate crimes, all serious crimes and legal persons are covered by criminally and civilly.
ii) It should ensure the enhanced due diligence procedures.

iii) It should increase the STRs requirements

iv) 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.
v) 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.

vi) 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.

vii) Turkey should insure any new legislation meets the FATF standards.

Anti-Money Laundering and Terrorist Financing
Hierarchy of Turkey’s Law

Legal Basis

Turkish laws are based on continental European Law. The first constitution was signed in 1921 which is called Teşkilatı Esasiye Kanunu and ratified by Turkish Grand National Assembly. It was replaced entirely by the constitution of 1924. The principal laws such as criminal law, civil law, commercial law are mostly modified versions of some European countries’ laws. The constitutional court has function of supervising the conformity of laws to the constitution. The country is based on separation of powers and the judiciary is independent. The military and civilian judiciary is separated.

Executive Branch

The executive branch is comprised of the President and the Council of Ministers. The President represents the Turkish Nation’s unity and responsible for ensuring the harmonious manner of state organs. He/she does not have to be a member of the parliament. The Council of Ministers is comprised of the ministers and headed by the prime minister. The prime minister is appointed by the President and responsible for coordination of ministers.

Legislative Branch

The legislative power is vested in the Turkish Grand National Assembly. All provinces (There are 81 provinces in Turkey) are represented by deputies in the Turkish Grand National Assembly and the deputies are elected every four years. Deputies are not only responsible for their provinces, they represent the all nation. There are 550 deputies in Turkey.

Judicial Branch

The judicial power is exercised by independent courts together with the supreme courts that are Constitutional Court, The Supreme Court of Appeals, the Council of State, the Supreme Military Court of Appeals, the Supreme Military Administrative Court, the Court of Jurisdictional Conflicts and the Supreme Council of Accountants. The judicial power is based on rule of law as defined in constitution. The courts are defined in three major classifications: Civil, criminal and administrative. Considering the delays in judiciary due to work load of Supreme Court of appeals, the new courts of regional courts of justice are authorized as intermediary appeal organ for some minor cases.

Legislation

All bills regarding all kind of law must be introduced into the Turkish Grand National Assembly by Council of Ministers. Each deputy has also right to introduce law proposals. The principles and procedures of the debate in Turkish Grand National Assembly are issued in Rules of Procedure. If no other provision in the Constitution, number of members of Turkey Grand National Assembly shall convene with at least one third, and shall take decisions by absolute majority, but a quorum shall not be less than one-quarter of total number of members in any way. According to the article 89 of Constitution, the President of the Republic shall promulgate the laws adopted by the Turkish Grand National Assembly within fifteen days. He/she shall, within the same period, refers to the Turkish Grand National Assembly for further consideration, laws which he/she deems wholly or in part or unsuitable for promulgation, together with a statement of his/her reasons. In the event of being deemed unsuitable by the President, the Turkish Grand National Assembly may only discuss those articles deemed to be unsuitable. Budget laws shall not be subjected to this provision. On the other hand, the Turkish Grand national Assembly may empower the Council of Ministers to issue decrees having the force of law. However, the fundamental rights, individual rights and duties, political rights and duties shall not be regulated by decrees having the force of law.

Regulations

Once a bill has passed the legislative process it is published in the Official Gazette, but it may require certain actions before it can become effective, and this is when the Turkish government uses regulation in Turkey. According to the article 124 of the Constitution, the Prime Ministry, the ministries and public corporate bodies may issue by-laws in order to ensure the application of laws and regulations relating to their particular fields of operation, provided that they are not contrary to these laws and regulations. The law shall designate which by-laws are to be published in the Official Gazette.

Application of the Anti-Money Laundering Laws to Banks, Businesses and Professions

1) Laws of General Applicability

a) Turkish Penal Code (Law No 5237)

The Turkish Penal Code is the principal document criminalizes money laundering. The Code was amended on 26 June 2009. According to the article 282 of the Code; Whoever transfers abroad the proceeds derived from an offence requiring a minimum of one year or more imprisonment or subjects the proceeds to any transaction for the purposes of disguising illicit sources of them and misleading as if they were derived from legitimate sources, is sentenced to imprisonment from 2 years up to 5 years and to judicial fine up to twenty thousand days. In case this offence is committed by public servants or particular professionals, during the execution of their professions, the sentence to imprisonment shall be increased by half of it. With regard to legal persons involved in this offence, security measures pertinent to them are taken. Before initiating the prosecution procedure, whoever enables the competent authorities to seize the proceeds subject of the offence or facilitates seizing the proceeds by informing competent authorities about where the proceeds are concealed shall not be sentenced under this Article.

