FINANCIAL MONITORING OF TURKEY'S CHARITIES

UNCLAS SECTION 01 OF 02 ANKARA 003325

SIPDIS

TREASURY FOR LEBENSON
JUSTICE FOR OPDAT

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EFIN PTER KTFN TU
SUBJECT: FINANCIAL MONITORING OF TURKEY'S CHARITIES



1. (SBU) SUMMARY: There are two types of private
charitable organizations that are subject to different
rules and official oversight. Charitable "foundations"
have played a prominent role in Turkish society dating
back to the Ottoman period, and non-profit
"associations" have become increasingly important under
the Turkish Republic. While both types of
organizations are regulated, the government
increasingly relies on the groups to self-monitor,
raising concerns about potential misuse of these
organizations to facilitate terrorist or criminal
finance. Although the Director of Foundations doubted
criminals would elect to make use of a regulated
foundation, a Ministry of Interior official hinted that
the regulatory system for associations is not strong
enough to prevent potential abuse by money launderers
or terrorist financiers. End summary.

--------------
ESTABLISHING AND MONITORING FOUNDATIONS
--------------


2. (SBU) The General Directorate of Foundations (VGM)
falls under the Prime Ministry's umbrella, and
regulates and oversees all charitable foundations, many
of which began their existence as religious trusts
(waqfs) under the Ottoman Empire. According to General
Director of Foundations (VGM) Yusuf Beyazit, there are
approximately 41,550 foundations registered in Turkey
as of April 2006. Beyazit noted that the "foundation"
concept is very important in Turkish culture, dating
back to the Ottoman period.


3. (SBU) Beyazit told us that every foundation submits
its balance sheet and activity report to VGM, which
reviews the records to monitor how the organization
spent its money. He said that all funding from abroad
must come through the banking system, and that
foundations must have Ministry of Interior (MoI)
permission to send money to or receive money from
foreign entities. Beyazit explained that VGM
communicates with MASAK (Turkey's financial
intelligence unit) or the MoI if the need arises, but
that it does not happen often because of "how heavily
regulated the system is." Beyazit was skeptical that
terrorism financiers would use Turkish foundations
given the extent of state oversight.

--------------
ASSOCIATIONS ADMITTEDLY LOOSE ON REGULATION
--------------


4. (SBU) Unlike foundations, non-profit associations
(dernekler) fall under the Ministry of Interior's
umbrella. According to Senturk Uzun, director of the
MoI's associations department, there are approximately
80,000 registered associations in Turkey, with nearly
250 new associations formed every month. Uzun
explained that because of changes in the Associations
Law in 2004, it is now procedurally and financially
easier to establish an association. To become an
association, an interested group of at least seven
people must apply to the MoI. After six months, the
group must increase to over 17 members. If it does
not, the association charter is revoked.


5. (SBU) Uzun told us that every association must
submit an annual report to the MoI, which reviews how
much each association has spent, how many employees it
has, and even how many computers it has. The MoI
compares associations' annual reports across the years
and if it notes unusual differences, it dispatches MoI
auditors to investigate. Uzun said that all donations
from abroad should come through the Central Bank - at
the MoI's request, the Central Bank semi-annually gives
the MoI a report of donations from foreign entities.
He also noted that in the past associations had to have
permission to receive money from abroad, now they
simply have to declare the receipt after they receive
it.


6. (SBU) Uzun admitted that the MoI's monitoring of
associations is not very strong. His office was
created only three years ago, before which security
forces regulated associations, often keeping them under
pressure by stationing police outside. Now the MoI

ANKARA 00003325 002 OF 002


relies on the associations themselves to declare their
wealth, and the MoI relies on its own ability to catch
it if they do not report accurately. Uzun said that
they tend to only investigate large associations
receiving substantial donations from single
individuals.

--------------
MASAK WEIGHS IN
--------------


7. (SBU) On the other hand, Ismail Caliskan, Head of
the State Security Department of the Turkish National
Police, told us that his department monitors all non-
governmental associations for terrorist connections.
However, the police are not financial sleuths, and they
monitor the association's members, rather than their
banking records, for links to terrorist organizations.


8. (SBU) Uzun noted that the MoI Associations
Department recently received a letter from MASAK,
asking the department to be vigilant to potential
criminal exploitation of associations. The MASAK
letter offered the unit's services in investigating
suspicious financial activities. (Comment: We believe
this letter may have been elicited by a note that we
sent to MASAK, alerting them to an op-ed by EB A/S Tony
Wayne published in a Turkish newspaper on this very
subject. End comment.)

--------------
COMMENT
--------------


9. (SBU) Uzun's candor in speaking about potential
loopholes and weaknesses in the MoI's regulation of
associations was unusual and may indicate weak
financial regulation of charitable organizations, much
as financial investigation tends to be a weak area in
Turkish law enforcement. On the other hand, Turkey's
bias towards state control and monitoring may be
deterrents to criminal abuse of associations and
foundations. Turkey's amending its laws in compliance
with more liberal EU regulations also makes controlling
foundations' and associations' inflows and spending
more difficult. Nonetheless, these new laws are not
applying anti-money laundering standards, such as "know
your customer" rules, to these organizations.

WILSON