Turkey Under the Spotlight: FATF's Upcoming Visit and Money Laundering Crackdown

Turkey is once again in the spotlight as the Financial Action Task Force (FATF) plans to visit the country this month. This visit follows Turkey's removal from the FATF's "grey list" last year for progress in combating money laundering and terrorist financing. However, the country must prove it is still meeting its commitments or risk being relisted, which would harm its financial reputation.

FATF Team's Visit

The FATF team's visit, which could last up to three weeks, will include meetings with various entities in Turkey's large and growing economy. These meetings will take place between November 24 and 28, according to sources familiar with the matter.

Background: Turkey's Grey List Placement

Turkey was first placed on the grey list in October 2021, just before the country experienced a series of currency crises. The FATF's visit will focus on evaluating Turkey's progress in supervising sectors vulnerable to money laundering, such as banking and real estate.

Preparations for the Visit

In preparation for the visit, Turkish authorities have launched several probes into alleged money laundering and have suspended the operations of dozens of companies. At least 10 payment firms have had their licenses temporarily suspended or revoked, including the popular brand Papara.

Criticism and Concerns

Critics argue that the recent crackdown on payment service providers is a step in the right direction, but it is long overdue. Ramazan Basak, a former deputy head of the Financial Crimes Investigation Board (MASAK), said the current state of the sector is due to three fundamental mistakes:

Insufficient care during company establishment
Ineffective audits
Failure to take timely and effective measures

FATF's 2023 Report

In a 2023 report, the FATF rated Turkey "partially compliant" in virtual asset regulation. The report also noted a turnaround in Turkish economic policy toward more orthodoxy, which has led to a trickle of foreign investors returning to the country.

Growth and Concerns in Payment Service Providers

The rapid growth of payment service providers in Turkey has raised concerns about the pace of expansion and the adequacy of monitoring networks of relationships. Both the sector and banks have criticized the number of licenses issued and the lack of oversight.