Cablegate: Turkey 2005-2006 International Narcotics

This record is a partial extract of the original cable. The full text of the original cable is not available.

161550Z Dec 05




E.O. 12958: N/A

REF: STATE 210691

1. The following is Embassy Ankara's submission of Part
II of the International Narcotics Control Strategy
Report: Money Laundering and Financial crimes.
Turkey is an important regional financial center,
particularly for Central Asia and the Caucasus, as well
as for the Middle East and Eastern Europe. Turkey is
not an offshore financial center. It continues to be a
major transit route for Southwest Asian opiates moving
to Europe. However, local narcotics-trafficking
organizations are reportedly responsible for only a
small portion of the total funds laundered in Turkey.
A substantial percentage of money laundering that takes
place in Turkey appears to involve tax evasion. There
is a large unregistered economy in Turkey. Though by
definition hard to estimate, as much as 50 percent of
the economy may be unregistered. Since tax evasion is
such a large problem, the Government of Turkey (GOT) in
2005 passed a tax administration reform law with the
goal of improving tax collection. There is no
significant black market for smuggled goods in Turkey.
There are 21 free trade zones operating in Turkey, but
there is no evidence that they are being used in trade-
based money laundering schemes or terrorist financing
operations. The GOT closely controls access to the free
trade zones.
Money laundering takes place in both banks and non-bank
financial institutions. Money laundering methods in
Turkey include: the cross-border smuggling of currency;
bank transfers into and out of the country; and the
purchase of high value items such as real estate, gold,
and luxury automobiles. It is believed that Turkish-
based traffickers transfer money to pay narcotics
suppliers in Pakistan and Afghanistan reportedly
through alternative remittance systems. The funds are
transferred to accounts in the United Arab Emirates,
Pakistan, and other Middle Eastern countries. The money
is then paid to the Pakistani and Afghan traffickers.
Turkey criminalized money laundering in 1996 for a wide
range of predicate offenses. Whoever commits a money
laundering offense shall be sentenced to imprisonment
from two to five years and is subject to asset
forfeiture provisions and a fine of double the amount
of the money laundered. Subsequent to passage of the
1996 money laundering law, the Council of Ministers
passed a set of regulations that require the filing of
suspicious transaction reports (STRs), customer
identification, and the maintenance of records for five
years. These regulations apply to banks and a wide
range of non-bank financial institutions, including
insurance firms and jewelry dealers.
In 2004, the GOT enacted additional anti-money
laundering legislation. The GOT also enacted a new
criminal law and a new criminal procedures law. The new
Criminal Law, which took effect in June 2005, broadly
defines money laundering to include as predicate
offenses all crimes punishable by one year's
imprisonment. Previously, Turkey's anti-money
laundering law comprised a list of specific predicate
offenses. A new Criminal Procedures Law, which also
came into effect in June 2005, will facilitate asset
In July 2001, the Ministry of Finance issued a banking
regulation circular requiring all banks, including the
Central Bank, securities companies, post office banks,
and Islamic finance houses to record tax identity
information for all customers opening new accounts,
applying for checkbooks, or cashing checks. The
circular also requires foreign exchange bureaus to sign
contracts with their clients. The Ministry of Finance
also issued a circular mandating that a tax identity
number be used in all financial transactions as of
September 1, 2001. The circular applies to all Turkish
banks and to branches of foreign banks operating in
Turkey, as well as to other financial entities and
property registration offices. These requirements are
intended to increase the Government's ability to track
suspicious financial transactions. Turkey does not have
secrecy laws that prevent disclosure of client and
ownership information to bank supervisors and law
enforcement officials. According to anti-money
laundering law Article 5, public institutions,
individuals, and corporate bodies must submit
information and documents as well as adequate
supporting information upon the request of Turkey's
Financial Crimes Investigation Board (MASAK) or other
authorities specified in Article 3 of the law.
Corporate bodies and individuals may not claim
protection provided by privacy provisions in order to
avoid submitting the requested items.
Generally speaking, Turkey does not have foreign
exchange restrictions. However, Turkey does have cross-
border currency reporting requirements. Except for
payments for imports, invisible transactions and
capital exports, banks and special finance institutions
must inform authorities, within 30 days, about
transfers abroad exceeding $50,000 or its equivalent in
foreign currency notes (including transfers from
foreign exchange deposits). Travelers may take up to
$5,000 or its equivalent in foreign currency notes out
of the country.
The Banking Regulatory and Supervisory Agency (BRSA)
conducts anti-money laundering compliance reviews at
banks under authority delegated from MASAK. The Banking
Law passed in 2005 was designed to strengthen bank
The 1996 anti-money laundering law establishes MASAK,
which falls under the umbrella of the Ministry of
Finance. MASAK, which became operational in 1997,
serves as Turkey's Financial Intelligence Unit (FIU),
receiving, analyzing, and referring STRs for
investigation. MASAK has a pivotal role between the
financial community, on the one hand, and Turkish law
enforcement, investigators, and judiciary, on the
other. MASAK's training and equipment needs are being
addressed by a European Union accession project, which
is expected to end in June 2006.
Under current law, MASAK has three functions:
regulatory, financial intelligence, and investigative.
In November, 2005, the Turkish Government submitted to
Parliament a new law under which the agency would cede
its investigative function to public prosecutors, while
retaining its regulatory and financial intelligence
roles. The proposed law would reorganize MASAK along
functional lines, explicitly criminalize the financing
of terrorism, and provide "safe harbor" immunity to
filers of suspicious transaction reports. The law also
expands the definition of parties subject to reporting
requirements to art dealers, pension funds, exchange
houses, jewelry stores, notaries, sports clubs, and
