Financial Crime World

Turkish Financial Institutions Must Enhance Due Diligence for Politically Exposed Persons

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In a move to combat money laundering and terrorist financing, Turkish financial institutions are required to take enhanced due diligence measures when dealing with Politically Exposed Persons (PEPs).

Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing Terrorism

According to the Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing Terrorism, financial institutions must:

  • Obtain senior management approval before establishing new correspondent relationships with PEPs
  • Conduct thorough customer due diligence, including verifying the source of funds and conducting ongoing monitoring

Risk-Based Approaches for Identifying and Mitigating Risks

Financial institutions must take into account factors such as:

  • The PEP’s profession
  • Commercial activities
  • Business history
  • Financial status
  • Risk profile
  • Sources of funds

Correspondent Banking

When conducting correspondent banking activities with PEPs, financial institutions must:

  • Verify the identity of the PEP and their beneficial owners
  • Monitor transactions for suspicious activity

Identification Documentation

Financial institutions must require original identification documents or certified copies stamped by a notary public when identifying customers or opening accounts. Trade gazettes and signature circulars must also be stamped by Chambers of Commerce and public notaries, respectively.

Risk-Based Approach

The Turkish Financial Regulatory Authority (BRSA) allows for a risk-based approach to customer due diligence, enabling financial institutions to focus on higher-risk customers and transactions.

Penalties for Non-Compliance

Financial institutions that fail to comply with the enhanced due diligence requirements may face:

  • Fines
  • Reputational damage

Conclusion

The enhanced due diligence requirements for PEPs are an important step in preventing money laundering and terrorist financing. Turkish financial institutions must take these measures seriously and implement them effectively to avoid penalties and maintain a reputation for integrity and compliance.