AML/KYC Compliance Guide: MASAK Obligations and Suspicious Transaction Reporting
Laundering of proceeds of crime (money laundering) is the introduction of proceeds from illegal activities (drug trafficking, corruption, organised crimes, etc.) into the economic system by pretending that they are obtained from a legal source through a series of complex transactions. Terrorist financing is the provision or collection of funds for the purpose of carrying out terrorist acts or supporting terrorist organisations. These two phenomena are global problems that threaten both national security and the integrity of the financial system. In Turkey, the main institution coordinating the fight in this area is the Financial Crimes Investigation Board (MASAK) under the Ministry of Treasury and Finance. Law No. 5549 on the Prevention of Laundering Proceeds of Crime and related regulations impose a series of strict compliance obligations on “obliged persons” operating in certain sectors. In this article, we will examine in detail who is liable, what these obligations are and the consequences of non-compliance.
Who is liable? MASAK legislation defines a broad group of “obliged persons”. The most well-known among these groups are as follows:
- Financial Institutions: Banks, participation banks, insurance and pension companies, capital market intermediary institutions, portfolio management companies, financial leasing and factoring companies.
- Certain Non-Financial Business and Professions:
- Buying and selling precious metals, stones or jewellery (jewellers).
- Organisers of all kinds of games of chance and betting.
- Those who buy and sell or auction historical artefacts, antiques and works of art.
- Notaries public.
- Sports clubs.
- Real estate agents and those who mediate in the purchase and sale of immovable property.
- Self-employed lawyers (limited to certain works).
- Independent accountant financial advisors and sworn financial advisors.
- Newly Added Obligors: Crypto asset service providers.
Basic AML/CFT Compliance Obligations:
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Know Your Customer (KYC) Principle: This is the cornerstone of AML compliance. Obligors must know who their customers are with whom they have a business relationship. The KYC process includes:
- Identification: Verification of identity through official documents such as ID card, passport, driving licence for natural persons and documents such as trade register, tax certificate for legal entities.
- Identification of the Beneficiary: Investigating and identifying the real person (real beneficiary) who has ultimate control over the transaction, especially in legal entities or complex ownership structures.
- Understanding the Business Relationship and Purpose of the Transaction: Understanding why the customer wants to establish this business relationship and the nature of the transactions.
- Risk Assessment: Making an assessment based on the risk profile of the customer (e.g., whether he/she is a politically influential person), his/her transactions and the country where he/she is located, and monitoring high-risk customers more closely.
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Suspicious Transaction Reporting (STR): This is one of the most critical tasks of obligors. If there is any information, suspicion or suspicion that a transaction conducted by or through obliged parties is related to laundering proceeds of crime or terrorist financing, it is obligatory to report this transaction to MASAK regardless of the amount. The circumstances that constitute suspicion may be various:
- Providing misleading information about the identity of the customer.
- The transaction is incompatible with the known business or financial profile of the customer.
- Complex and unusually large transactions.
- Transactions where cash is used extensively or where money is invested in small portions.
- Transactions with high-risk countries. Suspicious transaction notification is made to MASAK within 10 business days at the latest, and it is essential that the customer or third parties are not informed of this notification (confidentiality obligation).
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Obligation to Provide Information and Documents: When requested by MASAK or other auditors, obliged parties are obliged to provide all kinds of information, documents and records.
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Obligation to Keep Records: The obliged parties are obliged to keep all kinds of documents and records related to their transactions for a period of eight years from the date of their issuance, and documents related to identification for a period of eight years from the date of the last transaction.
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Establishing a Compliance Programme and Appointing a Compliance Officer: Obligors (especially financial institutions and other obligors of a certain size) are obliged to establish a “compliance programme” within their own internal structure. This programme should include the following:
- Establishment of corporate policies and procedures.
- Risk management activities.
- Monitoring and control activities.
- Appointment of a compliance officer and establishment of a compliance unit.
- Training activities.
- Internal audit activities. The compliance officer is the person responsible for the execution of this programme and reports directly to senior management.
Consequences of Non-Compliance: Failure to comply with MASAK legislation carries very severe sanctions.
- Administrative Fines: In case of breach of obligations, MASAK may impose administrative fines ranging from tens of thousands of liras to millions of liras.
- Imprisonment: Persons who deliberately fail to fulfil the obligation to report suspicious transactions or violate the obligation to keep secrets are subject to imprisonment.
- Loss of Reputation: If an institution’s name is associated with money laundering or terrorist financing, it causes an irreparable loss of reputation and undermines customer confidence.
Prevention of money laundering and terrorist financing is not only a legal obligation but also a corporate and social responsibility. The obligations set by MASAK aim to prevent the abuse of the financial system and other sensitive sectors by criminals. It is of vital importance that all institutions and professionals within the liable groups meticulously implement the “Know Your Customer” principle, report suspicious situations to MASAK without hesitation and establish an effective internal compliance programme with a risk-based approach. Even the slightest negligence in this area may result in severe legal and financial consequences for both the institution and its managers.