“What’s up in X?” will be a series of more casual looks at jurisdictions that might not be proper, full-on offshore jurisdictions but are nonetheless interesting. The previous one was Djibouti.

This article will not touch on Northern Cyprus. I am saving that for another day.

Türkiye

O Turkey.

To anyone with even a semblance of interest in history, I strongly recommend reading about the rise and fall of the Ottoman Empire and the rise of the Republic of Turkey. It tells a story of Europe rarely taught in western education and it offers an interesting glimpse into Middle Eastern history.

In the eyes of many Europeans, not European enough to be European but also not quite Middle Eastern. In the eyes of many Middle Eastern people, not Middle Eastern enough to be Middle Eastern but also not quite European.

There is only one Turkey in this world.

It is a country that keeps on giving. While most foreign visitors are content to stay at one of the many warm beaches, Turkey is best experienced in cities such as Istanbul, Ankara, Izmir, Bursa, and Samsun, and by travelling the vast steppes and up into the mountains to see the small villages.

It is a nation of proud, friendly people.

It is also a nation divided. Traditionally secular, it has time and time again seen rises of religious (Muslim) groups. The very popular and through-and-through (well, almost) secular military has repeatedly deposed governments it has considered too religious.

Despite harsh scepticism from many EU members and repeated criticisms for failing to reach even the basic requirements for EU membership (including human rights issues), Turkey enjoys good relations with Europe, most Arabic nations, Russia, China, and Israel, one of few Muslim-dominated nations to recognize Israel. The purpose of this blog is not to discuss politics, but this is worth pointing out simply to illustrate the context in which we find present-day Turkey.

Turkey is not all roses, though. 2013 and 2014 saw several uprisings against current president Erdoğan. Some of the secular population of Turkey feels wary of what they perceive to be an increase in religiousity. There are also problems in the far eastern corner of Turkey where Kurds claim a strip of land covering several nations.

Banking in Turkey

This is probably what you came here for, so let’s get right into it.

The Turkish banking sector puts several western countries to shame. It is a fast-moving, innovative sector which is leading the way in terms of mobile banking and ease of use. While the user interfaces may look old and clunky, all the bells and whistles are there when you log in to your Turkish internet bank. There is usually an English-language version available, at least with the larger banks.

Fees are low. The banks are easy to deal with.

Opening a Bank Account in Turkey

Personal bank accounts are very easy to open in Turkey. If you show up in person, it can all be done during a vacation to Turkey if you stay for a couple of days. Often a day is enough. Remotely, it’s a longer process (two – three weeks).

You will need a Turkish tax identification number (Vergi Kimlik Numarası) to prove that you are a non-resident. This can easily be obtained by walking into the nearest tax office (Vergi Dairesi) with just your passport. If you are in a major city or a tourist city, you can usually find someone who speaks English but bringing someone who speaks Turkish along is helpful.

Banks are more than happy to help out either by sending a representative with you or by filling in all the forms in advance for you.

When you have your Vergi Kimlik Numarası, you can walk into just about any bank in Turkey and open an account. The account-opening process shouldn’t take more than half an hour, often just a few minutes. You’ll be back on the beach in no-time.

It’s easy to open accounts in foreign currencies and getting debit cards. Credit cards are also possible but will usually require a security in the range of 50% to 100% depending on your profile and financial situation. Minimum deposit requirements, if any, are low.

Documents required to open a Turkish bank account:

• Passport.
• Turkish tax identification number (Vergi Kimlik Numarası).
• One (sometimes two) proof of address such as a utility bill or bank statement. Not always required but good to have.

Corporate Bank Account in Turkey

This is a different beast but still very much doable. As long as you have your tax identification number, all corporate documents duly certified, and a solid business plan, it doesn’t seem to matter at all where you are incorporated. I have personally placed and know of others who have been able to open corporate accounts in Turkey with everything from Maltese companies to Mauritius GBC to Liberian LLC to various IBCs.

There are limitations on business activities, though. Businesses which engage in immoral activities (typically adult entertainment, gambling, and other) are not at all as readily welcome. Affiliates and marketing of immoral activities are sometimes tolerated. In these cases, it helps if the company or companies for which you are an affiliate do not offer their services in Turkey.

With regards to certification, notarized is usually enough but sometimes banks ask for apostille so make sure to check in advance with your chosen banking partner(s). Turkey signed the 1961 Hague Convention on Apostille in 1985.

