These regulations govern the procedures pertaining to the establishment of identity and to reporting requirements in detail and before going into the particulars it will be advisable to discuss the overall thrust of the regulations.
In basic terms these regulations impose two requirements on financial institutions and on real persons and legal entities engaged in particular businesses. The first is that they must establish the identity of anyone engaging in virtually every transaction worth more than TL 2 billion or the equivalent in a foreign currency. The second is that they must report all transactions involving sums of more that TL 5 billion to the "Fiscal Offense Investigation Commission" (MSAC).
The first requirement (that of establishing identity) went into effect with the regulations' publication on July 2nd. The reporting requirement however will not become operational until 1 October 1997. Reporting is to take place in monthly cycles; that is, transactions taking place during a given month must be reported to the "Department of the Fiscal Offenses Investigation Commission" by the evening of the 15th day of the following month.
As these regulations redefine procedures pertaining to the establishment of identity, the existing "Regulations concerning the obligation of banks to determine the identifies of their customers" have been rescinded.
In determining the TL 5 billion reporting limit, the total value of all transactions undertaken by a single person (real or corporate) in a single day will be taken into account.
In the regulations, the term yukumluler ("those obliged") is used to refer to those who must establish identity in transactions in excess of TL 2 billion and report transactions in excess of TL 5 billion. These persons and entities are defined in article 3 of the communique and include financial institutions as well as:
- Mail and cargo-handling companies
- Those who engage in the purchase and sale of real estate or act as intermediaries in deals
- Those who operate games of chance halls
- Those who engage in the purchase and sale of seacraft, aircraft, or motor vehicles of any kind
- Those who have collections of antiquities, antiques, or works of art; those who engage in the purchase and sale or auctioning of the same
- Athlctic clubs.
There are a few exceptions to the identity establishment and reporting requirements, It is not necessary to establish identity or report transactions undertaken with government administrations fielded by the general budget or by their own special budget, with public-owned entities, or with quasi-governmental organizations; nor is it necessary to do so in the case of transactions to which only banks and financial institutions are parties. In the case of transactions that must be reported by those other than banks or private finance houses. those (but not winnings paid out by those operating games of chance halls) in which payment is effected by transfers made in accounts held by banks or private finance houses, by means of checks made out in the name of the payee, or by means of credit cards do not have to be reported. Finally, certain types of transactions that fall within the scope of one of the areas of business specified by the finance ministry need not be reported if they are conducted through commercial accounts that are related to one's business activities in Turkey.
Identity will be established by taking a photocopy of a piece of identification in the case of someone who is a real (ie non-corporate) person or by entering the details of identity on the back of the document pertaining to the transaction. Where the party to a transaction is a corporate entity, evidence of the entity's registration together with proof of power of representation and authorized signature specimens must be adduced,
Another rule that has been introduced concerns passengers who enter and leave Turkey and are carrying more than TL 5 billion in Turkish liras, or the equivalent of that in some other currency, or documents authorizing payments in such amounts. Such effects must be declared to customs authorities when passing through customs.
Those with an obligation. to establish identity and report transactions are required to notify MSAC if it becomes known to them or if they have suspicions that the money or instruments involved in a transaction were acquired illegally or if they become aware of any other suspicious circumstances. Normally they have fifteen days in which to do this but if urgency demands, they must do so immediately. Failure to establish identity, to retain evidence, or to report is punishable by prison sentences of from six months to one year and by fines of from TL 12 million to TL 120 million.
Having summarized the general tenure of the regulations we will now discuss the details.
Those who are obliged to establish identity and routinely report transactions
A complete list is given at the end of this circular,
The regulations also state that the "foreign branches and agencies" of those with headquarters in Turkey must fulfill the same identity establishment/reporting requirements as their parents unless doing so would be a violation of the laws of the country in which the branch/agency is located.
The obligation to establish identity
Anyone who is indicated in, the list (including their agents, representatives, and commercial proxies) and who is a party to or an intermediary in any of the transactions indicated below &at is worth more than TL 2 billion (or the equivalent in a foreign currency) must establish the identity of their customers or those involved in the transaction before carrying the transaction out. (Note that identity must be established in the case of all safe deposit box services, irrespective of the sums involved.)
If a transaction is being performed on behalf of another (non-corporate) person, the identity of that person must also be established.
It is not necessary to establish identity or report transactions undertaken with government administrations funded by the general budget or by their own special budget, with public-owned entities. or with quasi-governmental organizations; nor is it necessary to do so in the case of transactions to which only banks and financial institutions are parties.
The types of transactions that necessitate establishing identity are defined in very broad terms so as, in effect, to include virtually everything. According to the communique. these transactions are:
"Business deals of whatever kind, payments by money order, custody, clearance, barter, borrowing, lending, transferring debts, assigning claims, renting, leasing, insuring, opening any form of deposit account or profit/loss-sharing account. withdrawing sums of money from or depositing them in any form of account or profit/loss-sharing account, making payment by means of certificates of deposit that represent deposit accounts, check and note collections, repo transactions, capital market transactions"
Retention requirement
Evidence of identity must be retained for a five-year period following the latest transaction date.
How identity is to be established
The identities of real (non-corporate) persons are to be established by taking a photocopy "whose validity is undoubtable" of a document, such as those indicated below, that has been issued by authorities and can be used to establish one's identity and that includes a photograph or by entering the details of identity on the back of the document pertaining to the transaction.
- Birth certificate
- Driver's license
- Passport
Either the original. of the document or else a notarized copy of it must be adduced.
The identities of corporate entities that have a commercial registration are to be established by adducing:
- A copy of evidence of commercial registration
- Evidence (including signature specimens) that the person acting on behalf of the corporate entity is authorized to do so.
In the case of foundations, proof of registration by the General Directorate of Foundations must be presented.