c) Law on Prevention of Money Laundering (Law No 4208)

The Law on Prevention of Money Laundering, dated 19 November 1996 is the first legal document that defines the “money laundering”.

d) Law on Fight Against the Terrorism (Law No 3713)

The Law on Fight Against the Terrorism is to define the terror and terrorist organizations and the offenses deemed as terrorist offenses.

e) Banking Law (Law No 5411)

The Banking Law as the principal for banking sector is to regulate the principles and procedures of ensuring confidence and stability in financial markets, the efficient functioning of the credit system and the protection of the rights and interests of depositors.

f) Law on Prevention of Laundering Proceeds of Crime (Law No 5549)

18 October 2006 dated law, the Law on Prevention of Laundering Proceeds of Crime was drawn up considering the international standards in combating laundering proceeds of crime. Since implementation of essential criminal and procedure laws has been adopted in punishing and investigation of money laundering this law includes arrangements accordingly.

g) Money Laundering Regulations

The Regulation of Duties and Working Procedures of Financial Crimes Investigation Experts determines the assignment and professional career procedures and principles of Financial Crimes Investigation Experts of Ministry of Finance Financial Crimes Investigation Board. The Regulation of Program of Compliance with Obligations of Anti-Money Laundering and Combating the Financing of Terrorism is to regulate principles and procedures regarding establishment of compliance programs and assignment of compliance officers by obliged parties for the purpose of anti-money laundering and combating the financing of terrorism for the implementation of law no 5549. The Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism is to regulate principles and procedures regarding obliged parties, obligations and inspection of compliance with obligations, disclosure to customs administration and other measures for the purpose of preventing laundering proceeds of crime and financing of terrorism for the implementation of law no 5549.

h) The Communiqués

There are nine communiqués, eight of them relate with laundering proceeds of crime and the one relates with terrorist financing. Communiqués 1,2,3,4 are abolished.

Communiqué 5 outlines the principles regarding customer due diligence are given in Chapter Three of the Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism.

Communiqué 6 outlines the principles of suspicious transactions reporting.

Communiqué 7 outlines the principles regarding (CDD) are specified in chapter three of “Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism” (hereinafter refers to Regulation) published in the Official Gazette No.26751 on 09.01.2008 and entered into force on 01.04.2008.

Communiqué 8 outlines the principles of suspicious transaction reporting (STR) by designated non-financial businesses and professions.

Communiqué 9 outlines the principles regarding customer due diligence are given in Chapter Three of the Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism published in the Official Gazette No. 26751 on January 9, 2008 and entered into force on April 1, 2008.

Enforcement of the Money Laundering Laws

The Financial Crimes Investigation Board (MASAK) which is a main service unit of Ministry of Finance and is directly attached to Ministry of Finance in Turkey. The mission of MASAK with regard to preventing money laundering and to detecting this offence is to make policies and to contribute making regulations, to collect information fast and reliably and to analyze them, to carry out investigation and research and, to convey the information and the results to relevant authorities.

Elements of Money Laundering

Turkey criminalizes money laundering in several different manners to reach international standards of compliance: 1) money laundering; 2) failing to notify the accused person or the evidences of the offense; 3) assisting an organized criminal group knowingly and willingly; and 4) purchase or acceptance of property acquired through committing an offense.

1) Offenses

a) Money Laundering

A person who transfers abroad the proceeds obtained from an offence requiring a minimum penalty of six months or more imprisonment, or processes such proceeds in various ways in order to conceal the illicit source of such proceeds or to give the impression that they have been legitimately acquired shall be sentenced to imprisonment from three years up to seven years and a judicial fine up to twenty thousand days.

A person who, without participating in the commitment of the offence mentioned in paragraph (1), purchases, acquires, possesses or uses the proceeds which is the subject of that offence knowing the nature of the proceeds shall be sentenced to imprisonment from two years up to five years.

Where this offence is committed by a public officer or professional person in the course of his duty then the penalty to be imposed shall be increased one half.

