Recent Development
Significant changes were made to the anti-money laundering and combating the financing of terrorism regulations with the legislative amendments published in the Official Gazettes dated 24 February and 26 February 2021. Changes to the Regulation on Measures regarding the Prevention of Laundering Proceeds of Crime and Financing of Terrorism (“Measures Regulation”); the Regulation on the Program of Compliance with Obligations of Anti-Money Laundering and Combating the Financing of Terrorism (“Compliance Program Regulation”); and Financial Crimes Investigation Board General Communiqué No. 5 (“General Communiqué No. 5”) through the General Communiqué No. 18 were published in the Official Gazettes Nos. 31405 (Additional Issue No. 2) and 31407. The amendments to the Measures Regulation, Compliance Program Regulation and General Communiqué No. 5 entered into force on 1 May 2021.
What are the Essential Changes to the Measures Regulation?
- The scope of the obliged parties clause has been expanded:
- In addition to the dealers in precious metals, stones or jewelry, persons dealing with the purchase and sale of any kind of sea, air and land transportation vehicles, including construction machines, and the persons mediating these transactions are also added to the scope of the Measures Regulation.
- Additionally, self-employed attorneys are once again included in the Measures Regulation. Previously, self-employed attorneys fell under the scope of the Measures Regulation until 2013, when the 10th Chamber of the Council of State removed self-employed attorneys from the scope with its decision.
- The sub-limits foreseen for the obligation to identify the customers for the transactions conducted by the obliged parties were increased:
- From TRY 20,000 to TRY 75,000 for the amount of a single transaction or the total amount of more than one related transaction; and
- From TRY 2,000 to TRY 7,500 for the amount of a single transaction or the total amount of more than one related transaction via wire transfer.
- The new Article 6/A of the Measures Regulation allows remote identification of natural persons. It is possible to use remote identification only if the relevant legislation related to the obliged party’s principal activity allows the use of identification methods other than holding a face-to-face meeting with the client for the conclusion of an agreement. Accordingly, remote identification methods can be used to verify the customers’ identity to establish continuous business relations with natural persons.
- The Measures Regulation introduced a concept of “reliance agreement,” which is defined as “a legal relationship stipulating that an asset is left to the control of a trustee by the founder of the agreement, for the benefit of a beneficiary or beneficiaries, for the management, usage or performance of other activities regarding the asset as specified under the agreement.” The amendments establish a different regime for the identification of reliance agreements executed abroad.
- New amendments change the extent of the information that should be included in electronic money transfer messages and introduce a new confirmation requirement for this information.
- It is now compulsory to confirm senders’ information for the messages of domestic and international electronic transfers worth TRY 7,500 or more. The already existing obligation was only requiring to include senders’ information for the messages. Additionally, information regarding the messages will now include the name and surname of the recipient; the title of the legal entities registered in the trade registry; the full name of other legal entities and institutions that do not have a legal personality; the account number; and the transaction reference number in the absence of an account number. However, the confirmation of the recipient’s information will not be compulsory.
- It is now compulsory to include the name and surname of the sender and recipient; the title of the legal entities registered in the trade registry; the full name of other legal entities and institutions that do not have a legal personality; the account number; and the transaction reference number in the absence of an account number for messages regarding domestic and international electronic transfers for less than TRY 7,500. The confirmation of the sender’s and recipient’s information will not be compulsory.
- According to the amendments made to the Measures Regulation (i) dealers in precious metals, stones or jewelry and persons who mediate these transactions; (ii) persons dealing with the purchase and sale of real estate for commercial purposes and those who mediate these transactions; (iii) notaries; (iv) self-employed attorneys, provided that they are limited to the works specified under the Measures Regulation; (v) self-employed professional accountants, public accountants and sworn-in certified public accountants working independently; and (vi) independent audit firms authorized to conduct audits in financial markets are defined as “certain non-financial jobs and occupations.” These changes are significant because now those mentioned above have to take measures against technological risks, as specified under Article 20 of the Measures Regulation. Furthermore, they must pay special attention to business relations and transactions involving risky states as stated under Article 25 of the Measures Regulation and take additional measures in high-risk situations that they will determine within the framework of a risk-based approach per Article 26/A of the Measures Regulation. If not, those mentioned may face administrative fines according to Article 39 paragraph 2 of the Measures Regulation.