real estate companies and defines sanctions for failure
to comply with reporting requirements. The law is
currently under review in Parliament, and passage is
expected in 2006.
The number of STRs being filed is quite low, even
taking into consideration the fact that many commercial
transactions are paid in cash. In 2004, 289 STRs were
filed. From January to November 2005, 266 STRs were
filed. A possible reason for this is the lack of safe
harbor protection for bankers and other filers of STRs.
According to MASAK statistics, since its inception, the
agency has pursued more than 2100 money laundering
cases, but, as of July 2005 only eight had resulted in
a conviction. Factors contributing to this low
conviction rate include the fact that Turkey's police,
prosecutors, judges, and investigators could still
benefit from additional training in dealing with
financial crimes, better coordination among law
enforcement agencies and better coordination between
the courts that prosecute the predicate offenses and
the courts that prosecute money laundering cases. Most
of the cases involve non-narcotics criminal actions or
tax evasion; roughly 30 percent are narcotics related.
Until the revised MASAK law is in place, terrorist
financing is not explicitly defined as a criminal
offense by Turkish law. Various laws with provisions
that can currently be used to punish the financing of
terrorism include Articles 220, 314, and 315 of the
Turkish Penal Code, which prohibit assistance in any
form to a criminal organization or to any organization
which acts to influence public services; media;
proceedings of bids, concessions, and licenses; or to
gain votes, by using or threatening violence. General
Communiqu No. 3 requires that a special type of STR be
filed by financial institutions in cases of suspected
terrorist financing. The GOT distributes the UNSCR 1267
Sanctions Committee's consolidated list to interested
GOT agencies and financial institutions.
Another area of vulnerability in the area of terrorist
financing is the GOT's loose supervision of non-profit
organizations. The General Director of Foundations
(GDF) issues licenses for charities and oversees them.
The GDF requires charities to verify and prove their
funding sources and to have bylaws. Charities are
audited by the GDF and are subject to being shut down
if they act outside the bylaws. The GDF keeps a central
registry of charities. However, the GOT does not have
other oversight mechanisms, such as requiring the
publication of annual reports or periodic reporting to
competent authorities. Alternative remittance systems
are illegal in Turkey-only banks and authorized money
transfer companies are permitted to transfer funds.
However, there is anecdotal evidence that alternative
remittance systems exist.
The Council of Ministers promulgated a decree
(2001/2483) to freeze all the funds and financial
assets of individuals and organizations included on the
UNSCR 1267 Sanctions Committee's consolidated list.
The tools currently available under Turkish law for
locating, freezing, seizing, and confiscating terrorist
assets are cumbersome, limited, and not particularly
effective. For example, there is no legal mechanism to
freeze the assets of terrorists not on the consolidated
list. According to MASAK statistics, no assets
connected to terrorist organizations or terrorist
activities were frozen in 2005. Turkey also has in
place a system for identifying, tracing, freezing, and
seizing assets that are not related to terrorism,
although Turkish law allows for only criminal
forfeiture not for the administrative freezing of
assets. The anti-money laundering law, Article 7,
provides for the confiscation of all property and
assets (including derived income or returns) that are
the proceeds of a money laundering predicate offense
(soon to be expanded to crimes punishable by one year
imprisonment), once the defendant is convicted. The law
allows for the confiscation of the equivalent value of
direct proceeds that could not be seized.
Instrumentalities of money laundering can be
confiscated under the law. In addition to the anti-
money laundering law, Article 54 and 55 of the Criminal
Code provides for post-conviction seizure and
confiscation of the proceeds of crimes. The defendant,
however, must own the property subject to forfeiture.
Legitimate businesses can be seized if used to launder
drug money, support terrorist activity, or are
otherwise related to other criminal proceeds. Property
or its value that is confiscated is transferred to the
The government enforces existing drug-related asset
seizure and forfeiture laws. MASAK, the Turkish
National Police, and the Courts are the government
entities responsible for tracing, seizing and freezing
assets. According to Article 9 of the anti-money
laundering law, the Court of Peace-a minor arbitration
court for petty offenses-has the authority to issue an
order to freeze funds held in banks and non-bank
financial institutions as well as other assets, and to
hold the assets in custody during the preliminary
investigation. During the trial phase, the presiding
court has freezing authority. Public Prosecutors may
freeze assets in cases where it is necessary to avoid
delay. The Public Prosecutors' Office notifies the
Court of Peace about the decision within 24 hours. The
Court of Peace has 24 hours to decide whether to
approve the action. There is no time limit on freezes.
There is no provision in Turkish law for the sharing of
seized assets with other countries.
The GOT cooperates closely with the United States and
with its neighbors in the Southeast Europe Cooperation
Initiative (SECI). Turkey and the United States have a
Mutual Legal Assistance Treaty (MLAT) and cooperate
closely on narcotics and money laundering
Turkey is a member of the Financial Action Task Force
(FATF) and the Egmont Group. Turkey is a party to the
1988 UN Drug Convention, the UN International
Convention for Suppression of the Financing of
Terrorism and the UN Convention against Transnational
Organized Crime. Turkey has signed and ratified the COE
Convention on Laundering, Search, Seizure, and
Confiscation of the Proceeds of Crime, and it will come
into force on February 1, 2005. Turkey has signed, but
not yet ratified, the UN Convention against Corruption.
In December 2005, the General Assembly's Foreign
Affairs Committee adopted a draft law ratifying this
convention. Implementation efforts on UN anti-financial
crime conventions are weak, and Turkey is not believed
to be in full conformity with the FATF's Special
Recommendations on Terrorist Financing. The MASAK law
will partially, but not completely, bring Turkey into
compliance with these Special Recommendations.


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