Different methods of money laundering have appeared since the 1980s and criminals continue to find new ways of hiding the proceeds of their activities. It has therefore become necessary for legislation in Turkey to be amended in such a way that it both covers newly developed methods and anticipates those that may appear in the future.
The Turkish anti-money laundering legislation prepared according to the 1980 European Council Recommendation, Basle Principles, Vienna Agreement, the 1990 Council Recommendation, the New York Contract and FATF Recommendations, is an autonomous structure peculiar to Turkey. Law No. 4208 on the “Prevention of Money Laundering” was approved and came into effect, initially, on 19 November 1996. By means of this law, Turkish legislation has harmonized with international legislation and various policies have been developed with regard to money laundering. In addition, the Financial Crimes Investigation Board (MASAK) was established.
Since money laundering methods have diversified since Law No. 4208 came into effect in 1996, certain amendments have been made to it and some new regulations have been developed by means of Law No. 5549 on the “Prevention of Laundering the Proceeds of Crime”, which came into effect on 18 October 2006. With the help of the new Law No. 5549, relevant terms have been widened and made compatible with international terminology and definition. As, for instance, “money laundering” has been changed to “criminal income laundering” to clarify the origin of the activity.
Incidents reported to MASAK have drastically increased. The underlying reason for this increase is the “support, education and supervision” provided for by this law. The provisions enable inquiries to be carried out with the widest scope in an urgent and confidential manner and ensure necessary protective measures can be taken before evidence is removed. These provisions have been tangibly incorporated into legislation by means of Law No. 5549, as well as the regulations issued for the execution of this law.
Turkish Criminal Code No. 5237
Another substantial innovation was introduced through Turkish Criminal Code No. 5237, which came into effect on 1 June 2005. Code No. 5237 replaced the obsolete Turkish Criminal Code and included essential innovations and amendments. On the basis that committing a crime becomes an attractive way to generate earnings, as it is possible to assimilate the assets obtained from crimes into the economy by legitimising them and that laundering money is an ideal way to alter and hide the evidence of the initial crime, it has become necessary to regulate the “Crime of Laundering the Assets Obtained from Crimes” explicitly by Code No.5237. The following provision has been strictly applied:
“The person, who delivers abroad the assets obtained from a crime requiring a minimum punishment with imprisonment of one year or more year, or who performs certain processes on such assets in order to hide the illegal resources thereof and create the impression that those assets have been obtained legally, shall be punished with imprisonment of two to five years and with a judicial money penalty of up to twenty thousand days.”
According to Code No. 5237, for an action to be considered to be money laundering, it has to have three clear elements. The first is the initial crime, which needs to be serious enough to require a punishment of imprisonment for a minimum of one year. The second is that there must be a financial asset or proceeds that were obtained as a result of the initial crime. The third element is the processof laundering that asset or proceeds.
Research has shown that the most commonly used methods of laundering the proceeds of crime are smurfing, restructuring, loans back and fictitious export. The list of money laundering methods set forth in Turkish legislation is more comprehensive than those in some jurisdictions, as, in Turkey, the initial crime needs only to be one which requires a punishment of imprisonment of a minimum of one year. In some judicial systems, only drug- or terror-related crimes are deemed as the initial crime in the definition of money laundering.
The Powers of MASAK
The latest change to Turkish Legislation with regard to money laundering is the “Regulation on Laundering Crime Investigation” (the Regulation) dated 4 August 2007. The procedures to be followed during investigations into money laundering crimes, as well as the measures to be taken, are outlined in this regulation. According to the Regulation, MASAK, or its supervisors, may request the Public Prosecution Office to confiscate assets within the scope of protection measures, if they have a strong suspicion that a money laundering crime is being committed. According to the regulation imposed by clause 17 of Law No. 5549, if it is considered that the delay may have an adverse affect on the investigation, the Public Prosecutor is entitled to take a confiscation decision, which has to be approved by the judge within 24 hours. In addition to this action, execution of protective measures such as capture, probation, arrest, judicial inspection, search and confiscation, supervising the communication via telecommunication, confidential inquiries and monitoring with technical devices etc., which are set forth in Law No.5271 on the Code of Criminal Procedure, may be requested from the Public Prosecutor.
In the Regulation, it is expressly stated that civilian authorities, mayors, law enforcement officers and other institutions and enterprises are obliged to facilitate the operations of MASAK and its supervisors and assist them in their activities with all the available capability. Upon the request of MASAK, law enforcement officers can also be provisionally commissioned by the Ministry of Internal Affairs under the Department.
MASAK is the financial intelligence service which collects all the accusations and complaints regarding money laundering in Turkey. Besides administering the intelligence unit, MASAK also undertakes certain tasks such as
- preparing policies for the prevention of crime income laundering and developing implementation strategies and legislation;
- being a regulatory body;
- collecting data, making analyses and assessments;
- establishing coordination between relevant institutions and establishments and carrying out supervisory activities;
- performing collaborative work; and
- receiving information and filing a criminal complaint where appropriate.
The most important data flow and collaborative work takes place between MASAK and banks. A “doubtful transactions notification guide”, which is prepared by MASAK, is sent to banks, financial institutions and related institutions. The guide outlines the stages of the money laundering process and methods, indications to watch out for, basic principles to be implemented during the prevention of money laundering crime, as well as identifying and explaining the financial institutions’ legal obligations
Issues that the institutions are obliged to respect under Law No.5549 by taking preventative measures are outlined under the following main headings: determination of identification; notification on doubtful transactions; internal supervision; establishing control and risk management systems; assigning compliance officers; continuous information provision; information and document submission; maintaining and presenting. Within this framework, some factors such as the customer’s background, country of residence, linked accounts, trade activities and other risk indications should be considered during preparation of customer admission policies. For instance, risk factors such as countries or territories set forth in the FATF’s “List of Non-Cooperating Countries and Territories”, as well as countries or offshore centres in which crimes related to drugs, terrorism and smuggling take place, should be taken into consideration.
Activities to be carried out in terms of customer identification are determined as per the recommendations of the FATF. According to these, the following obligations have been introduced.
- Determine customer identification, taking necessary precautions to verify that identity by using reliable and independent documents, data or information.
- If the customer is a legal person or enterprise, the financial institution must establish the ownership and supervision structure of the customer, in addition to the abovementioned activities.
- Obtain information with regard to the type of business relationship and business that the customer undertakes.
- Monitor the customer continuously in order to verify risk profile information, including identifying fund resources, when necessary.
Within this context, if MASAK establishes at the end of these studies that the transaction is a crime as per the provisions of the specified legislation, it refers the transaction to the Public Prosecution Office.
By means of the Regulations, Turkish legislation has achieved a quality by which it can both follow the latest improvements at the international level and respect the internal dynamics of Turkish business. The aimed-for achievement of preventing money laundering can be ensured by decreasing the unregistered economy to a minimum.
Studies performed in Turkey regarding the prevention of money laundering have had repercussions in the international arena. As a result, relevant institutions and organizations in Turkey trained an Uzbekistan Delegation, which visited Turkey between 30 May and 4 June 2007, on certain issues relating to policies on money laundering such as collection and assessment of information regarding illegal financial and economic transactions and cooperation between both public institutions and enterprises and similar organizations at the international level in order to reveal money laundering of illegal incomes. In recent months, Turkey also shared its experience and knowledge with another delegation from Indonesia. Turkey firmly believes in the benefit of sharing knowledge and experience obtained through legislation renewals and performed studies and the contribution to the solution of the issue by international, collective work.