TÜRKİYE’S GRAY LIST ADVENTURE

The Reason for Our Entry and Removal from the List and the Consequences

Türkiye was removed from the FATF (Financial Action Task Force) grey list, where it had been since October 2021, following the decision made at the FATF General Assembly in Singapore from June 23-28, 2024. The General Assembly decided to remove both Türkiye and Jamaica from the grey list. The FATF operates under the auspices of the OECD and its main mission is to develop standards for combating money laundering and the financing of terrorism, monitor global adherence to these standards, and impose sanctions on non-compliant countries. Although 40 countries are members of the FATF, the FATF-Style Regional Bodies (FSRBs) work with the FATF to monitor and sanction non-compliant institutions in over 200 countries. As part of its activities, the FATF has established 40 standards that countries are required to comply with.

As a result of the audits, countries that do not meet these standards are placed on the blacklist, while those that partially meet them but commit to addressing the deficiencies are placed on the grey list. Today, Iran, North Korea, and Myanmar are on the blacklist, while most of the countries on the grey list are located in Africa, including Burkina Faso, Cameroon, the Democratic Republic of Congo, Kenya, Mali, Mozambique, Namibia, Nigeria, Senegal, South Africa, South Sudan, and Tanzania. The list also includes Haiti and Jamaica in the Caribbean, Yemen and Syria in the Middle East, the Philippines and Vietnam in Asia, and Bulgaria and Croatia in Europe.

Türkiye was placed on the grey list in October 2021 and successfully removed from it after approximately 3 years. It had previously been greylisted in 2011 and removed from the list in 2014. A country’s inclusion on the grey list does not necessarily mean that it is involved in money laundering or financing terrorism. As per FATF standards, countries can be placed on the grey list if there are deficiencies in their legislation, due to concerns that these gaps might allow potential money laundering or financing of terrorism. As a matter of fact, after the 2019 review, Türkiye was greylisted in 2021 due to insufficient regulation of crypto assets.

The draft law to address this deficiency was submitted to the Turkish Grand National Assembly in May 2024. At the FATF’s general assembly in Singapore in June, the Ministry of Treasury and Finance presented the regulation’s content, leading to Türkiye’s removal from the grey list. The draft law was published in the Official Gazette on July 2, 2024, and entered into force. With the regulation that entered into force, crypto assets are defined, the establishment and activities of crypto asset service providers, including platforms, are subject to authorization, and the responsibilities of these providers and their members are regulated.

As a result of these regulations, the legal framework for trading and holding crypto assets has been aligned with FATF standards. In Türkiye, the Financial Crimes Investigation Board (MASAK), under the Ministry of Treasury and Finance, primarily focuses on preventing and detecting money laundering and terrorist financing. Its responsibilities include contributing to policy development and regulation, swiftly and accurately gathering and analyzing information, and conducting research and investigations.

The most significant advantage of Türkiye’s removal from the grey list was the boost in its reputation in international financial markets. In particular, some investment funds in Europe and the US require countries to be off the FATF’s grey list before considering them for investment. Their internal regulations prohibit these funds from investing in financial instruments in countries on the grey list. With Türkiye’s removal from the grey list, the biggest obstacle to these funds’ investment in the country has been eliminated.

It is clear that not only these funds but also other portfolio investors will benefit significantly from increased confidence in our financial system, leading to greater external financing and direct investments. All these developments will positively impact Türkiye’s current disinflation policies. In particular, the decline in Türkiye’s risk premium will significantly affect the stability of foreign exchange markets and boost the CBRT’s foreign exchange reserves.