Banking Secrecy

The right to privacy is guaranteed under Article 20 of the 1982 Constitution of Turkey.

Everyone has the right to demand respect for his or her private and family life. Privacy of an individual or family life cannot be violated.

Unless there exists a decision duly passed by a judge on one or several of the grounds of national security, public order, prevention of crime commitment, protection of public health and public morals, or protection of the rights and freedoms of others, or unless there exists a written order of an agency authorised by law in cases where delay is prejudicial, again on the above-mentioned grounds, neither the person nor the private papers, nor belongings, of an individual shall be searched nor shall they be seized. The decision of the authorized agency shall be submitted for the approval of the judge having jurisdiction within 24 hours. The judge shall announce his decision within 48 hours from the time of seizure; otherwise, seizure shall automatically be lifted.

Article 73 of the banking law specifies further secrecy clauses for banking information.

Turkey is a independent (at times defiant) but not reckless country. It cooperates internationally on matters related to serious crimes. Although laws are in place which empower Turkish tax authorities to force banks to disclose customer information, it is far less clear if any information can be exchanged.

Legal provisions enabling tax authorities to gather information for exchange of information purposes are not clearly provided in Turkish Law

OECD

In reality, Turkish banks very rarely give out information. In the rare case that they do, it is up to the relevant Turkish authority to determine if they are legally permitted to share the information with a foreign government. In the even more rare cases where information is shared, it is often incomplete with generous usage of redaction markers.

There are no signs of this changing any time soon.

Thus, Turkey has created strict banking secrecy without passing laws as strict and controversial as those in for example Switzerland and Lebanon.

Banks in Turkey

Turkish banks have been featured on my last two Best Offshore Banks lists (2013 and 2014). There are a lot of banks in Turkey, a full list of which can be found on the Türkiye Bankalar Birliği (Turkish Banks Association) website: http://www.tbb.org.tr/en/banks-and-banking-sector-information/member-banks/list-of-banks/34.

Using the latest financial data (September 2014 as of writing), I have put together the below table which lists all banks in Turkey with assets of more than one million TRY.
[table] Bank;Assets (million TRY)
Türkiye Cumhuriyeti Ziraat Bankası A.Ş.;238,347
Türkiye İş Bankası A.Ş.;230,989
Türkiye Garanti Bankası A.Ş.;214,891
Akbank T.A.Ş.;202,044
Yapı ve Kredi Bankası A.Ş.;168,713
Türkiye Halk Bankası A.Ş.;149,809
Türkiye Vakıflar Bankası T.A.O.;147,266
Finans Bank A.Ş.;74,545
Denizbank A.Ş.;70,192
Türk Ekonomi Bankası A.Ş.;61,449
ING Bank A.Ş.;38,522
Türk Eximbank;34,005
HSBC Bank A.Ş.;33,203
Odea Bank A.Ş.;21,993
Şekerbank T.A.Ş.;20,532
İller Bankası A.Ş.;15,454
Türkiye Sınai Kalkınma Bankası A.Ş.;14,671
Alternatifbank A.Ş.;11,113
Anadolubank A.Ş.;9,362
Citibank A.Ş.;8,324
Fibabanka A.Ş.;7,742
Burgan Bank A.Ş.;7,681
Aktif Yatırım Bankası A.Ş.;5,888
İstanbul Takas ve Saklama Bankası A.Ş.;5,265
Turkland Bank A.Ş.;5,083
Tekstil Bankası A.Ş.;3,782
Türkiye Kalkınma Bankası A.Ş.;3,700
Arap Türk Bankası A.Ş.;3,531
The Royal Bank of Scotland Plc.;3,064
Deutsche Bank A.Ş.;3,044
Bank of Tokyo-Mitsubishi UFJ Turkey A.Ş.;2,485
Birleşik Fon Bankası A.Ş.;2,059
BankPozitif Kredi ve Kalkınma Bankası A.Ş.;1,959
Turkish Bank A.Ş.;1,374
Intesa Sanpaolo S.p.A.;826
Société Générale (SA);711
Nurol Yatırım Bankası A.Ş.;611
JPMorgan Chase Bank N.A.;355
Bank Mellat;318
Merrill Lynch Yatırım Bank A.Ş.;204
GSD Yatırım Bankası A.Ş.;120
Diler Yatırım Bankası A.Ş.;110
Habib Bank Limited;82
Standard Chartered Yatırım Bankası Türk A.Ş.;78
Taib Yatırım Bank A.Ş.;61
Adabank A.Ş.;51
[/table]

To preempt the question, these are some of the Turkish banks that I consider noteworthy:

• Akbank
• Citibank
• Denizbank
• Finans Bank
• GarantiBank
• Habib Bank
• HSBC
• ING
• Türkiye İş Bankası
• Yapı Kredi Bankası
• Ziraat

Turkey, FATF, and money laundering

Turkey, not a country to give in to international pressure lightly, has a troubled relationship with FATF.

