Identifier
Created
Classification
Origin
05ANKARA1664
2005-03-22 15:21:00
CONFIDENTIAL
Embassy Ankara
Cable title:  

GOT TAKES STEPS TO BOLSTER ITS COUNTER-TERROR

Tags:  KTFN EFIN PTER TU 
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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).

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.

--------------
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.

--------------
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.

--------------
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