VZCZCXRO2169
RR RUEHDA
DE RUEHAK #2970/01 3481517
ZNR UUUUU ZZH
R 141517Z DEC 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 4671
INFO RUEHIT/AMCONSUL ISTANBUL 3638
RUEHDA/AMCONSUL ADANA 2533

UNCLAS SECTION 01 OF 04 ANKARA 002970 
 
SIPDIS 
 
INL FOR JOHN LYLE 
 
SIPDIS 
 
REF: STATE 136780 
 
E.O. 12958: N/A 
TAGS: SNAR TU
SUBJECT: TURKEY: 2007 INTERNATIONAL NARCOTICS CONTROL STRATEGY 
REPORT PART TWO 
 
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. It continues to be a major transit route for 
Southwest Asian opiates moving to Europe. However, narcotics 
trafficking organizations are reportedly responsible for only a 
small portion of the total funds laundered in Turkey. 
 
Money laundering takes place in banks, nonbank financial 
institutions, and the underground economy. Money laundering methods 
in Turkey include: the cross-border smuggling of currency; bank 
transfers into and out of the country; trade fraud, and the purchase 
of high-value items such as real estate, gold, and luxury 
automobiles. It is believed that Turkish-based traffickers transfer 
money and sometimes gold via couriers, the underground banking 
system, and bank transfers to pay narcotics suppliers in Pakistan or 
Afghanistan. Funds are often transferred to accounts in the United 
Arab Emirates, Pakistan, and other Middle Eastern countries. A 
substantial percentage of money laundering that takes place in 
Turkey involves fraud and tax evasion. Informed observers estimate 
that as much as 40-50 percent of the economy is unregistered. In 
2005, the Government of Turkey (GOT) passed a tax administration 
reform law, with the goal of improving tax collection.  The GOT is 
working on additional reforms to combat the unregistered economy and 
move these businesses onto the tax rolls. 
 
Turkey first criminalized money laundering in 1996. Under the law 
whoever commits a money laundering offense faces a sentence of two 
to five years in prison, and is subject to a fine of double the 
amount of the money laundered and asset forfeiture provisions. The 
Council of Ministers subsequently passed a set of regulations that 
require the filing of suspicious transaction reports (STRs), 
customer identification, and the maintenance of transaction records 
for five years. 
 
In 2006, the GOT enacted additional anti-money laundering 
legislation, 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 all predicate offenses 
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 also came into effect in 
June 2005. 
 
Under a Ministry of Finance banking regulation circular all banks, 
including the Central Bank, securities companies, post office banks, 
and Islamic financial houses are required to record tax identity 
information for all customers opening new accounts, applying for 
checkbooks, or cashing checks. The circular also requires exchange 
offices to sign contracts with their clients. The Ministry of 
Finance also mandates that a tax identity number be used in all 
financial transactions. The requirements are intended to increase 
the GOT's ability to track suspicious financial transactions. Turkey 
has a new law, which protects the identity of those who file 
suspicious transaction reports, and has helped to push suspicious 
transaction reports above 2,000 for the first time as of October 
¶2007.  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. 
Individuals and corporate bodies from whom information and documents 
are requested may not withhold the requested items by claiming the 
protection provided by privacy provisions in order to avoid 
submitting the requested items. 
 
A new Banking Law was enacted in 2005 to strengthen bank 
supervision. The Banking Regulatory and Supervisory Agency (BRSA) 
conducts periodic anti-money laundering and compliance reviews under 
the authority delegated by MASAK. The number of STRs currently being 
filed is low, even taking into consideration the fact that many 
commercial transactions are conducted in cash. In 2006, 1140 STRs 
were filed.  The upward trend continues as shown by the following 
results: 2005: 352 STRs were filed; 2004: 288 STRs were filed; 2003: 
177 STRs were filed. Year-end 2007 statistics are not available. 
 
