US embassy cable - 05ANKARA1664

C O N F I D E N T I A L SECTION 01 OF 04 ANKARA 001664 
 
SIPDIS 
 
TREASURY FOR OFAC, FINCEN, AND ASST. SECRETARY ZARATE 
 
E.O. 12958: DECL: 03/22/2015 
TAGS: KTFN, EFIN, PTER, TU 
SUBJECT: GOT TAKES STEPS TO BOLSTER ITS COUNTER-TERROR 
FINANCE REGIME 
 
Classified By: Robert S. Deutsch for Reasons 1.4 (b) and (d). 
 
1. (C) Summary.  Turkey's current counter-terror finance 
regime lacks the legal authority to carry out effective 
action against financiers of terror and it is weak on 
enforcement and interagency coordination.  For example, 
terrorism finance is not clearly criminalized in Turkish law 
and Turkey does not fully comply with international standards 
such as the FATF Special Eight Recommendations to Fight 
Terrorism Finance.  Currently, the GOT is working to improve 
its legal regime by re-defining terrorism and criminalizing 
terrorism finance.  In addition, it is endeavoring to bolster 
its enforcement capabilities through a new law which governs 
the functions of its Financial Intelligence Unit, MASAK. 
Though these proposed legal reforms seek to address some of 
the regime's deficiencies, a track record of repeated delays 
warrants continued engagement and pressure on many fronts 
from the US, EU, UN, FATF, and the Egmont Group.  End 
Summary. 
 
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A Regime with no Legal Teeth 
----------------------------- 
 
2. (C) Acts of terrorism against third parties are not 
specifically addressed in the GOT's existing law since 
terrorism is currently defined in the Turkish mindset and law 
as a crime against the State or against Turkish citizens. 
Moreover, terrorism finance has yet to be defined as a crime 
in Turkey,s Law Number 3713 on the Fight Against Terrorism 
(LFAT) which, in addition to the Turkish Penal Code (TPC), 
serves as one of the GOT's principal mechanisms for fighting 
terror finance.  Though the GOT says it already has 
provisions in the law that can be activated for preventing 
and suppressing financing of terrorists acts, there is no 
strong legal basis for these mechanisms if the acts are not 
committed against Turkish citizens or the Turkish State. 
Therefore, the GOT is only legally capable of taking action 
against those who commit acts of terror against the Turkish 
State.  However, according to Article 90 of the Turkish 
Constitution, international agreements signed and endorsed by 
the GOT acquire the force of domestic law.  On this basis, 
the GOT, according to a decree issued in 2001, can 
administratively freeze assets of UN-designated individuals 
or entities on the UN 1267 Committee's consolidated list. 
 
3. (C) Since September 11, 2001, the GOT has realized that it 
needs to take a more international perspective in its 
approach to terrorism.  The GOT is aware that it must amend 
the LFAT and redefine terrorism and criminalize terror 
finance in order for its laws to be in harmony with the 
International Convention for the Suppression of the Financing 
of Terrorism to which Turkey is a party.  As a member of 
various UN organizations, the Financial Action Task Force 
(FATF) and the Egmont Group, Turkey's traditional definition 
of terrorism does not comply with international standards. 
 
--------------------------------------------- ---------- 
An Ineffective FIU and Lack of Interagency Coordination 
--------------------------------------------- ---------- 
 
4. (C) In addition to legal deficiencies, the GOT's regime is 
handicapped by a weak Financial Intelligence Unit (FIU) --the 
Financial Crimes Investigation Board, or MASAK--and lack of 
interagency coordination.  MASAK serves as the GOT's primary 
investigator of financial crimes.  However, a July 2004 visit 
by a joint Department of Treasury FinCEN and Italian Ufficio 
dei Cambi (UIC) delegation found MASAK to be a relatively 
weak-functioning FIU whose analysts perform only the most 
basic of analytical work when looking at suspicious 
transaction reports (STRs).  MASAK may task one of six 
Turkish regulatory and supervision authorities such as the 
Bank Sworn Auditors Department of the Bank Regulatory and 
Supervisory Agency (BRSA) to conduct investigations on STRs, 
however, MASAK has not yet developed a set of uniform 
guidelines for these agencies to follow when conducting their 
investigations.  Furthermore, despite the potential 
complexity of financial crimes networks, nowhere in the 
investigative process does MASAK interact with law 
enforcement authorities.  In short, the delegation concluded 
that if MASAK were to apply for Egmont Group membership 
today, it would not meet the criteria for membership and 
would be rejected. 
 
