What does getting off the gray list mean? Here is the new era of the Turkish economy in 10 questions.

The efforts carried out by Turkey to combat 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).

The 6th FATF Plenary, held from June 23-28 this year under the presidency of Singapore, completed its work. According to the OECD's statement, the FATF Plenary removed two countries from the "grey list" known as the "enhanced follow-up process". An AA correspondent compiled the structure of FATF, the grey list application, and the possible effects of Turkey's removal from this list.

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, are as follows:

1- WHAT IS FATF?

FATF was established as an intergovernmental organization at a meeting of the G-7 countries, including the United States, Japan, Germany, France, the United Kingdom, 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 FATF Plenary, which is the decision-making body of the organization, meets three times a year. The FATF President is appointed by the FATF Plenary among the FATF members for a period of two 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 United States, Germany, Austria, Australia, Argentina, Belgium, the United Kingdom, 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 areas of work. The organization operates as a determining institution in setting international standards in the fight against money laundering, terrorism financing, and the financing of the proliferation of weapons of mass destruction.

4- HOW DOES THE MONITORING SYSTEM WORK IN FATF?

FATF has 40 recommendations in this field. These recommendations are examined through mutual evaluations with countries, and follow-up processes are implemented. Evaluations are carried out 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 inspections, 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 are a wide range of topics, including international cooperation, the powers and responsibilities of competent authorities, preventive measures, and 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 combating money laundering and terrorism financing. The organization works with countries to address these deficiencies in this field.

6- HOW DID THE GREY LIST PROCESS WORK FOR TURKEY?

Turkey, which became a member of FATF on September 24, 1991, has undergone 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" that includes "countries subject to enhanced monitoring" in October 2021.

7- WHAT DID TURKEY DO TO BE REMOVED FROM THE LIST?

Since the mutual evaluation process, the Ministry of Treasury and Finance, Ministry of Justice, and Ministry of Interior of Turkey 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. FATF emphasized 7 issues in the section regarding Turkey in its announcement published in October 2021, and after the June 2023 Plenary, the number of these issues decreased to 2. Special investigation bureaus were established after the determination of specialized courts and prosecutors responsible for combating money laundering and terrorism financing. MASAK was restructured, and a risk analysis study was completed for legal entities. The National Strategy Document on increasing the effectiveness in the prevention of money laundering and terrorism financing was put into effect. Finally, a regulation regarding crypto assets was passed 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 the FATF Plenary in Singapore, Monaco and Venezuela were included in the grey list due to "deficiencies" in combating money laundering and terrorism financing.

In addition to these two countries, Bulgaria, Burkina Faso, Cameroon, Croatia, Democratic Republic of the Congo, Haiti, Mali, Mozambique, Nigeria, the Philippines, Senegal, South Africa, South Sudan, Tanzania, and Vietnam continue to remain in the FATF's enhanced monitoring process.

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 implications in various sectors, from banking to the real sector. As a result, it is anticipated that banks will strengthen their international financial relationships and improve their credit ratings. This is expected to enable banks to obtain funding at lower costs and access more resources from international markets. The positive effects of the decision are expected to be felt 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 implications, especially in international economic relations. As confidence in the country's financial system increases, it is anticipated that it will be easier to achieve the goals of the implemented economic program. The Ministry of Treasury and Finance stated that "Turkey will continue to carry out its fight against the financing of terrorism and money laundering in full compliance with international standards" and emphasized that MASAK and other institutions will further strengthen their administrative and technical capacities, and if necessary, legal and administrative regulations will be implemented. Additionally, it is predicted that the decision will accelerate international capital inflows to Turkey and have a positive impact on borrowing costs. Increased interest in Turkish lira assets is also among the expectations.