Turkey

Sanctions

US Sanctions no longer in place

FATF AML Deficient List

No

Higher Risk

Non - Compliance with FATF 40 + 9 Recommendations
US Dept of State Money Laundering Assessment
Supporter of or Safe Haven for International Terrorism

Not on EU White list equivalent jurisdictions
Corruption Index (Transparency International & W.G.I.)
World Governance Indicators (Average Score)
Failed States Index (Political Issues)(Average Score)
International Narcotics Control Majors List

Medium Risk

Weakness in Government Legislation to combat Money Laundering

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ANTI-MONEY LAUNDERING

FATF Status

Turkey is no longer on the FATF List of Countries that have been identified as having strategic AML deficiencies

Latest FATF Statement  -  21 June 2013

The FATF welcomes Turkey’s significant progress in improving its AML/CFT regime and notes that Turkey has established the legal and regulatory framework to meet its commitments in its action plan regarding the strategic deficiencies that the FATF had identified in February 2010. Turkey is therefore no longer subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. Turkey will work with the FATF as it continues to address the full range of AML/CFT issues identified in its mutual evaluation report.

 

Compliance with FATF Recommendations

The Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Turkey was undertaken by the Financial Action Task Force (FATF) in 2007. According to that Evaluation, Turkey was deemed Compliant for 3 and Largely Compliant for 12 of the FATF 40 + 9 Recommendations. It was Partially Compliant or Non-Compliant for 5 of the 6 Core Recommendations.

Follow-up Report (October 2014)

Turkey has made significant progress in addressing the deficiencies in its anti-money laundering/countering the financing of terrorism (AML/CFT) measures, as identified in the mutual evaluation report of February 2007. The assessment team conducting the mutual evaluation, rated Turkey non-compliant or partially compliant on five out of six Core Recommendations and partially compliant on five out of 10 Key Recommendations.  As a result of this lack of compliance, the FATF Plenary placed Turkey in a follow-up process. The follow-up process is a desk-based review that monitors that a country takes the necessary steps to strengthen its AML/CFT framework. 

Since the adoption of the mutual evaluation report in 2007, Turkey has taken a number of important steps to strengthen its legal and regulatory framework. In particular, Turkey has:

  • amended the money laundering offence in the Criminal Code, by lowering the threshold for predicate offences and including elements required by the relevant UN conventions;

  • adopted new regulations and amendments to existing regulations,  which strengthen the requirements on customer due diligence, beneficial ownership, risk and simplified/enhanced due diligence;

  • strengthened the reporting requirements for suspected terrorist financing transactions; and

  • adopted a new regime on the Prevention of the Financing of Terrorism.

 

As a result of this progress, the FATF Plenary decided at its October 2014 Plenary meeting that Turkey had taken sufficient steps in addressing technical compliance with the Core and Key Recommendations to be removed from the follow-up process.

US Department of State Money Laundering assessment (INCSR)

Turkey is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

OVERVIEW

Turkey is an important regional financial center, particularly for Central Asia and the Caucasus, the Middle East, and Eastern Europe.  Turkey’s rapid economic growth over the past 15 years combined with its commercial relationships and geographical proximity to areas experiencing political turbulence, such as Iraq, Syria, and Crimea, make Turkey vulnerable to money laundering 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.  Recent conflicts on the southern border of Turkey have, to a small extent, increased the risks for additional sources of money laundering.  In 2018, Turkey implemented new regulations on the registration and supervision of foreign exchange houses, passed a tax amnesty law, and the government underwent a restructuring, resulting in new ministries.   

 

SANCTIONS

 

23rd October 2019  -  The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) revoked all sanctions put in place against Turkey on 13th October 2019

On 13th October 2019 the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) took action against two ministries and three senior Turkish Government officials in response to Turkey’s military operations in Syria. 

BRIBERY & CORRUPTION

Index                                                                          Rating (100-Good / 0-Bad)

Transparency International Corruption Index                             41

World Governance Indicator – Control of Corruption               50

Corruption is widespread in Turkey's public and private sectors. Politics, public procurement and construction projects are particularly prone to corruption, and bribes are often demanded. Corruption allegations against the government caused mass protests in 2013; the government responded with a crackdown on police officers and judges who were voicing such accusations. Turkey's Criminal Code criminalises various forms of corrupt activity, including active and passive bribery, attempted corruption, extortion, bribing a foreign official, money laundering and abuse of office. Anti-corruption laws are poorly enforced, and anti-corruption authorities are ineffective. Punishment can include imprisonment of up to 12 years. Companies should note that despite facilitation payments and gifts being illegal, they are frequently encountered. For further information - GAN Integrity Business Anti-Corruption Portal

ECONOMY

Turkey's largely free-market economy is increasingly driven by its industry and service sectors, although its traditional agriculture sector still accounts for about 25% of employment. An aggressive privatization program has reduced state involvement in basic industry, banking, transport, and communication. An emerging cadre of middle-class entrepreneurs is adding dynamism to the economy and expanding production beyond the traditional textiles and clothing sectors. The automotive, petrochemical, and electronics industries are rising in importance and have surpassed textiles within Turkey's export mix.

