Under Turkish laws, the main legislation pertaining to anti-money laundering is the Law No. 5549 on Prevention of Laundering Proceeds of Crime ("Law No. 5549"). The Law No. 5549 defines the "obligated parties" (e.g., investment companies, finance companies, payment companies, factoring companies) and sets out their duties and obligations to prevent financial crimes. The obligated parties are required to take the specific measures such as customer identification, suspicious transaction reporting; conduct employee training and internal controls; implement control and risk management systems and undertake periodical reporting. If they fail to meet these requirements, as per Law No. 5549, the obligated parties might be faced with administrative fines from the Financial Crimes Investigation Board ("MASAK"), the competent authority to enforce Law No. 5549.
Further, in parallel with Law 5549, the Regulation on Measures to Prevent Laundering of Proceeds of Crime and Financing of Terrorism ("Regulation") also adopts certain measures in combatting against the financing of terrorism, in addition to the measures for prevention of money laundering. The Regulation particularly sets forth measures such as customer due diligence, procedures for reporting of suspicious transactions, provision of information and documents, disclosure to customs administration.
In line with the foregoing legislative framework, the Law Proposal on Preventing the Proliferation of Financing Weapons of Mass Destruction1 ("Law") which brings several significant amendments to the Law No. 5549 has been accepted by the Grand National Assembly of Turkey and was published in the Official Gazette on December 31, 2020.2 One of its most remarkable amendments is the expansion of the Know Your Client (KYC) requirements to independent attorneys, by way of including them among the "obligated parties."3
- Scope in terms of Independent Attorneys
With the recent amendment, independent attorneys will be deemed an "obligated party" and thus, required to conduct KYC checks before the following transactions:
- The sale and purchase of real estate,
- Establishment and cancellation of limited rights in rem,
- Incorporation, merger, management, assignment and liquidation of companies, foundations and associations; and financial transactions with respect to such,
- Management of bank accounts, securities investment and all sorts of accounts; as well as the assets therein.
The foregoing scope excludes (i) the information obtained with respect to first paragraph of Article 35 of the Attorney Law No. 1136 (i.e., judicial procedures) and (ii) information obtained under professional services conducted within the scope of alternative dispute resolution methods. The foregoing will also be applicable to the extent that it does not violate any other laws in terms of the right to defense.
- KYC Obligations
The persons included in the definition of "obligated parties" must identify the persons carrying out the transactions and beneficiaries of said transactions to be conducted by or through the obligated parties, before the transactions are conducted.
In that regard, the independent attorneys will be obliged to confirm their clients' identities (i) for permanent business relationships,4 (ii) for cases that require suspicious transaction reporting, or (iii) if there is a suspicion on the accuracy or the sufficiency of the previously obtained customer information. None of these three circumstances are subject to a monetary threshold. MASAK will probably determine what would constitute a "permanent business relationship" with respect to independent attorneys, through its guidelines.
For instance, an independent attorney conducting a transaction regarding purchase of a real estate will be obliged to conduct a KYC check, if such transaction requires suspicious transaction reporting, regardless of the amount of the transaction.
In terms of monetary thresholds, (i) if the amount of the electronic transfer or the sum of more than one correlative transaction exceeds TRY 2,000 or (ii) if the transaction amount or the sum of more than one correlative transaction exceeds TRY 20,000, the independent attorney will be obliged to confirm the client's identity, as well.
For instance, an independent attorney will be obliged to do a KYC check regarding the incorporation of a company, where the amount of funds transferred exceed TRY 20,000 (which is the case in most of the incorporation transactions). The amount to be taken into consideration here would be the transaction amount (and not the attorney expenses to be paid to the independent attorney), but again, this will likely be further explained through the guidance of MASAK.
- Reporting of Suspicious Activities
Independent attorneys, as obligated parties are also under the obligation to report suspicious activities and transactions to MASAK.
A suspicious transaction is the case where there is any information, suspicion or reasonable grounds to suspect that the asset, (for which the transactions are carried out, or attempted to be carried out under, or through the obligated parties) has been acquired through illegal ways or used for illegal purposes, and as such, used for terrorist activities or by terrorist organizations, terrorists or those who finance terrorism (Article 27/1 of the Regulation).
- Content, Verification and Retention
Information to be obtained for KYC and the verification of such information varies depending on the nature of the person concerned, such as real persons, legal entities registered in trade registries, legal entities resident abroad etc. For instance, name, surname, birth place and date, parents' name, nationality, Turkish ID number for Turkish citizens, identity document type and number will be obtained from real persons to fulfill the identification obligation. As for legal entities, trade name, trade registry number, field of activity, company address, contact information, as well as the authorized representative's name, surname, place and date of birth, nationality, specimen signature, identity document type and number, along with Turkish ID number and parents` names for Turkish citizens will be obtained. The information to be collected should also be verified, e.g., by checking the legally acceptable identity documents or trade registry records, as applicable, based on the type of the person concerned.
Independent attorneys should keep the documents on customer identification for eight (8) years as of the last transaction date and should present them to authorized bodies, upon request.
- . Sanctions
In case of failure to fulfill the obligation on client identification, non-compliance may be subject to an administrative fine of TRY 30,000. Failure to comply with the obligation to report suspicious transactions may be subject to an administrative fine of TRY 50,000, with the new amendment. Before the amendment, both of these fines were TRY 5,000 (subject to annual increases based on re-evaluation rates published each year).
Footnotes
1 See https://www2.tbmm.gov.tr/d27/2/2-3261.pdf (Last accessed on February 23, 2021)
2 See https://www.resmigazete.gov.tr/eskiler/2020/12/20201231M5-19.htm (Last accessed on February 23, 2021)
3 Prior to the addition of "independent attorneys" into scope, the obligated parties were defined as "banking, insurance, individual pension, capital markets, money lending and other financial services, and postal service and transportation, lotteries and bets; those who deal with exchange, real estate, precious stones and metals, jewelry, all kinds of transportation vehicles, construction machines, historical artifacts, art works, antiques or intermediaries in these operations; notaries, sports clubs and those operating in other fields determined by the President." (Article 2/d of the Law No. 5549)
4 Article 3/1(i) of the Regulation on Measures regarding Prevention of Laundering of Crime Revenues and Financing of Terrorism defines permanent business relationships as "business relationship that is established between obligated parties and their customers through services such as opening an account, lending loan, issuing credit cards, safe-deposit boxes, financing, factoring or financial leasing, life insurance and private pension, and that is permanent in nature."
This article was first published in Legal Insights Quarterly by ELIG Gürkaynak Attorneys-at-Law in March 2021. 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.
