Financial Crime World

Turkey Enacts Stricter Know Your Customer (KYC) Rules to Combat Money Laundering

In an effort to strengthen its anti-money laundering (AML) efforts, Turkey has introduced stricter know your customer (KYC) rules for financial institutions and other businesses. These new regulations require companies to verify the identity of their customers, assess the risks involved in maintaining business relationships, and report any suspicious transactions.

National Regulatory Framework

The AML regime in Turkey is governed by a range of laws and regulations, including:

  • Turkish Criminal Law No. 5237
  • Law on the Prevention of Laundering of Crime Revenues No. 5549
  • Regulation on Measures to Prevent Money Laundering and Terrorist Financing

Reporting Obligations

Financial institutions, such as banks and investment firms, are required to:

  • Detect and report any suspicious transactions to the Financial Crimes Investigation Board (MASAK)
  • Notify MASAK when a transaction exceeds certain amounts prescribed by law

Customer Due Diligence

The KYC process involves:

  • Verifying the identity of customers through face-to-face verification or remote identification methods
  • Remote identification methods may be used if permitted by the main field of activity and designed to include all required information with minimum risk in confirmation

Risk Assessment

A risk assessment is made about the applicant to create and evaluate the customer profile, including:

  • Collecting mandatory information about the customer, such as:
    • Purpose and nature of business relationship
    • Source of assets and funds
    • Average income
    • Monthly estimated transaction volume
    • Number of transactions

Obliged Parties

Investment firms under the Communiqué on Principles of Establishment And Activities Of Investment Firms must:

  • Verify the identity information of their customers before opening an account
  • Verify the identity information of beneficiaries in joint accounts separately

Outsourcing Customer Due Diligence

It is not prohibited to outsource customer due diligence by contract to third parties who are not obliged by law to meet AML regulations. However, it may be regulated or restricted under sector-specific regulations.

Conclusion

Turkey’s stricter KYC rules aim to combat money laundering and terrorist financing by ensuring that financial institutions and other businesses have a thorough understanding of their customers’ identities and business activities. By verifying customer identity and assessing the risks involved in maintaining business relationships, Turkey seeks to maintain its reputation as a stable and secure financial hub.