5. (C) MASAK's would-be allies--prosecutors and law 
enforcement officials--also play a key role in the fight 
against financial crimes.  However, MASAK and law enforcement 
agencies admit that interagency coordination is a problem. 
In December 2004, the USG sponsored two separate training 
programs on anti-money laundering and terrorism finance. 
Representatives from the Turkish National Police (TNP), 
MASAK, the Jandarma, and the BRSA participated in the first 
program on the investigation of money laundering and 
terrorism finance led by experts from the US Federal Bureau 
of Investigation (FBI).  The second program focused on the 
prosecution of financial crimes and was led by a US District 
Court Judge, US prosecutors, and an expert from the US 
Department of Justice.  Turkish judges, including from the 
Supreme Court, as well as prosecutors and officials from the 
Ministry of Justice and MASAK participated and made 
presentations. 
 
6. (C) In both of these courses, one of the most common 
concerns voiced by members of all the relevant agencies was 
the lack of coordination among the various agencies who deal 
with money laundering and terrorism finance.  The President 
of MASAK, Genc Osman Yarasli, told econoffs that although 
MASAK has a good relationship with the Ministry of Justice 
(MOJ), very rarely do members of MASAK interact with judges 
and prosecutors from various provinces.  Law enforcement 
agencies, in turn, commented that lack of coordination 
between MASAK and their agencies serves as a huge 
disadvantage in the fight against financial crime.  All the 
agencies said they benefited positively from the training and 
would seek to implement some of the techniques they learned 
in their efforts to fight terrorism finance and money 
laundering. 
 
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Weak Compliance with FATF 
------------------------- 
 
7. (C) A weak FIU and lack of interagency coordination on 
combating financial crimes impedes compliance with 
international standards.  Turkey has been a member of FATF 
since 1991 and has committed to multilateral surveillance and 
peer review.  It is up for FATF review in 2006.  If the 
review were held today, FATF would find that Turkey is not 
compliant with all eight of FATF,s special recommendations 
on terrorism finance. 
 
8. (C) Turkey's compliance with the FATF terror finance 
recommendations is reviewed below: 
 
--Special Recommendation 1:  Ratification and Implementation 
of UN Instruments. 
 
Though Turkey is a party to all relevant UN instruments, 
including the United Nations International Convention for the 
Suppression of the Financing of Terrorism, implementation of 
these instruments is weak. 
 
--Special Recommendation 2: Criminalizing the Financing of 
Terrorism and Associated Money Laundering. 
 
The 1996 anti-money laundering law lists terrorism as a 
predicate offense for money laundering.  However, due to the 
above-mentioned definition of terrorism in the current law, 
the law does not necessarily apply to terrorist acts or 
terrorist financing committed against parties other than the 
Turkish State or against non-Turkish people. 
 
--Special Recommendation 3: Freezing and Confiscating 
Terrorist Assets. 
 
The GOT only has the legal authority to identify and freeze 
the assets of terrorist individuals and groups designated by 
the UN 1267 Sanctions Committee.  Even this authority could 
be vulnerable to court challenge under Turkey's constitution, 
since the authority to freeze derives from the Council of 
Ministers Decree rather than law. 
 
--Special Recommendation 4: Reporting Suspicious Transactions 
Related to Terrorism. 
 
MASAK,s suspicious transaction form specifically lists 
terrorism finance as one of the indicators for filing an STR. 
 However, the lack of safe harbor for filers can be a 
limiting factor in their willingness to file. 
 
--Special Recommendation 5: International Cooperation. 
 
There is no mechanism for timely information sharing with 
other countries' law enforcement and anti-terrorist financing 
agencies. 
 
--Special Recommendation 6: Alternative Remittance. 
 
The GOT has taken no steps to regulate or register 
alternative remittance networks. 
 
--Special Recommendation 7: Wire Transfers. 
 
A Cabinet decree based on law number 32 (the law to protect 
the Turkish currency) requires monthly official reporting to 
the Turkish Central Bank for all types of wire transactions 
equal to or above USD 50,000.  These reports are then sent to 
MASAK.  STR,s are required and, according to BRSA and bank 
officials, if a cross-border transfer which appears to be a 
suspicious transaction transpires, the transaction is 
immediately reported to a MASAK liaison officer.  Under the 
current law, if MASAK decides the transaction requires 
further investigation, then it appeals to the prosecutor's 
office for an investigation.  Nevertheless, there are still 
some deficiencies in this system.  MASAK currently has a very 
small FIU database, there are unclear guidelines for 
regulatory agencies, investigations, and financial 
transaction evidence from September 11 shows that terrorist 
funded transactions have been made in amounts well under USD 
50,000. 
 