- The Financial Crimes Investigation Board (“MASAK”) will conduct its supervisory responsibilities to determine whether the obliged parties comply with their obligations through on-site or remote methods. MASAK will be able to supervise through a finance and treasury specialist assigned to this task and employed by MASAK.
What are the Essential Changes to the Compliance Program Regulation?
- Article 4 of the Compliance Program Regulation lists the obliged parties. The recent amendment expanded the scope and included (i) Group A authorized organizations specified in the currency exchange legislation; (ii) financing, factoring and financial leasing companies; (iii) portfolio management companies; (iv) precious metals intermediary firms; (v) electronic money institutions; and (vi) payment service providers, except for those who provide (a) intermediary services for invoice payments, (b) payment order initiation services exclusively, and (c) payment account information submitting services to its definition. Therefore, these newly added companies are now required to establish a compliance program and comply with the new obligations outlined in the Compliance Program Regulation.
- The “financial group” definition under Law No. 5549 on the Prevention of Laundering Proceeds of Crime on 27 December 2020 is also included in the Compliance Program Regulation. As per this definition, a financial group is a group of financial institutions located in Turkey connected to a parent institution whose head offices are either in Turkey or abroad, or is controlled by the parent institution together with their affiliates such as branches, agencies, representatives and commercial agents. Additionally, detailed regulations regarding the nature of the financial group were made in the Compliance Program Regulation.
- The scope of the financial groups’ obligation for establishing a compliance program was determined. Financial groups are required to review certain measures and make necessary updates biennially. The responsibility for overseeing the execution of the compliance program at the financial group level is ultimately attributed to the board of the main financial institution as explained under Article 6 of the Compliance Program Regulations.
- The amended Compliance Program Regulation imposes a new obligation to appoint an assistant compliance officer to those who are already under the obligation to appoint a compliance officer. The amendments set out strict deadlines for the appointment of compliance officers and assistant compliance officers.
- The amended Compliance Program Regulation regulates financial group information sharing, the assignment of a financial group compliance officer and assistant compliance officers, and the compliance unit’s activities.
- The Compliance Program Regulation had already overseen the designing of institution policies. However, the amendments expand the list of obliged parties who must design an institution policy. According to the amendments, financial groups must design an institution policy. Additionally, after receiving official authorization, the obliged parties and financial groups must enact an institution policy within thirty days after the appointment of a compliance officer.
- The obliged parties must sign the institution policy commitment form included in the annexes of the Compliance Program Regulation prepared by the Ministry of Treasury and Finance and send them to MASAK within thirty days after the confirmation of the institution policy. Obliged parties that already have an institution policy and (i) Group A authorized organizations specified in the currency exchange legislation; (ii) financing, factoring and financial leasing companies; (iii) portfolio management companies; (iv) precious metals intermediary firms; (v) electronic money institutions; and (vi) payment service providers as defined above are required to fill the institution policy commitment form included in the annexes of the Compliance Program Regulation and submit it to MASAK by 1 July 2021.
What are the Essential Changes to the General Communiqué No. 5?
The General Communiqué No. 5 foresees more basic measures regarding customer identification for obliged parties in the scope of Article 26 of the Prevention Regulation. The scope of the basic measures and monetary limits stipulated under the General Communiqué No. 5 were changed with the General Communiqué No. 18. These changes include a monetary limits increase stipulated for transactions exempt from identification for transactions regarding electronic money and payment service providers. The monetary limits of transactions exempt from identification for transactions related to prepaid cards for natural person customers were increased.
Previously, identification of legal person customers was mandatory when the customers’ shares were listed on the Borsa İstanbul Anonim Şirketi. However, it was not mandatory to confirm the customers’ information. The amendments expanded the scope of the identification obligation and now customer identification is likewise mandatory when the shares of a customer’s majority shareholder, the person who owns more than 50% of the customer’s shares, are listed on the Borsa Istanbul. Similar to the previous regulation, the confirmation of the information received after customer identification will not be mandatory.
Conclusion
Both the Prevention Regulation and Compliance Program Regulation expanded the definition of “obliged party.” Furthermore, the Prevention Regulation and Compliance Program Regulation foresaw various additional obligations for the obliged parties. Considering that these amendments entered into force on 1 May 2021, it is crucial for the obliged parties to determine the relevant obligations applicable and take the necessary steps to promptly comply with the amendments by the deadlines specified in these regulations. Otherwise, those who fail to comply with the relevant obligations may face administrative fines imposed by MASAK.
