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WHY TURKEY IS STILL ON FATF GREY LIST

The Financial Action Task Force (FATF) has kept Turkey on its ‘grey list’, despite significant progress made by the country in meeting international standards against money laundering and terrorist financing, Treasury and Finance Minister Mehmet Şimşek announced. According to Şimşek, Turkey has largely fulfilled the criteria required by FATF and expects to be removed from the grey list following an on-site inspection scheduled for June.

During a General Assembly held in Paris from February 21-23, FATF acknowledged Turkey’s efforts, particularly noting the country’s commitment since October 2021 to enhance the effectiveness of its Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) system. The statement from FATF highlighted that Turkey has almost completed its action plan to meet the required standards and emphasized the need for an on-site assessment to ensure the reforms are ongoing and the political will for implementation remains strong.

Turkey has introduced significant reforms aimed at strengthening its AML/CFT system, focusing on a risk-based approach to combatting money laundering and terrorist financing. The country has worked to ensure that penalties for violations and requirements for beneficial ownership are sufficiently deterrent.

FATF’s report in 2023 indicated that Turkey complied with 39 of the 40 FATF standards, demonstrating the country’s commitment to international standards.

Minister Şimşek expressed optimism about the final phase of the process to exit the grey list, stating, “FATF has recognized that our country has completed all the elements of the Action Plan for further strengthening our combat against money laundering and terrorist financing. We are now in the final stage of exiting the grey list. Following the FATF team’s visit to Turkey, the evaluation report will be discussed at the General Assembly meeting in June, where we anticipate the decision to remove our country from the grey list will be made.”

Accordinng to experts, Turkey remains on the Financial Action Task Force (FATF) grey list primarily because, while it has made significant progress, it still needs to fully address specific deficiencies in its efforts to combat money laundering and terrorist financing to meet the FATF’s comprehensive criteria. The grey list includes countries that have committed to resolving identified strategic deficiencies within agreed timeframes and are subject to increased monitoring. Key reasons for Turkey’s continued placement on the grey list might include:

  1. Incomplete Implementation of Action Plans: Turkey has committed to an action plan to address deficiencies but has not yet fully implemented all the required actions. This includes enhancing its legal framework and operational measures to fight money laundering and terrorist financing effectively.
  2. Need for Effective Enforcement: Even when laws and mechanisms are in place, their effective enforcement and the operational independence of regulatory bodies are crucial. The FATF often looks for evidence of effective implementation, including prosecutions and convictions in money laundering and terrorist financing cases.
  3. Risk-Based Supervision: FATF has emphasized the need for countries to adopt and implement a risk-based approach to supervision of financial institutions and designated non-financial businesses and professions. Turkey has been working on enhancing its risk-based supervision but may still need to demonstrate that these measures are sufficiently robust and effective.
  4. Transparency of Beneficial Ownership: Ensuring that the beneficial ownership of legal persons and arrangements is transparent is a key aspect of FATF’s recommendations. Turkey may need to show further progress in establishing a comprehensive beneficial ownership registry and ensuring it is accessible and reliable for timely law enforcement investigations.
  5. International Cooperation: The ability to effectively cooperate with international law enforcement and regulatory agencies is another critical area. While Turkey has made strides in improving its legal framework for international cooperation, continuous enhancement and evidence of effective international collaboration are necessary.

The FATF conducts periodic reviews to assess the progress of countries on the grey list. Turkey’s continued efforts to address these deficiencies, including legal and regulatory reforms and their effective implementation, are essential for its removal from the grey list. The recent statements from Turkish officials, including the commitment to completing the action plan and the positive feedback from the FATF on Turkey’s compliance with many of its standards, suggest that Turkey is on the path toward being delisted, pending verification of its reforms’ effectiveness and sustainability.

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