Turkey's fight against terrorism: The impact of being removed from the FATF grey list on sectors.

The efforts carried out by Turkey in the fight against terrorism financing and money laundering are expected to have a positive impact on many sectors, from banking to energy, construction to manufacturing, as it is removed from the "grey list" by the Financial Action Task Force (FATF).

An AA correspondent compiled the structure of FATF, the grey list application, and the possible effects of Turkey's removal from this list.

Here are the questions and answers regarding the process, which is seen as the recognition of Turkey's success in the fight against terrorism financing and money laundering:

1- What is FATF?

FATF was established as an intergovernmental organization at a meeting of the G-7 countries, including the US, Japan, Germany, France, the UK, Italy, and Canada, in Paris in 1989. The term of office of this structure has been periodically extended since its establishment and became indefinite with the decision taken in April 2019. The General Assembly, which is the decision-making body of the organization, meets 3 times a year. The President of FATF is appointed by the General Assembly among the FATF members for a period of 2 years.

2- Which countries are members of the organization?

FATF has 39 members, including 37 countries and 2 regional organizations. The members of the organization include the US, Germany, Austria, Australia, Argentina, Belgium, the UK, Brazil, China, Denmark, Finland, France, South Africa, India, the Netherlands, Hong Kong, Italy, Ireland, Israel, Spain, Sweden, Switzerland, Iceland, Canada, South Korea, Luxembourg, Malaysia, Mexico, Norway, Greece, Japan, Turkey, New Zealand, Portugal, Russia, Singapore, Saudi Arabia, the European Commission, and the Gulf Cooperation Council.

3- What are the areas of activity of FATF?

FATF plays a "policy-making" role in its working areas. The organization operates as a determining institution in the fight against money laundering, terrorism financing, and the financing of the proliferation of weapons of mass destruction by setting international standards.

4- How does the audit system work in FATF?

FATF has 40 recommendations in this field. These are examined through mutual evaluations with countries and follow-up processes are carried out. Evaluations are made in terms of technical compliance and effectiveness to check the compliance of the elements of the crime of terrorism financing in the country with FATF standards. Matters such as whether effective investigation/prosecution is carried out in the fight against these crimes, whether proceeds of crime are tracked, and whether effective judicial cooperation is carried out with foreign countries are examined. In its audits, FATF evaluates the compliance of countries not only with the crime of terrorism financing but also with the standards it has brought in the areas of money laundering and the financing of the proliferation of weapons of mass destruction. Among the 40 recommendations of the organization, there are comprehensive headings ranging from international cooperation to the powers and responsibilities of competent authorities, preventive measures to money laundering and confiscation.

5- What is the grey list?

The grey list is a list created by FATF to identify countries that are insufficient in the fight against money laundering and terrorism financing. The organization works with countries to address these deficiencies.

6- How did the grey list process work for Turkey?

Turkey, which became a member of FATF on September 24, 1991, went through 3 FATF evaluations with starting dates in 1994, 1998, and 2006. The fourth evaluation started in 2018 and was completed in 2019. Along with the mutual evaluation report and the follow-up period report prepared afterwards, Turkey was included in the "grey list" which includes "countries subject to increased monitoring" in October 2021.

7- What did Turkey do to get off the list?

Since the mutual evaluation process, the Ministry of Treasury and Finance, the Ministry of Justice, and the Ministry of Interior have made intense efforts for Turkey to be removed from the FATF "grey list". The issues in the 40 recommendations were fulfilled one by one. Regulations were made in legislation from the Turkish Penal Code to the Law on the Prevention of Money Laundering, from the Code of Criminal Procedure to the Turkish Commercial Code. In its announcement published in October 2021, FATF emphasized 7 issues in the section regarding Turkey, and after the June 2023 General Assembly, the number of these issues decreased to 2. After the determination of specialized courts and prosecutors responsible for the fight against these crimes, special investigation offices were established. While MASAK was restructured, a risk analysis study was completed for legal entities, and the National Strategy Document on increasing the effectiveness in the prevention of money laundering and terrorism financing was put into effect. Finally, the regulation regarding crypto assets was also accepted in the Turkish Grand National Assembly before the meeting in Singapore, and various powers were given to the Capital Markets Board regarding these assets. Thus, Turkey fulfilled all 40 recommendations.

8- Which countries are on the grey list?

As a result of the evaluations made at FATF's General Assembly in Singapore, Monaco and Venezuela were included in the grey list due to "deficiencies" in the fight against money laundering and terrorism financing. In addition to these two countries, Bulgaria, Burkina Faso, Cameroon, Croatia, the Democratic Republic of the Congo, Haiti, Mali, Mozambique, Nigeria, the Philippines, Senegal, South Africa, South Sudan, Tanzania, and Vietnam continued to be in the enhanced follow-up process of FATF.

9- What are the benefits of getting off the grey list?

It is expected that Turkey's removal from the grey list will further strengthen confidence in its financial system and have positive reflections in many areas, from banking to the real sector. As a result, it is predicted that banks will be able to obtain funding at lower costs and find more resources from international markets. It is expected that the decision will have positive effects internationally, from energy to construction and infrastructure, tourism to industry and manufacturing, real estate to other sectors.

10- What will happen next?

It is expected that Turkey's removal from the grey list will have positive reflections, especially in international economic relations. It is predicted that achieving the goals of the economic program will be easier parallel to the increase in confidence in the country's financial system. While the Ministry of Treasury and Finance stated that "Turkey will continue to carry out its fight against terrorism financing and money laundering in full compliance with international standards", it emphasized that the administrative and technical capacity of MASAK and other institutions will be further strengthened and that legal and administrative regulations will be implemented if necessary. In addition, it is estimated that the decision will accelerate international resource inflows to Turkey and have a positive effect on borrowing costs.Increasing interest in Turkish assets is also among the expectations.