1. What are the key developments related to anti-corruption regulation and investigations in the past year in your jurisdiction, and what lessons can compliance professionals learn from them?
The cost of non-compliance is great. If you think compliance is expensive, try non-compliance’, US Deputy Attorney General Paul McNulty. This is applicable to all jurisdictions and companies operating in Turkey.
Turkey does not have a separate anti-bribery and anti-corruption (ABAC) law specific to corporations’ liability and mandatory requirement to ABAC compliance programmes. Exceptions to this include Law No. 5549 on Prevention of Laundering Proceeds of Crime, Law No. 6415 on Prevention of Financing of Terrorism, the Regulation on Measures Relating to Prevention of Laundering Proceeds of Crime and Financing of Terrorism and Regulation On Program Of Compliance With Obligations Of Anti-Money Laundering And Combating The Financing Of Terrorism (Compliance Program Regulation).
Article 43/A of Misdemeanors Law No. 5326 also sets out an administrative fine ranging from 10,000 Turkish lira to fifty million Turkish lira for cases where company executives or representatives commit crimes such as fraud, collusive tendering, smuggling, laundering proceeds of a crime, bribery and etc. The provision explicitly states that the fine cannot be less than the interest from the proceeds of the crime.
Turkish Criminal Code No. 5237 sets out a list of white-collar crimes such as fraud, bribery, abuse of trust and misconduct. That being said, bribery and misconduct are stipulated to be specific to public officials, which means that private company employees’ acts are not classified as bribery and misconduct. Except for publicly traded companies, representatives of publicly traded companies are in the status of public officials for the enforcement of bribery crime stipulated under article 252 of Turkish Criminal Code.
The Compliance Program Regulation mandates that certain entities prepare a compliance programme and appoint a compliance officer. According to article 5 of the Compliance Program Regulation, objectives of a compliance programme include establishing corporate policies and procedures, conducting risk management activities, conducting auditing and monitoring activities, appointing a compliance officer and establishing a compliance department, conducting training activities, conducting internal audit activities. Prior to February 2021, the scope of the regulation was limited to banks, intermediary capital market institutions and insurance and retirement companies. In February 2021, the Compliance Program Regulation was amended to cover Group A, authorised establishments specified in the foreign exchange legislation, financing, factoring and leasing companies, portfolio management companies, intermediary institutions for precious mines, electronic money institutions and payment institutions. As of February 2021, the compliance programme must be revised every two years.
Turkey is now taking extra steps to spread ethical culture and implement compliance programmes as the most important financial institutions are now legally expected to establish a compliance department and report to the Financial Crimes Investigation Board (MASAK).
2. What are the key areas of anti-corruption compliance risk on which companies operating in your jurisdiction should focus?
Third-party involvement is a priority of anti-corruption compliance. Besides other major elements of anti-corruption such as monitoring-auditing and senior management commitment, companies must urge third parties such as agents, consultants, clients, business partners, etc, to ensure that all transactions related payments are in accordance with the law and procedures and if any government official has been involved in the process companies must be wary of bribery risk.
3. Do you expect the enforcement policies or priorities of anti-corruption authorities in your jurisdiction to change in the near future? If so, how do you think that might affect compliance efforts by companies or impact their business?
There is no specific authority established for anti-corruption in Turkey except MASAK. However, when considering Turkey’s low Corruption Perceptions Index score in the recent years and Financial Action Task Force (FATF) ’s placement of Turkey in its Grey-List, it is expected that Turkey will fulfill its commitments in the international area, and take necessary remedial actions.
MASAK published a strategy document regarding Turkey’s Strategies for 2021-2025 on Better Implementation of Fight Against Money Laundering and Terrorism Financing and Forfeiture Practices (Strategy Document) on 3 June 2022. The Strategy Document states Turkey’s priorities and objectives related to its fight against money laundering, corruption and terrorism financing. The first strategical objective is stated as ‘the effective execution of judicial and administrative processes related to combating money laundering and financing of terrorism’, and addresses ‘assembling investigative teams specialized in money laundering and terrorism financing cases against the crimes involving legal person and establishing different working circuits in this manner’ as a priority. It addresses a number of deficiencies to be improved or remediated, and assigns different public agencies and ministries for the addressed actions. The Strategy Document also underlines the importance of a data and risk-based plans: actions include aggravating the legislative framework, ensuring the effective implementation and monitoring of financial sanctions, asset freezing and forfeiture measures.
Turkey does not require corporations to have compliance programems or oblige corporations to comply with particular compliance liabilities, except the requirements addressed in the Compliance Program Regulation. However, since it is expected from Turkey to adopt new regulations and to strengthen its ABAC and AML enforcement mechanisms, bringing compliance requirements to all organisations regardless of their industry is anticipated. Turkey, an attractive destination for investors in various industries, aims to establish a consistent, compliant and trusted environment across all potential investment markets.
In accordance with the aforementioned, all corporations, including family companies, where compliance deficiencies are most frequently observed due to the absence of corporate governance, delegation of authorities and monitoring mechanisms, must prepare for a broader and more rigorous regulatory environment, and establish their internal compliance mechanisms. To prevent and detect corrupt activities, corporations should develop customised compliance programmes, ABAC and AML policies, and tools for implementing and monitoring compliance rules effectively.
* This article was initially published on Lexology. You may access the article on Lexology by following this link