TURKEY: NO PROGRESS ON TERRORISM FINANCE

C O N F I D E N T I A L ANKARA 005612

SIPDIS

SIPDIS

TREASURY FOR OTI
JUSTICE FOR AFMLS

E.O. 12958: DECL: 09/21/2016
TAGS: KTFN PTER EFIN ETTC TU
SUBJECT: TURKEY: NO PROGRESS ON TERRORISM FINANCE

REF: ANKARA 5440 AND PREVIOUS

Classified By: Deputy Chief of Mission Nancy McEldowney for reasons 1.4
(b) and (d).


1. (C) Summary: More than a year after Treasury Under
Secretary Levey's June 2005 visit, Turkey has made negligible

SIPDIS
progress strengthening its regime against terrorism finance
and in some respects is backsliding. Although terrorism
finance is now criminalized, the definition of terrorism
remains narrowly Turkocentric, and the assets of a
UN-designated terrorist financier are likely to be unfrozen.
Turkish leaders are not motivated to make terrorism finance
a political priority and fail to see how terrorism finance
mechanisms will help them fight the PKK. Key ruling party
politicians also seem to harbor sympathies for certain Middle
Eastern Islamists who are targeted by the international
community's fight against terrorism finance. Only a
combination of external pressure, embarrassment at the
political level and sustained engagement at the technical
level is likely to lead to a stronger CTF regime in Turkey.
End Summary.

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Stalled Agenda on Terrorism Finance
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2. (C) In June 2005, Treasury Under Secretary Stuart Levey
came to Ankara to urge senior Turkish officials to strengthen
Turkey's regime against terrorism financing. Having warned
the Finance and Justice Ministers, among others, that
Turkey's laws and implementation were deficient, he urged
them to act quickly to avoid a negative review by the
Financial Action Task Force (FATF). Treasury followed up
with an exchange of letters with Turkish officials and a
series of follow-up meetings in Ankara.


3. (C) Fifteen months later, with the FATF team having
visited Ankara and now writing up their report in preparation
for a March 2007 formal review in Paris, it is striking how
little the Turkish Government has accomplished, failing even
to fulfill the relatively limited promises made by Finance
Minister Unakitan in his August 2005 reply to Under Secretary
Levey. On balance, Turkey may even have slid backwards on
its overall regime. Here's how it racks up:

--MASAK law: Since 2003, the centerpiece of the Turkish
effort to bring its AML/CTF regime in line with international
norms has been a draft law to reorganize its financial
intelligence unit (FIU),MASAK. The legislation would
broaden the kinds of entities subject to know-your-customer
rules and required to file suspicious activity reports
(SARs). Importantly, it provides "safe harbor" immunity from
prosecution for filers of SARs. Despite the Finance
Minister's verbal and written assurances that passage of the
law was a priority, it was not submitted to parliament until
November 2005, and parliament recessed in June 2006 without
having passed it. The director of MASAK informed us that his
review of the incoming Parliament's agenda did not find a
reference to the law, although he claims Minister Unakitan is
committed to its passage.

--Definition of terrorism: Turkish law defines terrorism as
attacks against Turkish citizens or the Turkish state.
Despite a Turkish interagency team's recommendation to
broaden the definition to include international terrorism --
and Minister Unakitan,s specific promise to Levey that this
would happen -- the ruling Justice and Development (AK) Party
decided to leave the definition unchanged when it submitted
to parliament a package of amendments to Turkey's terrorism
statute in spring 2006. In response to our vigorous
objections, the Turkish Justice Ministry continues to argue
that no change is required because a) there is no
international consensus on the definition of terrorism and b)
Turkey has the tools to extradite people accused of crimes in
other countries. The revised terrorism law did, however,
explicitly criminalize terrorism finance, albeit within the
old, narrow definition of terrorism.

--The legal basis for freezing terrorist assets: U/S Levey's
raised the weakness of the legal regime by which Turkey
freezes the assets of UN-designated terrorist financiers by
decision of the Council of Ministers. Turkish authorities
have made no attempt to strengthen the legal basis for
implementation of 1267 designations or to develop a legal
mechanism for independently designating terrorist financiers
and freezing their assets. As Levey pointed out in his
letter, these gaps are vulnerable to legal challenge. Sure
enough, on July 20, 2006 a Turkish administrative court
(Danistay) held that the Council of Ministers decree freezing
the assets of UN-designated financier Yasin al-Qadi was
invalid. Among other justifications, the court asserted that
the Council of Ministers lacked authority to impinge on
property rights. The Turkish MFA and Prime Ministry
initially appealed the Danistay decision, but recently
withdrew the appeal at the instruction of the Prime Minister,
who apparently believes al-Qadi's contention that he has done
nothing wrong. If al-Qadi,s assets are released, those of
Nasreddin, another 1267-listed financier are also likely to
be unfrozen.

--Alternative Remittance Systems: Another point raised in
the Levey letter is the use of Alternative Remittance
Systems. Though illegal in Turkey, we understand they are
used and the Turkish authorities have shown no interest in
cracking down on these remittance systems. One of the
provisions of the draft MASAK law would require gold and
currency exchanges to file SARs.

