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

161550Z Dec 05

UNCLAS SECTION 01 OF 04 ANKARA 007400 
 
SIPDIS 
 
DEPARTMENT FOR INL, EUR/SE 
JUSTICE FOR OIA, AFMLS, AND NDDS 
TREASURY FOR FINCEN 
DEA FOR OILS AND OFFICE OF DIVERSION CONTROL 
 
E.O. 12958: N/A 
TAGS: SNAR TU
SUBJECT: TURKEY 2005-2006 INTERNATIONAL NARCOTICS 
CONTROL STRATEGY REPORT, VOLUME II 
 
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. 
¶2.  BEGIN TEXT OF REPORT. 
TURKEY 
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 
forfeiture. 
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 
supervision. 
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 
Treasury. 
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 
investigations. 
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. 
 
WILSON