In the case of associations, proof of registration by the provincial directorate of public security must be presented.
Subsequent transactions
If a real person or legal entity whose identity has already been established later engages in additional transactions, the evidence he presents during those transactions must be compared with that retained by the party that is required to establish identity-
Reporting requirements
Routine reporting requirement
Effective 1 October 1997, those who are required to establish identity must regularly report to MSAC any transaction for which they are required to establish identity that involves (except for safe-deposit box transactions) more than TL 5 billion or the equivalent in foreign currency.
In determining the TL 5 billion reporting limit, the total value of all transactions undertaken by a single person (real or corporate) in a single day will be taken into account.
Transactions that take place on weekends or legal holidays or during the night are to be considered as having taken place on the first business day following the period of time in which they occurred.
Transactions taking place during a single month are to be reported by the fifteenth day of the following month.
There are a few exceptions to the regulations' transaction reporting requirements. These are.
- Transactions that banks or private finance houses conduct among themselves or with government administrations funded by the general budget or by their own special budget, with public-owned entities, or with quasi-governmental organizations established by law;
- In the case of transactions that must be reported by those other than banks or private finance houses, chose (but not winnings paid out by those operating games of chance halls) in which payment is effected by transfers made in accounts held by banks or private finance houses, by means of checks made out in the name of the payee, or by means of credit cards.
- Banks and private finance houses do not have to report transactions that they habitually perform for real persons and legal entities that are residents of Turkey and whom they must identify, provided that these transactions fall within the scope of one of the areas of business specified by the finance ministry and are conducted through their commercial accounts that are related to their business activities in Turkey.
How information is to be reported
The regulations authorize MSAC to determine rules and procedures governing how information is to be reported.
Declarations by passengers entering or leaving Turkey
Passengers who enter and leave Turkey and are carrying more than TL 5 billion in Turkish liras, or the equivalent of that in some other currency, or documents authorizing payments in such amounts must declare such effects to customs authorities when passing through customs.
Customs authorities will report transactions taldng place during a single month to MSAC by the fifteenth day of the following month, This reporting requirement will go into effect on 1 October 1997.
Principles concerning suspicious transactions
In addition to the identity-establishing and transaction-requirements discussed above, the regulations also impose an obligation to report "suspicious transactions" to MSAC after identity has been established and a transaction of any kind has been conducted.
The regulations do not defuse what constitutes a "suspicious transaction" all they say is that MSAC must be notified if it becomes known or one has suspicions that the money or instruments involved in a transaction were acquired illegally or If one becomes aware of any other suspicious circumstances.
Anyone who does notify MSAC (including those who actually perform the transaction, their superiors, or their legal representatives) is expressly prohibited from informing any party to the transaction in any way whatsoever.
MSAC is authorized to identify "types of suspicious transactions" to be used as guidelines for those required to establish identity and report transactions.
Suspicious transactions must be reported within fifteen days of their occurrence but if it should appear that any delay would be inadvisable, they must be reported immediately to MSAC as well as to the local public prosecutor's office. MSAC is authorized to determine procedures and principles concerning such reporting.
Miscellaneous
Exchange rates: In transactions involving foreign currencies, the rate of exchange to be used in determining the Turkish-lira counter-value of instruments securing payment in a foreign currency is the applicable Turkish Central Bank foreign-exchange buying rate in effect on the date the transaction takes place.
Foreign currency
Regulation limits: The TL 2 billion minimum beyond which identity must be established and the TL 5 billion limit beyond which transactions must be reported are to be redetermined in December of each year by a "Anti-Fiscal-Offenses Coordination Board" taking changes in the wholesale price index announced by the State Institute of Statistics.
Oversight: MSAC is authorized to have compliance with the requirements of the .Anti-Money-Laundering Act checked by inspectors selected from among finance ministry inspectors, specialist accountants, revenue comptrollers, chartered bank. comptrollers, Treasury comptrollers, and Capital Market Board specialists-
Penalties and responsibilities
- Failure to adduce reformation or documents demanded by MSAC or other
- authorities
- Failure to determine identity as required
- Failure to retain documents pertaining to the establishment of identitv for five years
- Acts in violation of other Council of Ministers resolutions pertaining to the discovery and prevention of money-laundering and of communiques pertaining to such resolutions
are punishable by prison sentences of from six months to one year and by fines of from TL 12 million to TL 120 million.
The regulations also state that those who actually perform the transaction as well as their superiors will be held responsible according to their duties and to their association with and degree of involvement in a violation.
List of those who are required to determine identity and routinely report transactions
- Banks
- Private finance houses
- Companies other than banks whose principal business is issuing credit cards
- bending, financing, and factoring companies that fall within the scope of laws and regulations governing the lending of money
- Insurance and reinsurance companies governed by the Insurance Control Act (Statute 7397)
- The Istanbul Securities Exchange's clearance and custodian bank
- Capital-market brokerage houses and portfolio-management companies
- Investment trusts
- Those engaged in the business of buying and selling precious metals, stones, or jewelry
- Enterprises licensed in accordance with exchange-control laws and regulations
- All mail and cargo-handling companies as well as the General Directorate of Postal Operations
- Financial leasing companies
- Those who engage in the business of buying and selling real estate or act as intermediaries in deals
- Those who operate games of chance halls
- Those who engage in the business of buying and selling seacraft, aircraft, motor vehicles of any kind, or heavy-duty equipment
- Those who have collections of antiquities, antiques, or works of art; those who engage in the purchase and sale or auctioning of the same
- Athletic clubs
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.
Please do not hesitate to contact us if you need any additional information regarding the matters discussed here on Tel: (90)(212)232 92 90/232 12 10 or Fax: (90)(212)234 10 67/230 82 91.