--Interagency cooperation: Turkish officials officially deny
problems with interagency coordination, but admit privately
that this is a weakness. There is anecdotal evidence there
may have been some slight improvement on this score, helped
along by the USG (DOJ's OPDAT and the FBI) having held a
series of seminars grouping police, prosecutors and MASAK
officials in seminars using AML/CTF case studies. The
Turkish National Police have established a unit specifically
focused on terrorism finance which should improve interagency
cooperation on the issue as well as creating a focal point
within TNP which can build expertise. We are not aware,
however, of any institutionalized, functioning interagency
mechanism. Nor have there been prosecutions on
money-laundering, let alone terrorism finance, that would
suggest close cooperation among police, prosecutors and
MASAK.

--Lack of a policy-making body: No policy-making body within
the Turkish government has clear responsibility and authority
for financial security issues. By default, MASAK, the FIU,
has assumed this role and is Turkey,s lead in FATF but as an
operational body it does not have the vision or mandate to
deal with legislative or broad coordination issues. The MFA
does not have sufficient expertise or interagency clout
although it does have the ability to convene interagency
meetings with foreign officials. This creates a vacuum for
discussions when Ministers are not adequately prepared and
don,t have authority to make commitments on issues that
require action by other agencies.

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Why the Sorry Track Record?
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4. (C) All of this begs the question why the Turkish
Government has such a sorry track record. We believe
multiple factors cause Turkish leaders not to view countering
of terrorism finance as a priority. First, the past few
years have been an extraordinary period of legislative reform
for Turkey, with multiple, far-reaching reforms most of which
are either EU- or IFI-related.


5. (C) The CTF effort is viewed as yet another
externally-imposed agenda that is not perceived as central to
Turkish interests. Despite the horrific November 2003
Istanbul bombings, Turks of many political stripes tend to
see al-Qaeda as primarily the West's problem, and focus much
more on homegrown terrorist groups that continue to kill
Turks: the PKK, but also leftist terrorists like DHKP-C.
This attitude is compounded in the case of some politicians
in the ruling AK Party by their ties to -- and sympathies
with -- Middle Eastern Islamists (such as al-Qadi). This is
the most plausible explanation for the AKP's readiness to
expose itself to international opprobrium by overruling
bureaucratic recommendations and past promises (like Minister
Unakitan's to Levey).


6. (C) Both Turkish political leaders and bureaucrats have
also failed to grasp how a strong regime against terrorism
finance could help the fight against PKK. On the one hand,
through strong international anti-terrorism cooperation,
Turkish leaders would be on stronger ground demanding the
same robust cooperation from other countries against PKK. On
a more technical level, a stronger regime against terrorism
finance would provide additional tools. MASAK has not used
the Egmont Group network of FIU,s to solicit information
from European FIU,s about financial transactions by PKK
front groups. Likewise, Turkey has made no effort to
establish a domestic designations system as a basis to press
other countries to crack down on PKK operatives.


7. (C) Professional bureaucrats are not blameless in Turkish
sluggishness on AML/CTF. Police and prosecutors in Turkey
lack a strong culture or technical expertise in "following
the money." Moreover, MASAK is a relatively recent creation
(1996) and has yet to build a strong reputation in the
Turkish state apparatus or meaningful bureacratic clout.
MASAK jealously monopolizes Turkey's dealings with FATF yet
fails to participate in FATF's terror finance working group.
Moreover, the President of MASAK, Genc Osman Yarasli, is an
AK Party appointee with a sufficiently Islamist background
that President Sezer -- a staunch secularist ) still refuses
to confirm his appointment three years on.


8. (C) Many Turkish officials, including senior Justice
Ministry lawyers as well as the Director of MASAK himself,
are skeptical about the legal basis of international
community's approach to AML/CTF issues. They have doubts
about how asset freezes can be reconciled with due process
and human rights, and how protections can be established
against abuse of executive power (which in Turkey has a
history of being abused). They assert that asset freezes
amount to deprivation of property rights, which can only be
accomplished by a judicial ruling. On the other hand,
Foreign Ministry officials have tended to be the most
supportive of the international community,s approach to
these issues.

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How to Move Forward
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9. (C) Only external pressure and international
embarrassment at the political level will drive Turkish
action on terrorism finance. Since the problem seems
centered on the Prime Minister's inner circle, the issue
needs to be elevated such that senior USG and other officials
raise terrorism finance with senior politicians in Turkey and
their close advisors. Our efforts will be more effective if
the pressure comes not only from the U.S. but from the EU,
the UN, and FATF. At the same time, at the more technical
level we need sustained engagement, both with training and
with more frequent visits from USG officials responsible for
AML/CTF issues. The recent assignment of a Resident Legal
Advisor to Ankara will help with technical level engagement,
especially training. But it is no substitute for sustained
engagement by Washington-based officials on the overall
policy. Finally, we need to do a better job getting across
the point that a stronger AML/CTF regime and more effective
cooperation against Islamic terrorist finance groups will
help Turkey's drive to elicit stronger cooperation in the
West against the PKK.

Visit Ankara's Classified Web Site at
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WILSON