Where this offence is conducted in the course of the activities of an organization established for the purpose of committing an offence, the penalty to be imposed shall be doubled.

Where a legal entity is involved in the commission of this offence it shall be subject to security measures.

In relation to the offences defined in this article, no penalty shall be imposed upon a person who directly enables the securing of financial assets, or who facilitates the securing of such assets, by informing the relevant authorities of the location of such before the commencement of a prosecution.

b) Failing to Notify the Accused Person or the Evidences of the Offense

Any person who fails to notify the authorized bodies about the known place of a person, against whom decision is obtained for his arrest or conviction, is sentenced to imprisonment up to one year.

Any person who knowingly fails to notify the place where all the evidences or indications of offense concealed by other are punished according to the provisions of above provision.

The punishment to be imposed is increased by one half in case of commission of this offense by a public officer while performing duty.

If the accused are publicized during the investigation or prosecution stages in order to give the impression that he is the offender prior to the judgment, the persons who involve in such act is punished with imprisonment from six months to two years.

c) Assisting an Organized Criminal Group Knowingly and Willingly

Any person who knowingly and willingly helps an organized criminal group although not takes place within the hierarchic structure of the group, is punishes as if he is a member of the organized group.

d) Purchase or Acceptance of Property Acquired Through Committing an Offense

Any person who purchases or accepts the property acquired through committing an offense, is punished with imprisonment from six months to three years and punitive fine up to thousand days.

Elements of Terrorist Financing

Turkey criminalizes terrorist financing in article 8 of the Law on Fight Against the Terrorism.

Turkey criminalizes terrorist financing in two different ways as follows:

i) Provides property
ii) Collects property

Any person who knowingly and willfully provide or collect property to be used for terrorist financing either in whole or in part, shall be punished as a member of the organization. Property, even if unused, the person shall be punished in the same way.

1) Property

The property refers to all kinds of goods that can be represented by money or value for money, rights, receivables, income, and interest, and the resulting exchange of these refers to the interest and value.

2) Terror

Every kind of acts which are perpetrated by any of the methods of extortion, intimidation, discouragement, menace and threat by using force and violence by a person or by persons belonging to an organization with a view to changing the nature of the Republic as defined in the Constitution and its political, legal, social, secular and economic order, impairing the indispensable integrity of the Turkish State and Republic, weakening or annihilating or overtaking the State authority, eliminating the basic rights and freedoms and damaging the internal and external safety, public order or general health of the country.

3) Terrorist Organization

The organization referred in the present Law is assumed to have been formed when two or more persons come together for the same purpose. The term organization includes also the associations, groups, armed groups, bands and armed bands mentioned in the Turkish Penal Code and in ad hoc laws containing penal provisions.

III. Criminal and Civil Forfeiture

Criminal Forfeiture

1) Confiscation Orders for Proceeds of Unlawful Activities

Turkey’s confiscation and forfeiture provisions are defined under article 54 (Confiscation of Goods) and article 55 (Confiscation of Benefits) of Turkish Penal Code.

Accordingly, provided not belonging to the bona fide third parties, the goods used in committing a deliberate offence or allocated for committing an offence or derived from a crime shall be confiscated. The goods prepared for using in committing an offence shall be confiscated in case of danger for public security, public health or public morality. In case of removing, transferring, consuming of the goods in the scope of above paragraph or in case confiscation of aforementioned goods is impossible in another way, an equivalent value of the goods shall be confiscated.

If it is considered that the confiscation of the goods used in committing the offence generates more serious results in comparison to this offence and for this reason it is understood that confiscation of the goods violates equity, then the confiscation may not be ordered.

The goods whose production, disposition, usage, transportation, purchase and sale constitutes a crime shall be confiscated.

When a partial confiscation of any article is required, that part shall be confiscated providing that it can be separated without giving any harm to the whole of it.

With regard to the goods belong to joint owners, only the share of the person participating the crime shall be confiscated.

With regard to the confiscation of benefits; The material benefits derived from committing a crime or constitutes the subject of the crime or provided for committing the crime with the economical earnings obtained by the deposition or conversion of them shall be confiscated. In order to give the confiscation decision in accordance with this paragraph, the material benefit cannot be returned to the inflicted person.

When the property or material benefits cannot be seized or submitted to the competent authorities, an equivalent value of these assets shall be confiscated.

