As much as anti-money laundering is old as money, it has undeniably become more important in the last century. People who committed acts deemed as criminal by their governments found that they could benefit from crime by simply concealing the origins of the proceeds and streaming them back into the financial system. It was then discovered that the easiest way to do so was to take the money out of the country and make it hard to trace. Consequently, over the course of years, anti-money laundering has become an issue for the international community and has made it necessary for them to cooperate and take a stand.
1) What Is Money Laundering?
In a nutshell, money laundering is converting “dirty” money into “clean” money without raising the suspicions of the authorities. “Dirty money” is basically money, goods, or any kind of proceeds gained through illegal means and criminal acts. As can be inferred, there must be a precedent crime that generates said gain. Even though drug trafficking, terrorism and terrorist financing, human trafficking, smuggling, fraud, counterfeiting money and prostitution are the most common precedent crimes, a precedent crime might be any kind of crime unless otherwise specified by local laws.
For many years, countries didn’t consider money laundering to be a separate felony. This resulted in impunity as penalties and prevention weren’t the deterrent they were supposed to be. Not considering money laundering as a distinct offence and treating it as a local issue also made it harder for countries to communicate and to formulate determined solutions. As we will explain, there are now many international organizations and agreements to engender international collaboration against money laundering.
The main problem with money laundering is that once money is “laundered” and safely put back into the financial system, it is usually used to fund criminal organizations. Having more money and power, these organizations enhance their criminal activities and find it easier to launder money. This clearly creates an unwanted cycle and a vast underground economy.
2) How Is Money Laundered?
It is generally accepted that money laundering consists of three stages:
It should be kept in mind that each case is individual and different, and these stages may not always take place separately. It is possible that two or three of them may occur at the same time.
Placement: The large amounts of proceeds generated through organized crime are usually in cash form, which is risky and unpractical. Therefore, money launderers want to make the money less apparent and suspicious to the authorities by placing it in the financial system. Perpetrators often place the money by taking it outside the country and depositing it in the banks of foreign countries where banking regulations are not strict, splitting the money and depositing it in small amounts in multiple bank accounts, purchasing commercial bills, etc.
Layering: This stage mainly aims to conceal the origin of the money and move it away from the criminal source through series of complex transactions. The launderer transfers the money to several different accounts in a short span of time, buys luxurious items such as yachts or jewelry, establishes transactions in favor of third parties who are seemingly unrelated to the money laundering. In this way, money is legitimized and impossible to trace.
Integration: The money is finally integrated and put back in the financial system. In cases where there is a criminal investigation, the launderer now has a “legitimate” explanation for the source of money. Therefore, it is almost impossible to press charges against a perpetrator after the laundered money has been integrated.
3) The International Response to Money Laundering and Its Effect on Turkey
As explained above, money laundering operations usually takes place in numerous countries. For this reason, it became necessary to take precautions internationally. The first written international document regarding money laundering is the UN Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (“Vienna Convention”) dated 19 December 1988. As the name suggests its sole aim was to fight drug smuggling. However, its successors have adopted the same principles in terms of preventing money laundering.
The Financial Action Task Force (hereinafter referred to as “FATF”) is the most important global organization aiming to prevent laundering the proceeds of crime and terrorist financing. It has forty recommendations against money laundering and nine additional recommendations for the prevention of terrorist financing. These recommendations set forth global standards and contracting states are expected to shape their legislation in accordance with the recommendations.
FATF recommendations set forth methodical regulations to fight and prevent money laundering, establish efficient monitoring systems within corporations, and create procedures to facilitate international collaboration .
Turkey became a party to FAFT on 25 September 1991, however, by 1996, the country still did not have a law on the prevention of laundering crime proceeds. Following FATF’s decision to impose sanctions upon Turkey for failing to make the required amendments to its legislation, Anti-Money Laundering Law No. 4208 (hereinafter referred to as “Law No. 4208”) finally passed on 19 September 1996. The law covered many of the aspects referred to in the FATF recommendations causing them to drop their sanctions.
The recommendations involved precautions such as establishing customer recognition systems, awareness of complex transactions with no apparent legal or economic reason, prevention of the use of technologies for money laundering, reporting suspicious activities within financial institutions, preparing corporate compliance programs, and establishing financial intelligence units.
The Nations Convention Against Transnational Organized Crime (“Palermo Convention”) is the first international convention that regulates money laundering as a separate felony. It was ratified by Turkey on 04 February 2003. It prompts contracting states to take necessary action to determine and prevent money laundering, and to establish regulative and monitoring systems for banking and other institutions suitable for money laundering. Another important aspect of the convention is that it requires contracting states to regulate money laundering as a separate felony.
The United Nations Convention Against Corruption was ratified by Turkey on 18 May 2006. Having adopted similar principles, it emphasized communication and collaboration between contracting states’ judicial and financial authorities, and law enforcement agencies.