Turkey does not have foreign exchange restrictions. With limited 
exceptions, banks and special finance institutions must inform 
authorities within 30 days, about transfers abroad exceeding $50,000 
(approximately 60,000 new Turkish liras) or its equivalent in 
foreign currency notes (including transfers from foreign exchange 
deposits). Travelers may take up to $5,000 (approximately 6,000 new 
Turkish liras) or its equivalent in foreign currency notes out of 
the country. Turkey does have cross-border currency reporting 
requirements. Article 16 of the recently-enacted MASAK law (see 
below) gives customs officials the authority to sequester valuables 
 
ANKARA 00002970  002 OF 004 
 
 
of travelers who make false or misleading declarations and imposes 
fines for such declarations. 
 
MASAK was established by the 1996 anti-money laundering law as part 
of the Ministry of Finance. MASAK became operational in 1997, and it 
serves as Turkey's Financial Intelligence Unit (FIU), receiving, 
analyzing, and referring STRs for investigation. MASAK has three 
functions: regulatory, financial intelligence, and investigative. 
MASAK plays a pivotal role between the financial community and 
Turkish law enforcement, investigators, and judiciary. 
 
In October 2006, Parliament enacted a new law reorganizing MASAK 
along functional lines, explicitly criminalizing the financing of 
terrorism, and providing safe harbor protection to the filers of 
STRs. The law also expands the range of entities subject to 
reporting requirements, to include art dealers, insurance companies, 
lotteries, vehicle sales outlets, antique dealers, pension funds, 
exchange houses, jewelry stores, notaries, sports clubs, and real 
estate companies. It also specifies sanctions for failure to comply. 
The law gives MASAK the authority to instruct a number of different 
inspection bodies (such as the bank examiners, the financial 
inspectors or the tax inspectors) to initiate an investigation if 
MASAK has reason to suspect financial crimes. Likewise, MASAK can 
refer suspicious cases to the Public Prosecutor and the Public 
Prosecutor can ask MASAK to conduct a preliminary investigation 
prior to referring a case to the police for criminal investigation. 
In August 2007, the regulation on money laundering crime was enacted 
enforcing MASAK's authority to combat these crimes. 
 
However, neither the current draft of the legislation, nor a June 
2006 set of amendments to Turkey's antiterrorism laws, expanded upon 
Turkey's narrow definition of terrorism applicable only in terms of 
attacks on Turkish nationals or the Turkish state. 
 
According to MASAK statistics, as of December 31, 2006 it had 
pursued 2,231 money laundering investigations since its 1996 
inception, but fewer than ten cases resulted in convictions. 
Moreover, all of the convictions are reportedly under appeal. Most 
of the cases involve nonnarcotics criminal actions or tax evasion; 
as of December 31, 2005 41 percent of the cases referred to 
prosecutors were narcotics-related. 
 
The GOT enforces existing drug-related asset seizures and forfeiture 
laws. MASAK, prosecutors, 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 nonbank 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. 
 
MASAK's General Communiqu No. 3, dated February 2002, requires that 
a special type of STR be filed by financial institutions in cases of 
suspected terrorist financing. However, until the amendments to the 
criminal code were enacted in June 2006, terrorist financing was not 
explicitly defined as a criminal offense under Turkish law. Various 
existing laws with provisions that can 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 that acts to influence 
public services, media, proceedings of bids, concessions, and 
licenses, or to gain votes, by using or threatening violence. To 
commit crimes by implicitly or explicitly intimidating people is 
illegal under the provisions of the Law No. 4422 on the Prevention 
of Benefit-Oriented Criminal Organizations. The GOT distributes to 
GOT agencies and financial institutions the names of suspected 
terrorists and terrorist organizations on the UNSCR 1267 Sanctions 
Committee consolidated list, as well as U.S.-designated names. 
 