 

Oil began to flow through the Baku-Tbilisi-Ceyhan pipeline in May 2006, marking a major milestone that has brought up to 1 million barrels per day from the Caspian region to market. The joint Turkish-Azeri Trans Anatolian Natural Gas Pipeline (TANAP) is moving forward to help transport Caspian gas to Europe through Turkey, helping to address Turkey's dependence on imported gas, which currently meets 98% of its energy needs.

After Turkey experienced a severe financial crisis in 2001, Ankara adopted financial and fiscal reforms as part of an IMF program. The reforms strengthened the country's economic fundamentals and ushered in an era of strong growth averaging more than 6% annually until 2008. Global economic conditions and tighter fiscal policy caused GDP to contract in 2009, but Turkey's well-regulated financial markets and banking system helped the country weather the global financial crisis, and GDP rebounded strongly to around 9% in 2010-11, as exports returned to normal levels following the crisis. Two rating agencies upgraded Turkey's debt to investment grade in 2012 and 2013, and Turkey's public sector debt to GDP ratio fell to 33% in 2014. The stock value of Foreign Direct Investment reached nearly $195 billion at yearend 2014.

 

Despite these positive trends, GDP growth dropped to 4.4% in 2013 and 2.9% in 2014. Growth slowed considerably in the last quarter of 2014, largely due to lacklustre consumer demand both domestically and in Europe, Turkey’s most important export market. High interest rates have also contributed to the slowdown in growth, as Turkey sharply increased interest rates in January 2014 in order to strengthen the country’s currency and reduce inflation. Turkey then cut rates in February 2015 in a bid to spur economic growth.

 

The Turkish economy retains significant weaknesses. Specifically, Turkey's relatively high current account deficit, uncertain commitment to structural reform, and turmoil within Turkey's neighbourhood leave the economy vulnerable to destabilizing shifts in investor confidence. Turkey also remains overly dependent on often volatile, short-term investment to finance its large current account deficit.

 

Agriculture - products:

tobacco, cotton, grain, olives, sugar beets, hazelnuts, pulses, citrus; livestock

 

Industries:

textiles, food processing, automobiles, electronics, mining (coal, chromate, copper, boron), steel, petroleum, construction, lumber, paper

 

Exports - commodities:

apparel, foodstuffs, textiles, metal manufactures, transport equipment

 

Exports - partners:

Germany 9.3%, UK 7.3%, Iraq 5.9%, Italy 4.8%, US 4.5%, France 4.1% (2015)

 

Imports - commodities:

machinery, chemicals, semi-finished goods, fuels, transport equipment

 

Imports - partners:

China 12%, Germany 10.3%, Russia 9.9%, US 5.4%, Italy 5.1% (2015)

Investment Climate  -  US State Department

Turkey has been an appealing market for investors over the last decade. It experienced strong economic growth on the back of the many positive economic and banking reforms it implemented between 2002 and 2007. After the global economic crisis of 2007, Turkey attracted substantial investment as a relatively stable emerging market with a promising trajectory of reforms and a strong, safe banking system. Over the last five years, progressive economic and democratic reforms seem to have slowed down or not been implemented. Growth has slowed since 2011, which presents a major challenge for Turkey to meet its ambitious goal of becoming a top ten economy in the world by 2023, the centenary of the founding of the Turkish republic.

 

The Turkish market is generally under-penetrated by U.S. businesses and presents many investment opportunities due to its solid economic fundamentals, although its investment climate is mixed. U.S. companies that are already established in the Turkish market have recently increased their investments in Turkey in certain sectors such as automotive, consumer goods, and defense. Other U.S. companies in other sectors and potential new market entrants, such as pharmaceuticals, generally did not make new investments in Turkey in 2015.

The most positive aspects of Turkey’s investment climate are its favorable demographics and prime geographical position that provides access to multiple regional markets. Turkey also has a relatively educated work force, developed infrastructure, and a resilient consumption-based economy. Turkey’s four percent GDP growth in 2015 outpaced most G-20 countries and was a sign of stability within a tumultuous region. This growth occurred despite the Turkish Lira losing 25% of its value in 2015.

 

The most negative aspects of Turkey’s investment climate are geopolitical risk and widespread concern over the deterioration of the rule of law. Many international observers remain concerned about transparency, corruption, and the appearance of reduced judicial independence. Over the past year, the government has marginalized critics and initiated takeovers of companies perceived to be controlled by political opponents based on allegations of providing material support for terrorism. The security situation has deteriorated to include multiple terrorist attacks, including in its political and business capitols of Ankara and Istanbul. Continued attacks would negatively affect consumer confidence and investor spending.

 

Key issues to watch include whether or not Turkey makes progress on promised economic structural reforms. In order to do so, government officials will need to make difficult political choices to liberalize the market to align with the goal of expanding Turkey’s EU Customs Union agreement. Another key issue to watch is the government’s increased push to require localization in manufacturing, healthcare, defense, and IT systems infrastructure. Other issues include tax reform and the independence of courts and the Central Bank. Hosting over three million refugees and political tensions with Russia will also create additional economic burdens on Turkey.

 

 

Country Links
Financial Crimes Investigation Board (MASAK )​
Central Bank of the Republic of Turkey
Other Useful Links
FATF
US State Department
Transparency International
World Bank
CIA World Factbook

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