FATF to visit Turkey after 'grey list' exit

A team from the international crime watchdog FATF will evaluate Turkey this month after removing it from its “grey list” last year for progress made in fighting money laundering and the funding of terrorist activity, five sources said.

Turkey has to show it is meeting commitments or it risks returning to the grey list of countries that require special scrutiny, which would dent its improving financial credentials.

The Financial Action Task Force’s (FATF) visit, which could last up to three weeks, includes meetings November 24-28 with the Financial Crimes Investigation Board (MASAK), banks, payment service firms and other entities in the big emerging market economy, the sources familiar with the matter told Reuters.

Turkey was put on the list in October 2021 – just before the worst of a series of recent lira crises – for failing to supervise banking, real estate and other sectors vulnerable to money laundering.

RECENT CRACKDOWN ON ALLEGED MONEY LAUNDERING

A representative of FATF said it expected an onsite period in November but could not comment on details or timing. MASAK, which works directly with the international watchdog, did not respond to requests for comment.

Ahead of the visit, authorities launched several probes into alleged money laundering and suspended operations or seized assets of dozens of companies.

According to central bank decisions published in the official gazette, at least 10 payment firms had their licenses temporarily suspended or revoked, including leading brand Papara, some due to alleged illicit transactions. The bank lists 61 licensed electronic money institutions.

Ramazan Basak, former deputy MASAK head, said the recent probes into payment companies, banks, and holding firms were the correct steps, albeit delayed.

“The current state of the sector is due to three fundamental mistakes: insufficient care shown during company establishment, especially regarding the controlling shareholder; ineffective audits; and failure to take timely and effective measures,” Basak told Reuters.

PAYMENT SERVICE PROVIDERS IN FOCUS

In a 2023 report, FATF rated Turkey “partially compliant” in virtual asset regulation. That year marked a stark turnaround in Turkish economic policy toward more orthodoxy, after which foreign investors began trickling back into local assets.

One of the sources, a banker, said the industry submitted some reports to authorities about ownership structures and licensing practices amid the rapid growth of payment service providers in the last five years.

Both the sector and banks have criticized the pace of expansion, the number of licenses issued and whether networks of relationships were adequately monitored, the source said.