Another area of vulnerability in the area of terrorist financing is 
the GOT's supervision of nonprofit organizations. The General 
Director of Foundations (GDF) issues licenses for charitable 
foundations and oversees them, although they have a limited number 
of auditors to cover more than 70,000 institutions. The Ministry of 
Interior regulates charitable nongovernmental associations (NGOs). 
GDF, as part of the Ministry of Interior, keeps central registries 
of the charitable organizations they regulate and they require 
charities to verify and prove their funding sources and to have 
bylaws. Charitable organizations are required to submit periodic 
financial reports to the regulators. The regulators and the police 
 
ANKARA 00002970  003 OF 004 
 
 
closely monitor monies received from outside Turkey. The police also 
monitor NGO's for links to terrorist groups. 
 
Alternative remittance systems are illegal in Turkey, and in theory 
only banks and authorized money transfer companies are permitted to 
transfer funds. Trade-based money laundering, fraud, and underground 
value transfer systems are also used to avoid taxes and government 
scrutiny. There are 21 free trade zones operating in Turkey. The GOT 
closely controls access to the free trade zones. Turkey is not an 
offshore financial center. 
 
According to MASAK statistics, no assets linked to terrorist 
organizations or terrorist activities were frozen in 2006. Turkey 
has a system for identifying, tracing, freezing, and seizing assets 
that are not related to terrorism, although the law allows only for 
their criminal forfeiture and not their administrative forfeiture. 
Article 7 of the anti-money laundering law 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, Articles 54 and 55 of the Criminal Code provide 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 or 
support terrorist activity, or are related to other criminal 
proceeds. Property or its value that is confiscated is transferred 
to the Treasury. 
 
In the months after 9/11, the Council of Ministers decreed 
(2482/2001) all funds and financial assets of individuals and 
organizations included on the UNSCR 1267 Sanctions Committee's 
consolidated list be frozen.  However, the tools available at that 
time under Turkish law for locating, freezing, seizing, and 
confiscating terrorist assets were cumbersome, limited, and 
ineffective.  In late 2001, the Council of Ministers froze the funds 
of one individual accused of financing terror in Turkey.  This 
individual filed an appeal in 2001, and in June 2006 the 10th 
Chamber of the Turkish Administrative Court overruled the original 
Council of Ministers decision on technical grounds.  The 10th 
Chamber's decision was appealed, and upon review, in February 2007 
the Highest Chamber Council of the Turkish Administrative Court 
upheld the original decision to freeze the individual's assets on 
the grounds that there were no legal irregularities in the original 
decision. The assets of the 1267-listed individual continue to be 
frozen. Since then changes in the law relating to MASAK, Turkish 
criminal code, and anti-terrorism law give more authority to seize 
and freeze assets quickly and make the Turkish system more compliant 
with international standards. 
 
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). Since 1998, MASAK has been a member of the Egmont 
Group, which is a coalition of international financial intelligence 
units that meet regularly to improve cooperation, information 
exchange, and the sharing of expertise. 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, which came into force on 
February 1, 2005. In 2006, Turkey became a party to the UN 
Convention against Corruption. 
 
With the passage of several new pieces of legislation, the 
Government of Turkey took steps in 2006 and 2007 to strengthen its 
anti-money laundering and counterterrorist financing regime.  The 
GOT now faces the challenge of aggressively implementing these laws. 
  In 2007, the GOT established a High Coordination Council on 
Financial Crimes, which consists of MASAK, Finance Ministry, Capital 
Markets Board, and Central Bank representatives.  The aim of this 
board is to improve coordination among the agencies to combat 
financial crimes and support the work of MASAK.  MASAK must improve 
its automation to be able to access to banks' and other financial 
institutions' data bases to speed up their process and refer cases 
more quickly to prosecutors.  The GOT should also regulate and 
investigate remittance networks to thwart their potential misuse by 
terrorist organizations or their supporters. The GOT should consider 
expanding its narrow legal definition of terrorism, which currently 
is limited to crimes committed in Turkey and against Turks.  The GOT 
should also strengthen its oversight of foundations and charities, 
 
ANKARA 00002970  004 OF 004 
 
 
which currently receive only cursory overview and auditing. 
 
Wilson