2) Restraint Orders

The courts may order a restraint order to freeze the property that may be realized in order to pay a confiscation order. A restraint order may be made at any time, even before the prosecution is instituted, as long as the court is convinced that a confiscation order against the defendant is likely.

Civil Forfeiture

The civil forfeiture regime is very poor in Turkey should rely on court orders in ordinary civil cases only. The decision is either given as temporary injunction or as final decision.

Agencies

The Financial Crimes Investigation Board of Republic of Turkey Ministry of Finance (MASAK) is the national authority to develop policies and implementation strategies, to coordinate institutions and organizations, to conduct collective activities, to exchange views and information in order to prevent laundering proceeds of crime, to prepare law, by-law and regulation drafts in accordance with the policies determined, to make regulations for the implementation of relevant laws and the decisions of Council of Ministers regarding the relevant laws, to carry out researches on the developments and trends on laundering proceeds of crime, and on the methods of detecting and preventing them, to make sectoral studies, to improve measures and to monitor the implementation on the purpose of prevention of laundering proceeds of crime, to carry out activities to raise the public awareness and support, to collect data, to receive suspicious transaction reports, to analyze and evaluate them in the scope of prevention of laundering proceeds of crime and terrorist financing, to request for examination from law enforcement and other relevant units in their fields, when required during the evaluation period, to denounce files to the Chief Public Prosecutor’s Office for the necessary legal actions according to the Criminal Procedure Law in the event of detecting serious findings at the conclusion of the examination that a money laundering offence is committed, to examine the cases conveyed from Public Prosecutors and to fulfill the requests relating to the determination of money laundering offence, to convey the cases to the competent Public Prosecutor’s Office in cases where serious suspicion exists that a money laundering or terrorist financing offence is committed, to ensure inspection of obligations within the scope of relevant laws and relevant legislation, to request all kinds of information and documents from public institutions and organizations, natural and legal persons, and unincorporated organizations, to request temporary personnel assignment from other public institutions and organizations within the Presidency, when their knowledge and expertise is necessary, to carry out international affairs, to exchange views and information for the subjects in the sphere of its duties, to exchange information and documents with counterparts in foreign countries, to sign memorandum of understanding that is not in the nature of an international agreement for this purpose as defined in the law, Law no. 4208 on Prevention of Money Laundering. MASAK has only headquarter in Ankara and no regional office.

Compliance
Risk Management

FATF recommends countries use a “risk based” approach to identify money laundering and terrorist financing. This type of system will allow the efforts of financial institutions to be focused where it can have the greatest impact.

Financial institutions are required to carry out business risk assessment in a regular and ongoing manner. Financial institutions must regularly review the risk assessment methods to ensure up to date methods are in place.

1) Determining the Level of Risk

The obliged parties as defined in the Law on Prevention of Laundering Proceeds Of Crimes means those who operate in the field of banking, insurance, individual pension, capital markets, money lending and other financial services, and postal service and transportation, lotteries and bets; those who deal with exchange, real estate, precious stones and metals, jewelry, all kinds of transportation vehicles, construction machines, historical artifacts, art works, antiques or intermediaries in these operations; notaries, sports clubs and those operating in other fields determined by the Council of Ministers,

Accordingly, in the scope of necessary measures, the Ministry has the authority to determine obliged parties and implementation principles and procedures, including measures to assign an officer with necessary authority at administrative level for ensuring compliance with this law and to establish training, internal control and risk management systems by regarding size of business and business volumes.

Customer risk as defined in the money laundering regulations means the risk for obliged parties to be abused due to the business field of the customer allowing intensive cash flow, purchasing of valuable goods or international fund transfers to be carried out easily; and due to the acts of customer or those acting on behalf or for the benefit of the customer for money laundering or terrorist financing purposes.

