Turkey: Authorized Institutions Under Turkish Law

1. Introduction

Turkey has adopted the Communique No. 2018-32/4511 related to the Decree No. 3222 (the "Communique") in order to determine the procedures and principles of the establishment, authorization, branch opening, liabilities and auditing of authorized institutions (namely exchange offices). The Communique entered into force on January 30, 2018. The Communique abolished the Communique No. 2006-32/32 related to the Decree No. 32.

As per Article 2 of the Decree No. 32, authorized institutions are defined as joint­ stock companies that are permitted to carry out transactions regarding foreign currencies, as well as precious metals, stones and objects.

This article addresses significant amendments and novelties introduced by the Communique.

2. Authorized Institution

(i) Area of Activity

The Communique sets forth two types of authorized institutions, namely Group A and Group B.

According to the Communique, Group B authorized institutions are defined as authorized institutions that may engage in the following activities:

  • Buying and selling foreign currencies, except for bank money,
  • Converting foreign currencies (except for bank money) into other foreign currencies using smaller or larger denominations, excluding different types of bank money,
  • Buying cheques in foreign currencies pursuant to the procedures and principles determined by the Turkish Central Bank,
  • Buying and selling gold pressed coins issued by the Turkish State Mint (such as Meskuk [standard] and Ziynet [decorative], etc.), as well as standard, unprocessed gold bars and ingots weighing less than 1 kg.,
  • Buying and selling foreign currencies and exchanging different types of foreign currencies through bank transfers, authorized institutions and customer transactions using banking systems, provided that the transfer order is given or the physical delivery subject to the transaction is completed within the same business day.

Group A authorized institutions are allowed to engage in all the activities that are permissible for Group B authorized institutions, as well as the following activities:

  • Importing and exporting precious stones, and standard and non-standard unprocessed precious metals and conducting transactions related to precious metals and stones on the stock exchange in accordance with the applicable laws, rules and regulations, provided that the authorized institution is a registered member of the stock exchange,
  • Purchase and sales of foreign currencies and exchanging different types of foreign currencies through banks, authorized institutions and other institutions that can carry out transfers with their customers, provided that a transfer order is given or the physical delivery subject to the transaction is completed within the same business day,
  • Acting as a representative for electronic money companies and electronic payment institutions,
  • Buying and selling foreign currencies and engaging in related transactions through cash machines (i.e. ATMs) at the head offices and/or branches and other suitable locations, subject to the permission of the Undersecretariat of Treasury,
  • Buying and selling foreign currencies up to USD 10,000 through pre-paid cards and in unlimited amounts through bank/debit cards,
  • Delivering foreign coins or Turkish Lira banknotes overseas, subject to the prior permission of the Undersecretariat of Treasury, and according to the procedures and principles that shall be determined by the Undersecretariat of Treasury,
  • Performing other activities deemed to be suitable and appropriate by the Undersecretariat of Treasury, which shall be announced on the website of the Undersecretariat.

Authorized institutions are not allowed to engage in any activities other than the ones enumerated above.

(ii) Authorization and Establishment

The permission of the Undersecretariat of Treasury is required for the establishment of an authorized institution. In order to establish an authorized institution, a joint-stock company with paid-in capital of at least TRY 5,000,000 for Group A authorized institutions and TRY 1,000,000 for Group B authorized institutions should be established. Other requirements for founding partners, general managers, members of the board of directors, authorized signatories and internal control officers for Group A authorized institutions, rules for trade names and share certificates, as well as the conditions of establishment of authorized institutions are specified in detail in the Communique.

Once permission for the establishment of an authorized institution is obtained, authorized institutions are required to obtain an "activity authorization" from the Undersecretariat of Treasury in order to perform the activities enumerated in section (i) above.

(iii) Other Matters

In order to open new branches, Group A authorized institutions are required to obtain permission from the Undersecretariat of Treasury. Group B authorized institutions are not allowed to open new branches or to apply to the Undersecretariat of Treasury for permission to open new branches.

Authorized institutions are obliged to inform the Undersecretariat of Treasury of a change of address (within 30 days) and they are also required to notify the Undersecretariat of Treasury of trade name changes and share transfers, both of which are subject to permission from the Undersecretariat of Treasury. Additionally, the required internal control and corporate management systems, as well as the auditing procedures and applicable sanctions that may be imposed on authorized institutions are described in detail in the Communique.

Applications for the establishment of Group A authorized institutions may be made as of March 1, 2018, and for Group B authorized institutions as of January 1, 2019. Authorized institutions that have already obtained an activity authorization before the Communique's entry into force are required to apply to the Undersecretariat of Treasury until January 1, 2019, to continue to perform their activities as Group A and Group B authorized institutions. Such authorized institutions are required to comply with the establishment and activity requirements set forth in the Communique by July 1, 2019.

3. Conclusion

The Communique sets forth two types of authorized institutions, as outlined above, which are categorized as Group A and Group B authorized institutions. In order to establish an authorized institution, it is necessary to establish a joint-stock company whose paid­ in capital cannot be less than the amounts stated both for Group A and Group B authorized institutions (TRY 5,000,000 and TRY 1,000,000 respectively). Moreover, authorized institutions are required to obtain permission from the Undersecretariat of Treasury in order to start engaging in the permitted activities, which are explicitly set forth in the Communique.


Footnotes

1 The Communique No. 2018-32/45 published inthe Official Gazette dated January 30, 2018 and numbered 30317

2 Decree No. 32 on the Protection of the Value of Turkish Currency published in the Official Gazette dated August 11, 1989 and numbered 20249.


This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in June 2018. A link to the full Legal Insight Quarterly may be found here.


The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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