Terrorism Finance: Turkish FIU Still Waiting for

UNCLAS SECTION 01 OF 02 ANKARA 001630

SIPDIS

TREASURY FOR OTI - RLEBENSON
EUCOM FOR BURDICK
PARIS FOR USOECD

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: KTFN EFIN PTER TU

SUBJECT: Terrorism Finance: Turkish FIU Still Waiting for
New Law; Possible Delay in FATF Review

REF: ANKARA 250 AND PREVIOUS

1.(SBU) Summary: The head of Turkey's Financial
Investigative Unit told us parliamentary consideration of
the new anti-money laundering law is slowly progressing, and
the law is not controversial. He expects the Financial
Action Task Force (FATF) mutual review on-site inspection in
September but think FATF may push the review itself into

2007. In his public remarks Yarasli links the fight against
financial crime to maintaining the competitiveness of the
Turkish economy. The number of suspicious transaction
reports filed rose from 290 in 2004 to 352 in 2005. End
Summary.

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MASAK Law
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2. (SBU) Genc Osman Yarasli, president of the anti-money
laundering agency MASAK, told us the long-awaited "MASAK
law" is close to moving from a sub-committee of Parliament's
Plan and Budget Committee to the full committee. The law
will reorganize MASAK, explicitly criminalize terrorism
finance (though other stalled legal reforms are needed to
internationalize Turkey's definition of terrorism),provide
safe harbor for filers of suspicious transaction reports
(STR's) and increase MASAK's ability to exchange information
with other international agencies. According to Yarasli,
the law is not controversial. He said one reason for the
slow pace of parliamentary consideration is that the
legislation is interdisciplinary, requiring comment from
multiple government agencies. The legislation first had to
be considered by the EU Harmonization Committee before
moving over to Plan and Budget. The law had been sent to the
Parliament on June, 9 2005, and the EU harmonization
Committee cleared the law on December, 29 2005. The Law is
with the Planning and Budget Commission since January 1,

2006.


3. (SBU) Wearily resigned to a long wait, Yarasli explained
the absence of the new law is holding up other MASAK
efforts: (preparing for the FATF review by) putting in place
implementing regulations, and conducting training programs
for judges, prosecutors, police and financial institutions
on their respective roles under the new legislative
framework. MASAK is gearing up for a series of such
training programs to be held around the country, including
more specialized courses for bank compliance officers at
headquarters (mostly in Istanbul). Each bank has a
compliance officer and, under the new law, insurance
companies, foreign exchange houses and other financial
intermediaries will also be required to have compliance
officers.

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FATF Review May be Delayed
--------------


4. (SBU) Yarasli confirmed press reports that FATF had sent
Turkey a long questionnaire preparatory to the upcoming
mutual review. He said Turkey would respond by June with
the FATF on-site review team expected to come to Turkey in
September. He professed no knowledge of who might be on the
team. The review itself, however, might slip into 2007, he
said, because FATF had concerns about trying to do three
countries' reviews at the same time.

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Interagency Cooperation
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5. (SBU) According to Yarasli, only with the new law would
MASAK be able to greatly strengthen interagency cooperation
against terrorism finance. He said, for example, that MASAK
lacked authority to receive intelligence information until
the law is passed. Nevertheless, he agreed that the
creation of a terrorism finance unit in the Intelligence

ANKARA 00001630 002 OF 002


Division of the Turkish National Police was positive, and
cited other examples of increased interagency cooperation
such as bank inspectors checking on bank compliance with
MASAK regulations.

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MASAK and Turkey's Economic Competitiveness
--------------


6. (SBU) Yarasli's vision of MASAK's role was to ensure
Turkey's economy was competitive by keeping it as free of
financial crime as possible. He pointed out that anti-money
laundering was included in the EU's free movement of capital
chapter, not under security. Rather than seeing his role as
solely law enforcement, he linked the fight against
financial crime to business confidence and attracting
foreign investment. He said illegal activities hamper
Turkey's competitive advantage.


7. (SBU) Yarasli believed that the banking community had
become more sensitized to the need to keep Turkey's
financial system free of financial crime. He contrasted the
banking association's proactive work with MASAK in recent
months with bankers' attitudes when MASAK was established in

1997. EU twinning advisor Mario Imparato has told us MASAK
and the Bankers' Association are cooperating on a common set
of guidelines for suspicious transaction reports, for
example.


8. (SBU) Yarasli said he expected the number of STR's to
increase substantially in 2007 after the law is passed (not
surprisingly, given the lack of safe harbor under current
law). MASAK's 2005 report states that STR filings increased
from 290 in 2004 to 352 in 2005, of which all but three came
from banks.

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PKK
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9. (SBU) When we updated Yarasli on USG efforts to enhance
cooperation with Turkey and western European countries
against PKK networks, he said it was a good thing. On the
other hand, as he has previously, Yarasli expressed
skepticism that the Europeans would effectively cooperate
with Turkey.

MCELDOWNEY