EU Anti-Money Laundering Directives Take Effect in Turkey: What Firms Need to Know
The European Union (EU) has introduced a set of anti-money laundering (AML) directives aimed at combating money laundering and terrorist financing. These new regulations have come into effect in Turkey, and it is essential for firms operating in the country to understand what they need to do to comply.
Stricter Customer Due Diligence Requirements
The new AML directives introduce stricter customer due diligence requirements to prevent financial institutions from being used as conduits for illicit activities. Firms must:
- Establish a single AML/CFT rulebook that applies across the EU
- Expand the scope of regulations to include mortgage and consumer credit intermediaries, fund managers, crowdfunding platforms, and investment migration operators
Increased Transparency in Cross-Border Transactions
The new directives also increase transparency in cross-border transactions by requiring firms to:
- Set up monitoring systems to detect atypical transactions
- Apply a risk-based approach to outsourcing arrangements
- Have training programs in place for AML/CFT compliance
New Transfer of Funds Regulation
The new Transfer of Funds Regulation requires certain information, including Legal Entity Identifiers (LEIs), to accompany wire transfers and crypto-asset transfers. Crypto-asset service providers must:
- Identify and hold originator/payer and beneficiary/payee information
- Provide this information to law enforcement authorities upon request
Severe Consequences for Non-Compliance
Non-compliance with the EU’s new AML regulations can result in severe financial and criminal penalties, as seen in recent cases in France and the Netherlands. The maximum fine under the Anti-Money Laundering Act (AMLA) is up to 10 percent of an entity’s previous annual turnover or €10 million.
Implementing Additional Controls
To ensure compliance with the new directives, firms operating in Turkey must develop additional controls, technology, monitoring, and reporting requirements. Compliance teams should consider implementing advanced technologies such as:
- Real-time screening
- Risk scoring
- Regulatory reporting
- Transaction monitoring
These technologies can help identify and report suspicious transactions promptly.
Cost Savings Expected
The EU’s AML reforms are designed to create a single set of standards across the bloc, which is expected to yield cost savings. However, firms operating in Turkey must act quickly to ensure compliance with the new regulations before they face fines and other penalties.
Penalties for Non-Compliance
Firms that fail to comply with the new AML package can face penalties including:
- Fines of up to 10 percent of an entity’s previous annual turnover or €10 million
- Referral to national authorities in cases where criminal activity is provable
To avoid these penalties, firms operating in Turkey must be proactive in ensuring compliance with the new AML package and consider implementing advanced technologies to help identify and report suspicious transactions promptly.
Conclusion
Implementing automated AML solutions can significantly strengthen a firm’s ability to comply with the new framework efficiently and stay proactive in the fight against financial crime. As the EU’s AML reforms continue to play out into 2024 and beyond, it is essential for firms operating in Turkey to be aware of their obligations under the new directives and take steps to ensure compliance.