• FATF Recommendations to Turkey and Draft on Preventing Terrorism Financing
  • October 21, 2013 | Author: Safak Herdem
  • Law Firm: HERDEM Attorneys At Law - Istanbul Office
  • The long delayed draft law on preventing terrorism financing has approved by the Justice Commission of the parliament and expected to be enacted before 22 February.

    Even the draft law does not bring that effective changes in money laundering legislation, it will require public authorities to monitor the suspicious transactions and push the button.

    As reported in 2007-dated report of FATF, while the number of suspicious transaction reports (STRs) submitted has increased substantially, the level of reporting remains low when the size and nature of Turkey’s financial sector is considered.
    So How Will This Law Take Role in Combatting Money Laundering?

    At first, it is fact that the delay in approving such a law caused Turkey to be listed among the high-risk countries.

    In evaluation of the scope of the draft law in comparison of the FATF decision, it is obvious that the expectation to remedy the deficiencies in terrorist financing is not met with this draft law.

    Besides, Turkey’s current compliance status shows that most of the FATF Recommendations for customer due diligence, correspondent banking, third parties and introducers and politically exposed persons that Turkey is not fully compliant are still not referred in this draft law.

    In this respect, the law seems like a regulation only setting the conditions and working procedures of Evaluation Commission on Freezing Assets.

    There are several clauses that will cause problems in construing the law and criminal procedure. For example, pursuant to the article 3 of the new law, funding an international institution to perform any act or force to be performed is illegal. The answers to the questions such as “which kind of international institution”, “for which acts” shall not exist in such a crucial issue.

    Pursuant to the article 4(5) of the draft law, investigation and prosecution of terrorism financing is subject to request of Minister of Justice in cases where it is committed against a foreign country or international institution.

    The term of “international institution” should be defined in the draft law before approval at the parliament.

    The decision of freezing assets is given by Council of Ministers and declared on the official gazette, which is risky for some that the executive branch will be given legislative authority. The date of the official gazette is accepted, as the date of notification and the terms and conditions to plea will be mentioned on the decision pursuant to the article 11(2) of the draft law.

    The terms and conditions to plea should be clear and defined by law however this articulation in the draft law does not meet the expectations in rule of law.

    The reciprocity principal in requests of a foreign country also seems as a problematic in practice. Pursuant to article 6(3) of the draft law, the Council of Ministers may demand security for execution of freezing the assets.

    The draft law requires to set a committee on evaluation of freezing the assets that consists of seven members who serves as the president of MASAK, deputy secretary of National Intelligence Agency, general director of Security Affairs of Prime Ministry, deputy secretary of Ministry of Internal Affairs, general director of Penal Affairs of Ministry of Justice, general director for investigation and intelligence of Ministry of Foreign Affairs, general director for foreign exchange and banks of Undersecreteriat of Treasury. The committee as only an investigation body is not entitled to freeze the assets at its discretion. Moreover, the prosecutors are only entitled to seize in proceeding.

    With respect to the expectations of the FATF, the draft law is not as efficient also to establishes an adequate legal framework since those all proceedings were already in force by Law No. 5549 on Prevention of Laundering Proceeds of Crime (2006) and criminal procedure law. However if no prosecution is launched within one year of declaration on official gazette it shall be revoked.

    When examining the approach of FATF in evaluation of Turkey, we clearly see that, the recommendations especially refers to in adequate legal framework and insufficient customer due diligence. However, it is very difficult to say that Turkey will win FATF’s favor with this draft law.

    The sanctions imposed for those whom does not execute the decision of freezing of assets or neglect in exercising are 6 months to 2 years imprisonment which will not satisfy FATF as imprisonments less than 3 years may be subject to deferment of the announcement of the decision according to the criminal legislation.

    As conclusion, the endeavors of Turkey to comply with FATF recommendations seems still not enough since the draft law does not make any essential changes in combatting terrorism financing. The purpose and the scope of the draft law is not well defined the clauses such of “Management of the frozen assets is owned by the concerned person and inspected by MASAK” (article 13) puzzles law professions about the future of such crucial legislations.