Over the years, FATF has had a lot to say about Turkey.

It started in 2007 with FATF calling Turkey out for lax money laundering legislation and even more lax enforcement. Turkey set to work to implement new laws but in 2010, FATF scorned Turkey:

Turkey has demonstrated progress in improving its AML/CFT regime; however, the FATF has determined that certain strategic AML/CFT deficiencies remain. Turkey has made a high-level political commitment to work with the FATF to address these deficiencies, including by: (1) adequately criminalising terrorist financing (Special Recommendation II); and (2) implementing an adequate legal framework for identifying and freezing terrorist assets (Special Recommendation III).

FATF, Paris, 18th of February 2010

This implied that Turkey was turning a blind eye to financing of terrorism, which was a controversial accusation. Turkey responded almost immediately and by June FATF concluded that:

In February 2010, Turkey made a high-level political commitment work with the FATF to address its strategic AML/CFT deficiencies. Since that time, Turkey has demonstrated progress in improving its AML/CFT regime, including by drafting CFT legislation. However, the FATF has determined that certain strategic AML/CFT deficiencies remain. Turkey should continue to work on implementing its action plan to address these deficiencies, including by: (1) adequately criminalising terrorist financing (Special Recommendation II); and (2) implementing an adequate legal framework for identifying and freezing terrorist assets (Special Recommendation III). The FATF encourages Turkey to address its remaining deficiencies and continue the process of implementing its action plan.

FATF, Paris, 25th of June 2010

A similar statement was released again in October 2010.

One year after the initial statement, FATF clamped down on Turkey again:

Despite Turkey’s high-level political commitment to work with the FATF to address its strategic AML/CFT deficiencies, the FATF is not yet satisfied that Turkey has made sufficient progress in implementing its action plan, and certain strategic AML/CFT deficiencies remain. Turkey should work on addressing these deficiencies, including by: (1) adequately criminalising terrorist financing (Special Recommendation II); and (2) implementing an adequate legal framework for identifying and freezing terrorist assets (Special Recommendation III). The FATF encourages Turkey to address its remaining deficiencies and continue the process of implementing its action plan.

FATF, Paris, 25th of February 2011

The criticism continued in June of 2011 with Turkey being put on a list of Jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress together with the likes of Cuba, Myanmar, and Syria. This was repeated in October 2011 and February 2012.

Although Turkey was taking steps to reach international levels of compliance, the criticism from FATF was regarding the slow parliamentary procedures. In Turkey, there was no real sense of emergency until the June 2012 notice which added that Turkey was one of a handful of jurisdictions marked as:

These jurisdictions have not made sufficient progress since being identified in the Public Statement of June 2011. If these jurisdictions do not take significant actions by October 2012, the FATF will call upon its members to apply countermeasures proportionate to the risks associated with the jurisdiction.

FATF, Paris, 22nd of June 2012

Turkey’s FATF membership was brought into play:

As a member of the FATF, Turkey has committed to implement the FATF standards.  Since its mutual evaluation report in February 2007, Turkey has taken a number of steps toward improving its AML/CFT regime.  However, thus far, Turkey has failed to do so in two important areas, namely criminalisation of terrorist financing and establishing a legal framework for identifying and freezing terrorist assets.  A delegation led by the FATF President travelled to Turkey in May 2012 to convey the concerns of the FATF to relevant Ministers, representatives of the Turkish Grand National Assembly and other officials.  The FATF now calls on Turkey to fulfil its FATF membership commitment by enacting counter terrorist financing legislation that adequately addresses these shortcomings.  If adequate counter terrorist financing legislation has not been enacted by October 2012, the FATF will initiate discussions on Turkey’s membership in the FATF.

FATF, Rome, 22nd of June 2012

October 2012 came and Turkey had still not satisfied FATF, which brought out the big guns.