Obliged parties shall establish a risk management policy under the scope of the institutional policy considering their business size, business volume and nature of the transactions they conduct. The objective of the risk management policy is to define, grade, monitor, assess and reduce the risk possible to be exposed by the obliged parties. Activities related to risk management shall cover at least:

a) Developing risk defining, rating, classifying and assessing methods based on customer risk, service risk and country risk,
b) Rating and classifying services, transactions and customers depending on risks,
c) Developing proper operational and control rules for ensuring monitoring and controlling risky customers, transactions or services; reporting in a way that warns related units; carrying out the transaction with the approval of senior management and controlling it when necessary,
d) Questioning retrospectively the coherency and effectiveness of risk defining and assessing methods and risk rating and classifying methods depending upon sample events or previous transactions, reassessing and updating them according to achieved results and new conditions,
e) Carrying out required development works through pursuing recommendations, principles, standards and guidelines established by national legislation and international organizations related to issues under the scope of risk,
f) Reporting risk monitoring and assessing results regularly to the executive board

a) Customer Risk

Obliged parties shall take at least the following measures for reducing the risk to be undertaken related to groups determined as risky as a result of risk rating activities:

a) Developing procedures for ongoing monitoring of transactions and customers,
b) Requiring approval of one level higher officer for establishing business relationship, sustaining current business relationships or carrying out transactions,
c) Gathering as much information as possible on the purpose of the transaction and source of the asset subject to transaction,
d) Obtaining additional information and documents under the scope of customer due diligence, and taking additional measures for verifying and certifying the information submitted.

b) Product or Service Risk

The Communiqué 6 defines the procedures to determine product or service risk. However, there is no certain indicator to define a customer or the transaction as suspicious for money laundering purposes. The only internal risk management system of financial institutions aims to determine the credibility and financial sustainability of the customer. It is initiative of the obliged parties to determine any transaction as suspicious which is lack of controlling mechanism. This is obviously understood from the Communique 6 prescribing that in each case where simplified measures shall be applied, obliged parties shall assess each transaction separately whether there will be any abuse of transaction for money laundering and terrorist financing and, therefore, whether there is any risk of money laundering or terrorist financing. In the event that there is a suspicious of money laundering or terrorist financing, obliged parties shall not apply simplified measures and shall report the transaction to MASAK.

c) Risk by Countr

Article 25 of the AML Regulation imposes financial institutions to pay special attention to business relationships and transactions with the natural and legal persons, unincorporated organizations and the citizens located in risky countries and to obtain information about the purpose and the nature of the transactions, as far as possible, which have no apparent reasonable legitimate and economic purpose and to record them. Besides, the principle of “reliance on third parties” may not be applied to cases where the third party is resident in a risky country,

Customer ID and Customer Due Diligence

1) Introduction

a) Fictitious or Anonymous Accounts

The obliged parties, in cases where they cannot make customer identification or obtain information on the purpose of the business relationship, shall not establish business relationship and not conduct the transaction which they are requested. In such a circumstance they cannot open an anonymous account or account in a fictitious name.

In cases where customer identification and its verification which are required to be conducted due to suspicion on the adequacy and accuracy of the previously obtained customer identification information cannot be carried out, the business relationship shall be terminated. Obliged parties shall also assess whether the situations specified in the first and second paragraphs of this Article are suspicious transactions or not.

b) When to Conduct CDD

As defined in the Guideline for the Turkish Banking System on Significance of Fight Against Laundering of Crime Revenues and Financing Terrorism in order to establish a bank-customer relationship based on trust under the policy of know-your-customer, it is important to have sufficient information on the following items:

Determination of the customer’s real identity and address,
Coherency of the customer’s documents and information,
The reason of the customer’s preference of the bank and the purpose of opening an account,
Profession, main revenue-raising activities, and professional principles of the customer,
Profile and capacity of the customer’s transactions,
Suppliers and buyers of the customer, and
Location of customer business office and activity.

It is extremely significant that the banks instruct their employees contacting with or making offers to the customers to be careful in these issues.

c) Steps in Obtaining Customer Information

The steps financial institutions must conduct for CDD are as follows:

Procedure for customer identification and recording of the stated addresses
Information Required

In customer identification of natural persons, their name, surname, place and date of birth, nationality, type and number of the identity card, address, sample of signature, and telephone number, fax number, e-mail, if any, and information on job and profession, and for Turkish citizens, as additional information, the names of mother and father and Turkish identity number shall be received. In additional to the minimum requirements shall be included in contract services between the customers and banks, only to prevent money laundering and terrorist financing purposes, it is recommended in the Guideline for the Turkish Banking System on Significance of Fight Against Laundering of Crime Revenues and Financing Terrorism to banks recommended that, based on the type of the customer and the types of the banking services to be provided, enhanced diligence should be placed on customer identification, recording of the addresses stated by the customers and determination of the other legal and individual information and documents, receipt of the documents and information, storing the records of such information and documents in physical and electronic media, and instruction of the data entries/methods.

