Turkey Seeks to Tighten Legislation Aagainst Money Laundering

By Gareth Jenkins

Friday, September 26, 2008

On September 16 a directive by the Turkish Ministry of Finance to try to tighten Turkish anti-money-laundering legislation was published in the country’s Official Gazette.

“The Directive on the Harmonization Program Regarding Responsibilities Related to the Prevention of the Laundering of Criminal Proceeds and the Financing of Terrorism” requires all financial institutions in the country—such as banks, brokerage houses, and insurance and pension companies—to improve the monitoring of financial transactions through the adoption of standardized procedures and an increase in staff training. The directive also obliges the institutions to establish specialized departments to ensure that the appropriate procedures are being followed (Official Gazette, No. 26999, September 16).

The directive is the latest in a flurry of legislative amendments passed by the Turkish authorities in the run-up to an assessment in February 2009 of Turkey’s anti-money-laundering efforts by the Financial Action Task Force (FATF) of the Organization for Economic Cooperation and Development (OECD). A previous assessment by the FATF in February 2007 listed numerous shortcomings in Turkish legislation and its implementation. They included the lack of a precise definition in Turkish law of the crime of money laundering; inadequate fulfillment of Turkey’s obligations under the 1999 International Convention on the Suppression of the Financing of Terrorism, particularly with regard to non-indigenous groups; the low level of notifications of suspicious transactions; and poor implementation of anti-money laundering-legislation by the Turkish court system (Dunya, July 7).

The Turkish authorities subsequently passed measures to tighten the legal definition of the financing of terrorism (Official Gazette, No. 26693, November 7, 2007), improve coordination between state authorities against money laundering (Official Gazette, No. 26730, December 12, 2007), and increase the measures that should be taken to combat it (Official Gazette, No. 26751, January 9). Serious doubts remain, however, about how effective these changes will be in practice.

The Financial Crimes Investigation Board (MASAK), whose primary purpose is to combat money laundering, was first established in the Turkish Ministry of Finance in 1997. Its legal status and responsibilities were overhauled in 2006 (Law No. 5549 on the Prevention of the Laundering of Criminal Proceeds, published in the Official Gazette, No. 26323, October 18, 2006). In addition to its activities inside the country, it is faced with an additional problem: Turkey’s position on one of the main heroin trafficking routes into Europe has ensured that members of the Turkish underworld have been able to amass considerable fortunes, much of which has been ploughed back into the Turkish economy. Yet, in the 11 years since MASAK was founded, nobody has served time in jail in Turkey for money laundering.

According to MASAK’s own figures, from February 17, 1997, until December 31, 2007 (the latest period for which official data are available), a total of 231 money-laundering cases were filed with the Turkish courts, of which 170 were still continuing as of December 31, 2007. Of the 61 cases that had been concluded in the court of first instance, 51 resulted in acquittal and 10 in convictions. The court granted the right of appeal in 54 of the 61 cases. Of these 54 cases, 46 were still continuing. Of the other eight, the appeal courts ruled for an acquittal in seven and a retrial in one (MASAK Annual Report 2007, www.masak.gov.tr)

There is no reason to doubt the Turkish authorities’ determination to combat indigenous terrorist organizations such as the Kurdistan Workers’ Party (PKK), nor Prime Minister Recep Tayyip Erdogan’s personal antipathy toward organized crime groups such as those involved in narcotics trafficking; but, while there is no evidence to suggest that leading members of the ruling Justice and Development Party (AKP) have knowingly concealed illegal financial transfers, there have recently been disturbing signs of a lack of political will by some members of the government to subject those with whom they are personally acquainted, or whom they believe share their ideological affiliations, to legal scrutiny.

On September 17 in a court in Frankfurt, Germany, three members of the Deniz Feneri e.V. charity, which collected donations from Muslims in Europe, were convicted of embezzling 41.3 million euros (approximately $58 million) (see EDM, September 11). The convicted men confessed to having transferred a large share of the money to Turkey, where it was invested in businesses (Milliyet, Radikal, Hurriyet, NTV, September 18). The three convicted men, Deniz Feneri e.V., and the businesses in Turkey in which the embezzled funds were invested were all close to the AKP. Yet, not only was the AKP reluctant to launch an investigation into what had happened to the money after it arrived in Turkey, but when non-AKP Turkish newspapers published details of the verdict, together with documents apparently implicating AKP-appointed members of the bureaucracy, Erdogan instructed AKP supporters: “Don’t allow these newspapers into your homes” (NTV, CNNTurk, Milliyet, Radikal, Hurriyet, September 19).

The AKP’s apparent reluctance to subject its own supporters and acquaintances to judicial scrutiny came less than a month after former AKP Foreign Minister and now President Abdullah Gul formally pardoned 82-year-old Necmettin Erbakan, the doyen of the Turkish Islamist movement and under whose wings both Erdogan and Gul himself had begun their political careers. Erbakan had been convicted of embezzling treasury aid while head of the Islamist Welfare Party (RP). The original indictment also named Gul as a co-defendant, although his parliamentary immunity meant that he could never be tried (Radikal, August 20). Gul defended his decision on the grounds of Erbakan’s age, but he has not extended this courtesy to other elderly convicted criminals.

As a result, in addition to doubts about how effective Turkey’s new anti-money laundering-measures will prove in practice, there are also now questions about how evenly they will be applied. There is no reason to suppose that Deniz Feneri e.V. was involved in the financing of terrorism, but other organizations masquerading as Islamic charities undoubtedly are; including some that are active in Turkey.

Source: Eurasia Daily Monitor