The Basel Committee on Banking Supervision was founded in 1974 by the central banks of the Group of Ten member states in order to create principles that prevent perpetrators from using banking systems in money laundering. Turkey became a member in 2009 and quickly started to adapt its banking system to the latest principles.
4) Current Anti-Money Laundering Regulations in Turkey
In a community that becomes more globalized each day, international conventions and principles have shaped Turkey’s anti-money laundering regulations. As of 1996, money laundering was regulated as a separate felony and the Financial Crimes Investigation Board (hereinafter referred to as "MASAK"), which develops policies for anti-money laundering and the prevention of terrorist financing, and collects and analyzes data and information, was established within the Ministry of Finance.
However, the abovementioned Law No. 4208 remained inadequate in the short term and the Law on the Prevention of Laundering Proceeds of Crime No. 5549 (hereinafter referred to as “Law No. 5549”) came into force on 18 October 2006.
Parties and their obligations are regulated under Law No. 5549 and are further elaborated under the Regulation on Measures for the Prevention of Laundering the Proceeds of Crime and Financing of Terrorism.
Anti-money laundering principles under the said legislation are as follows:
1. Identification of customers and the beneficial owner
2. Reporting suspicious transactions,
3. Providing information on demand and/or continuous information
4. Retention and submission of documents concerning the obligations under anti-money laundering legislation
5. Establishing internal audits, control and risk management systems and conducting training activities
Furthermore, most of the important actors in the financial system are listed as obliged parties who should employ compliance officers to conduct compliance programs ensuring that obliged corporations are in accordance with anti-money laundering legislation and that they report to MASAK when necessary. The principles regarding compliance policies and the appointment of a compliance officer are regulated under the Regulation on Compliance Programs Regarding Prevention of Laundering the Proceeds of Crime and Financing of Terrorism (Please find further details in our article “6 Legal Requirements for Organizations in Turkey To Prevent Money Laundering” for anti-money laundering programs in Turkey).
5) How Is Money Laundering Punished?
Money Laundering is regulated as a separate felony under Article 282 of the Turkish Criminal Code No. 5237, which is titled “Laundering the Proceeds of Crime”.
Further to that, the following acts are considered to be criminal under the article:
a. transferring proceeds that are acquired through a crime abroad or
b. conducting any kind of act upon these proceeds in order to i) conceal their illegal sources or ii) give the impression they were acquired legally.
These acts are subject to a penalty of imprisonment for a term of three to seven years and a judicial fine of up to twenty thousand days. The penalty is aggravated if the offence is a) committed in the course of the activities of an organization b) committed by a public officer or a professional on duty.
Any person who, without participation in committing an offence i) purchases, accepts, keeps or ii) uses an asset by being aware of its value and such nature shall be subject to a penalty of imprisonment for a term of two to five years.
What if the person committing the crime is a legal entity and not a real person? The personality principle is essential to criminal law and legal entities are not criminally liable. The principle is cited in Article 282 as it stipulates that a legal entity involved in such activity will be subject to the security measures specific to legal entities.
However, considering the board of directors’ responsibility to ensure a corporation’s compliance with anti-money laundering regulations and for the appointment of a compliance officer, a legal entity’s involvement in money laundering is very likely to result in criminal liability of the board of directors.
In scope of the fast globalization of trade and economics, it is impossible to consider money laundering as a local issue and countries have a responsibility towards one another.
Turkey keeps taking concrete actions to hold its commitments both in the international and local arena through reforming anti-money laundering regulations, such as tightening its mechanisms to prevent money laundering, extending the scope of those obliged to notify authorities of suspicious transactions, increasing administrative fines for the failure to impose anti-money laundering obligations, and so on. Although there is no other specific regulative enforcement authority established for anti-corruption, MASAK is an authorized body researching, analyzing, and contributing to policymaking and the investigation of money laundering and terrorism financing.
Due to its Judicial Reform Strategy for 2019 – 2023 and its unique geopolitical position, it is expected that Turkey will follow a methodical and assertive approach in its anti-money laundering efforts. Therefore, it is very important for corporations and investors in Turkey to follow and comply with their obligations arising from both domestic and international legislation, and to always keep themselves up to date to avoid any kind of penalty or sanction.
 Kerim Çakır, “Suçtan Kaynaklanan Malvarlığı Değerlerini Aklama Suçu”, Ankara, 2016, p. 32
 Kerim Çakır, “Suçtan Kaynaklanan Malvarlığı Değerlerini Aklama Suçu”, Ankara, 2016, p. 88
 Murat Volkan Dülger, “Suçtan Kaynaklanan Malvarlığı Değerlerinin Aklanmasına İlişkin Suçlar Ve Yaptırımlar”, Unpublished Phd Dissertation, Istanbul University Social Sciences Institute, Department of Public Law, İstanbul, 2010, p. 137 - 138
Kemal Altuğ Özgün