--Special Recommendation 8: Non-profit Organizations 
 
The GOT has a General Director of Foundations which licenses 
and oversees charitable organizations. 
Applicants are required to verify and prove their funding 
sources.  Charities must have bylaws and are audited by the 
Directorate and are subject to being shut down if they act 
outside the bylaws.  All NGOs are required to hold an annual 
general assembly meeting to publish their financial reports. 
MASAK, in turn, investigates any denunciations.  However, 
there is no central registry for these financial reports to 
provide ease of access to appropriate law enforcement and 
regulatory agencies.  The EU accession twinning project is 
providing MASAK with a sound structural database system and 
could serve as a registry for information for law enforcement 
and other regulatory agencies. 
 
------------------------- 
Legal Reforms in Progress 
------------------------- 
 
9. (C) In order to address the weaknesses in its 
counter-terror finance regime, the GOT must pursue a dual 
approach whereby it broadens the legal definition of 
terrorism to comply with international standards and 
criminalizes the financing of terrorism.  Former MFA Director 
General for Intelligence and Research, Hakan Okcal, told us 
he believed legal changes were necessary for Turkey to be 
able to take appropriate action against individuals and 
entities involved in the financing of terrorist groups 
outside of Turkey and apart from UN designees.  The MFA 
believes it must be able to act immediately once they receive 
corroborating evidence of terrorism finance, however, the 
current extent of their authority and jurisdiction over 
freezing and confiscating assets of terrorist financiers is 
limited.  The GOT has looked to the EU framework decision on 
terrorism, and existing US, UK, and French laws on terrorism 
as references in amending their own laws. 
 
10. (SBU) At the behest of the UN Counter-Terrorism Committee 
(UNCTC), the GOT established the Working Group on Terrorist 
Financing (WGOTF) in April 2004 to make the necessary legal 
reforms to criminalize terrorism finance in accordance with 
international conventions and taking into account UNSCR 1373. 
 The Prime Ministry authorized the creation of the group 
whose members include representatives from the Ministries of 
Finance, Foreign Affairs, Justice, Interior, and the 
Undersecretariat for Treasury.  MASAK (the anti-financial 
crimes agency which is also Turkey's Financial Intelligence 
Unit (FIU)) was assigned as the coordinating agency for the 
group. 
 
11. (SBU) The WGOTF recently submitted their initial 
proposals*specifically adding provisions for criminalizing 
terrorist financing in the LFAT and amending the definition 
of terrorism so that the LFAT is more in line with the 
International Convention for the Suppression of the Financing 
of Terrorism*to all relevant agencies for review.  The final 
proposals will be submitted to the Prime Minister,s Office 
by MASAK, and subsequently to the Turkish Parliament for 
final approval. 
 
12. (SBU) All changes in the LFAT will be referenced in the 
new Turkish Penal Code passed in 2004 where amendments have 
also been prepared with regards to terrorism finance and 
money laundering.  Terrorism finance would become a predicate 
offense for money laundering in the new Turkish Penal Code 
Article 282 where money laundering predicate offenses were 
broadened to include all predicate offenses punishable by one 
year imprisonment.  Terror finance*as defined in the new 
proposed LFAT provisions*can be punishable by one year 
imprisonment.  The amendments to the LFAT are expected to be 
sent to the Council of Ministers soon.  The above-mentioned 
Turkish Penal Code will enter into force on April 1, 2005. 
 
--------------------- 
Streamlining its FIU 
--------------------- 
 
13. (C) The GOT is also taking measures to streamline its 
FIU, MASAK.  MASAK claims that a new draft law focusing on 
structural and procedural changes for the agency will 
ameliorate some of the inherent weaknesses of the 
organization.  MASAK has been working on this draft law since 
October 2003 and embassy contacts indicate that the draft was 
finally sent to the Minister of Finance in mid-February 2005. 
 According to MASAK Vice President Ender Tosun, if this law 
is passed, Turkey will be in full compliance with all 
international standards, including the FATF Special Eight 
Recommendations to Fight Terrorism Finance.  Based on the 
poor track record for interagency coordination on this draft 
law, it is difficult to predict whether or not the draft will 
actually be approved and enacted in the near future. 
 
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Comment 
-------- 
 
14. (C) Comment.  The GOT,s plans to criminalize terror 
finance, define terrorism in accordance with international 
standards, and streamline its FIU are important steps towards 
strengthening its counter-terror finance regime.  However, it 
is still unclear how quickly these new laws will be enacted 
and whether relevant agencies will use the strengthened legal 
regime to effectively toughen enforcement.  Given the GOT's 
track record, the road to reform will not be easy or speedy. 
The USG, along with the FATF, Egmont, OFAC, the UN, and the 
EU, should continue to look for ways to keep the pressure on 
the GOT to follow through with its proposed reforms. 
Furthermore, the USG should continue its long-standing 
engagement with the GOT not only with training in 
counter-terror finance, but also on policy.  End Comment. 
EDELMAN