Accordingly, it is recommended that the principles of the customer identification method and recording of the stated address should comprise the following:

i) Verification of the customer’s legal identity and structure, name or title, address, managers, company documents regarding the definition of authority and other related conditions binding the legal entity; by comparing such information with official records and with the information received from the customer,
ii) Verifying that the person maintaining that he acts in the name of the customer is authorized and determining his identity as well, and

iii) Carrying out the customer identification procedures in compliance with the documents and obligations defined under laws.

The procedures are better classified under the following groups:

i) Identity determination procedure and recording of stated addresses for permanent customers,
ii) Identity determination procedure and recording of stated addresses for temporary customers,

iii) Determination of the additional legal and other information and documents to be used in bank’s internal transactions other than the basic determination of the customer’s identity (tax, identity and citizenship numbers, power of attorney, contract, contact information such as telephone number, electronic mail address, and profession), and

iv) Verification of the documents and information regarding the customer and other information and documents used during opening of the account.
b) Verification of Information

A financial institution must verify the full names, date and place of birth, mother’s and father’s name, nationality and identity number of a natural person. Name and surname, place and date of birth, mother’s and father’s name, nationality, type and number of the identity card of the person concerned shall be verified through Turkish identity card, Turkish driving license or passport for Turkish citizens.

Residential addresses must also be verified. The address submitted while establishing permanent business relationship shall be verified through a certificate of residence, any utility bill drawn up within the previous three months from the date of transaction for a service requiring subscription such as electricity, water, natural gas, telephone, any document issued by a public institution or through any other documents or methods approved by MASAK. Legible photocopies or electronic image of the documents to be verified shall be received or the information specific to them shall be received.

2) Foreign Nationals

a) Information Required

An accountable institution must obtain from a natural person who is a foreign national the following information:

Passport, certificate of residence or any type of identity card considered proper by the Ministry for non-Turkish citizens in addition to the requirements for Turkish nationals.

b) Verification of Information

An accountable institution must verify the particulars obtained by comparing the information with an identification document that is notarized passport copy. After originals or notarized copies of documents which are subject to verification are submitted, their legible photocopy or electronic image shall be received or information regarding the identity shall be recorded in order for submittal upon request of authorities.

3) Legal Persons- Turkish Companies

a) Information Required

In customer identification of legal persons such as companies and corporations registered to trade registry.

(a) the registered name of the legal person,

(b) its trade registry number,

(d) field of activity,

(e) full address,

(f) telephone number,

(g) fax number and e-mail,

(h) if any, and the name, surname, place and date of birth, nationality, type and number of the identity card, and a sample signature of the person authorized to represent the legal person and for Turkish citizens, as additional information, the names of mother and father and Turkish identity number shall be received.

b) Verification of Information

In verification of information provided from legal persons such as companies and corporations registered to trade registry, the title of the legal person, its trade registry number, field of activity, full address shall be verified through documents of registration to the trade registry; its tax identity number shall be verified through documents drawn up by the related unit of Revenue Administration.

Identification information of persons authorized to represent the legal person shall be verified through identity cards stipulated in above; and their authority to represent shall be verified through documents of registration.

After originals or notarized copies of documents which are subject to verification are submitted, their legible photocopy or electronic image shall be received or information regarding the identity shall be recorded in order for submittal upon request of authorities.

In establishing permanent business relationship, financial institutions shall verify through consulting records kept by the related trade registry office or the database of Turkish Union of Chambers and Commodity Exchanges whether the information given in registration documents submitted to them are up-to-date and correct.

In case of a request of transaction, within the scope of an existing permanent business relationship, on behalf of the legal person by a written instruction of the person authorized to represent the legal person the authenticity of the identification information of the person authorized to represent the company may be verified through a notarized signature circular comprising the information in identity cards provided that there is no doubt that the instruction is from the representative of the company.

4) Legal Persons: Foreign Companies

a) Information Required

The customer identification of non-resident legal persons shall be made through notarized Turkish translations of copies of the documents approved by the consulates of the Republic of Turkey corresponding to the documents in related country required for legal persons residing in Turkey and or through notarized Turkish translations of copies of the documents attached apostille by an authority of the country which is a party to the “Convention on Abolishing the Requirement of Legislation for Foreign Public Documents”.

b) Verification of Information

The title of the legal person, its trade registry number, field of activity, full address shall be verified through documents of registration to the trade registry; its tax identity number shall be verified through documents drawn up by the related unit of Revenue Administration.

