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Turkey's Dirty Money
TOM KEATINGE, a former investment banker at J.P. Morgan, is an analyst of terrorist and extremist financing. Follow him on Twitter @keatingetom.See more by this author
Earlier this month, financiers, bankers, and investors waited anxiously to see whether Turkey, having passed a law in 2013 to prevent the financing of terrorism, would be taken off the Financial Action Task Force’s (FATF's) list of high-risk and noncooperative jurisdictions.
The result? Disappointing. Turkey will remain in uncomfortable company on the gray list of countries that the FATF, the G7-founded body charged with developing and implementing global standards to counter illicit financing, deems as having deficiencies in their efforts to combat money laundering and terrorism financing. The body was most concerned about Turkey’s weak framework for identifying and freezing terrorist assets -- for example, its definition of "terrorism financing" is too narrow and its asset freezing procedure is too slow -- and urged investors and other countries to think twice before diving in.
For Turkey, the blow of remaining on FATF’s gray list, where it has been listed since 2011, was all the more painful because both Kenya and Tanzania were removed from it, “due to their progress in substantially addressing their action plan agreed upon with the FATF.” Turkey had surely hoped that, with its new law and recent decision to freeze the assets of individuals and legal entities known to have links to al Qaeda and the Taliban, it would be treated likewise. It was not.
To be sure, the outcome could have been worse. Prior to the mid-February FATF session in Paris, there had been talk of downgrading of Turkey’s status from gray to dark-gray, a classification that no other country shares and that is just one step above the category in which Iran and North Korea reside. That was always unlikely. But for some, Kenya and Tanzania's simultaneous rise in the ranking will be as insulting as an explicit downgrade for Turkey -- after all, Turkey’s economy, banking sector, and geopolitical influence dwarf those of Kenya and Tanzania.
But how did FATF come to label Turkey, a member of NATO, as high-risk and noncooperative in the first place? And how can Turkey possibly face the prospect of sliding toward the financial netherworld?