Finance watchdog ‘graylists’ Turkey threatens investments

A commercial vessel sails the Bosphorus during the coronavirus disease (COVID-19) outbreak in Istanbul, Turkey, April 8, 2020. REUTERS / Umit Bektas / File Photo

ISTANBUL, Oct.21 (Reuters) – An international watchdog demoted Turkey to a so-called gray list on Thursday for failing to prevent money laundering and terrorist financing, a move that could further erode foreign investments after an exodus of several years.

The Financial Action Task Force (FATF), set up by the group of advanced economies of the G7 to protect the global financial system, has also put Mali and Jordan on its increased watch list, known as the “list. grey”.

Citing improvements, he removed Botswana and Mauritius from the list, which now includes 23 countries.

Turkey, the largest to be decommissioned, must resolve “serious supervisory problems” in its banking and real estate sectors, as well as with gold and gemstone traders, FATF President Marcus Pleyer said during of a press conference.

“Turkey must show that it effectively tackles complex money laundering cases and show that it pursues terrorist financing prosecutions … and prioritizes cases of UN-designated terrorist organizations such as ISIL and al-Qaeda, ”he said.

Research shows that a downgrading of the gray list is straining countries’ ties with banks and foreign investors who follow the FATF rankings, suggesting that move could weigh more on the Turkish lira, which has reached a low record earlier Thursday. Read more

“Despite our work on compatibility, putting our country on the gray list is an undeserved result,” the Turkish Treasury said in a statement Thursday evening.

“In the coming period, the necessary measures will continue to be taken in cooperation with the FATF and all the institutions concerned, to ensure that our country is removed from this list, which it does not deserve, as soon as possible. time limit.”

In 2019, the FATF warned Turkey of “serious shortcomings”, including the need to improve asset freezing measures linked to terrorism and the proliferation of weapons of mass destruction.

The other countries on the FATF gray list are Pakistan, Morocco, Albania and Yemen.

This year’s International Monetary Fund research found that the gray list reduces capital inflows by around 7.6% of gross domestic product (GDP), while foreign direct investment (FDI) and portfolio flows are also affected.


Foreign investors have fled Turkey in recent years, citing political interference in monetary policy, double-digit inflation and low official foreign exchange reserves.

Foreign ownership of bonds has fallen to around 5% from 25% five years ago, a period in which the Turkish lira has lost two-thirds of its value against the dollar.

Turkey has implemented some of the FATF recommendations.

But one – a law last year aimed at limiting arms funding – has come under heavy criticism for unintentional damage to civil society groups.

The European Commission this week urged Turkey to adopt the FATF recommendations, but also said the law – also based on the FATF recommendations – puts civil society organizations at risk, which are now subject to sanctions and harms. ” undue control of fundraising.

Amnesty International said the Turkish government would “almost certainly” use the law to target nonprofits.

This is an “unintended consequence” of FATF policies “which are too often misused by repressive governments” to restrict rights, Amnesty said, calling on FATF to push Turkish authorities to adjust the law .

Pleyer said the FATF is aware of concerns about Turkey’s treatment of nonprofit organizations (NPOs).

“Turkey must implement a real risk-based approach for NPOs and ensure that the authorities do not disrupt or discourage legitimate activities,” he said.

In August, Reuters reported that in at least five other countries – Uganda, Serbia, India, Tanzania and Nigeria – legislation passed to meet FATF standards has been used by authorities to investigate cases of journalists, NGO workers and lawyers. Read more

Reporting by Jonathan Spicer and Ece Toksabay; Editing by Dominic Evans and Angus MacSwan

Our standards: Thomson Reuters Trust Principles.

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