Identification information of persons authorized to represent the legal person shall be verified through notarized Turkish translations of copies of the documents attached apostille by an authority of the country which is a party to the “Convention on Abolishing the Requirement of Legislation for Foreign Public Documents”.

5) Legal Persons: Other Legal Persons

a) Information Required

An accountable institution must obtain from a legal person that is an association:

(a) the name of the association,

(b) its aim,

(d) full address,

(e) telephone number,

(f) fax number and e-mail, if any,

(g) the name, surname, place and date of birth, nationality, type and number of the identity card and sample signature,

(h) and for Turkish citizens, as additional information, the names of mother and father and Turkish identity number of the person authorized to represent the association shall be received.

An accountable institution must obtain from a legal person that is a foundation:

(a) its aim,

(b) central registry record number,

(d) telephone number,

(e) fax number and e-mail address,

(f) if any, and the name, surname, place and date of birth, names of mother and father, nationality, type and number of the identity card and sample signature of the person authorized to represent the foundation and for Turkish citizens the additional information as the names of mother and father and Turkish identity number shall be received.

An accountable institution must obtain from a legal person that is a trade union and/or confederation

(a) the name of the organization,

(b) its aim,

(d) full address,

(e) telephone number,

(f) fax number and e-mail,

(g) if any, and the name, surname, place and date of birth, nationality, type and number of the identity card of the person and sample signature of the person authorized to represent the trade unions and confederations and for Turkish citizens the additional information as the names of mother and father and Turkish identity number shall be received.

An accountable institution must obtain from a legal person that is a political party:

(a) the name of the relevant unit of the political party,

(b) its full address,

(d) fax number and e-mail address,

(e) if any, and name, last name, place and date of birth, nationality, type and number of the identity card and sample signature of the person authorized to represent and for Turkish citizens the additional information as the names of mother and father and Turkish identity number shall be received.

An accountable institution must obtain from a legal person that is an unincorporated organization (Such as building, housing estate or office site management):

(a) the name of the organization,

(b) its full address,

(d) fax number and e-mail address,

(e) if any, and name, last name, place and date of birth, nationality, type and number of the identity document and sample signature of the person authorized to represent the organization and for Turkish citizens the additional information as the names of mother and father and T.R. identity number shall be received.

An accountable institution must obtain from a legal person that is an unincorporated organization (Such as unincorporated joint venture):

(a) the name of the joint venture,

(b) its aim,

(d) telephone number,

(e) fax number and e-mail address,

(f) if any, and name, last name, place and date of birth, nationality, type and number of the identity document and sample signature of the person authorized to represent the organization and for Turkish citizens the additional information as the names of mother and father and Turkish identity number shall be received.

b) Verification of Information

An accountable institution must verify the information in respect of associations:

The name, aim, log number and full address of the association shall be verified through the charter of the association and documents of registry in the associations’ log; the identification information of the person authorized to represent the association shall be verified through identity cards stipulated above; and the authority to represent shall be verified through documents of authorization to represent.

An accountable institution must verify the information in respect of foundations:

Name, central registry record number, full address of the foundation shall be verified through foundation deed and records kept by the General Directorate of Foundations; the identity information of the person authorized to represent the foundation shall be verified through identity cards stipulated above; and the authority to represent shall be verified through documents of authorization to represent.

Customer identification for branches and representatives of foreign associations and foundations in Turkey shall be conducted depending on registry documents in the Ministry of Interior.

An accountable institution must verify the information in respect of trade unions and confederations:

The information gathered shall be verified through charter of these organizations and the records kept by local directorates of Ministry of Labor and Social Security; the identity information of the person authorized to represent the organization shall be verified through identity cards stipulated above; and the authority to represent shall be verified through documents of registration or documents of authorization to represent.

An accountable institution must verify the information in respect of political parties:

The name and address of the relevant unit of the political party shall be verified through their charter identity of the person authorized to represent shall be verified through the identity documents stipulated above, the authorit

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Money Laundering, Asset Forfeiture and Recovery and Compliance Country Report: Turkey in the year 2012