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