Given Turkey’s continued lack of progress in these two areas, as a counter-measure, the FATF has decided to suspend Turkey’s membership on 22 February 2013 unless the following conditions are met before that date: (1) Turkey adopts legislation to adequately remedy deficiencies in its terrorist financing offence; and (2) Turkey establishes an adequate legal framework for identifying and freezing terrorist assets consistent with the FATF Recommendations. FATF calls upon countries to take additional steps as necessary proportionate to the risks arising from the deficiencies associated with Turkey.

FATF, Paris, 19th of October 2012

A long statement was issued as a part of the Outcomes of the Plenary meeting of the FATF, Paris, 17-19 October 2012.

This would mean that on the 22nd of February 2013, Turkey would risk becoming a blacklisted country together with (and only with) Iran and North Korea. Sanctions would be around the corner, crippling Turkey’s growing but sensitive economy.

So what ended up happening?

By February 2013, Turkey had passed the bare minimum laws to avoid suspension of membership and risk blacklisting. However, FATF noted that that:

In spite of this positive step, there still remain a number of ongoing shortcomings in the Turkish counter-terrorist financing regime. Turkey must address these shortcomings in order to reach a satisfactory level of compliance with the FATF standards. Turkey has committed to addressing these deficiencies and will submit, prior to the next FATF meeting in June 2013, a report on how these deficiencies are being addressed.

FATF, Paris, 22nd of February 2013

By June 2013, a new report from FATF continued praising Turkey for its continued actions (as opposed to just promises in previous years).

The October 2013 statement was positive but urged improvement on implementations of UN recommendations for identifying and freezing assets in cases of terrorist financing, which was repeated in February 2014 with Turkey “largely complying” but still not being quite there.

In June 2014, FATF sounded almost optimistic about Turkey. By then, several other countries which had followed a similar journey were finally approved by FATF (including for example Tanzania). An on-site visit was scheduled to inspect the new laws in greater detail.

Finally, in October 2014, Turkey was given green light by the FATF. It was now compliant enough with all FATF recommendations to pass the bar.

Turkey Today: AML, CFT, ABC

Anti Money Laundering. Counter Financing of Terrorism. Anti Bribery/Corruption. The shining lights of any compliance officer’s daily routine.

So what did FATF actually accomplish?

Money laundering is still a problem in Turkey – probably. Enforcement of the new laws has been lackluster. While banks have strengthened their application procedures significantly, there are still problems with international cooperation and disclosure of information.

Turkey is heavily used to smuggle narcotics and unlicensed weapons to and from Europe. Trafficking is a major problem as well. The government is working to address these issues, but being far from politically stable and with wars raging in the region, change comes slowly.

Significant amounts of money going into Turkey end up in the hands of terrorist organizations in Syria and neighbouring countries.

In addition to banks, criminals use money remittance services, unregulated money services (hawala), and couriers carrying cash or gold to fund their activities. Hawala is regulated in Turkey but there is still an estimated 15 to 20% of all hawala transactions that are unrecorded. These pose an enormous money laundering risk.
Turkey’s economy is one watched very closely by international investors. It has seen relatively stable growth and may well continue to grow. Rankings vary but the Turkish economy is usually well within the top-20 of the world today, ahead of all countries in its region, beating even Saudi Arabia.

An economy of such magnitude is a lot less exposed to the risks of money laundering, compared to the smaller economies with oversized banking sectors. This is one of many reasons why Turkish banks are so much more easy-going than less reputable banking sectors in for example the Caribbean and Africa.

Bribery and corruption are rampant throughout government and financial institutions. It’s not something the average foreign investors or non-resident bank account holder notices, but it does cause Turkey some disrepute.

Taxation in Turkey

On a global scale, the tax rates in Turkey are average or slightly below average. A company formed in Turkey is only liable for tax on income earned in Turkey which could make it attractive to non-residents from a tax point of view. In reality, the paperwork and compliance exercise to form and maintain a Turkish company make it unattractive.

For those seeking to invest or start a business locally, Turkey has signed over 80 tax treaties which with Turkey’s 20% corporate tax rate (lower for certain sectors) can become quite attractive.

Non-residents need not worry about taxes on their Turkish deposits, as there are no applicable taxes.

Conclusion

Doing business in Turkey is hard work. It is a country of negotiations. Anything can be questioned. You won’t always get what you want but you won’t know until you try.

Come for the banking. Stay for the culture and landscapes. Have some rakı with your meze.

See also

• What’s Up In Djibouti?