Turkey’s Trouble: FATF Grey-Listing!
Groupe d'action financière, or worldwide known as "Financial Action Task Force", has gained tremendous currency in the last couple of decades, especially following the tragic 9/11 terror attacks at the heart of hegemon-the United States. The FATF was established in 1989 by the countries of G7 primarily to deal with money laundering. However, in the wake of the twin towers terror attack, FATF got its current shape. The group met in Washington DC and discussed the need to bring a radical shift in its plan.
The terror attacks in the U.S. was a wake-up call for the countries of the West that remained "terror-free" post the world wars. It was their introduction to the mammoth that "terrorism" is and its potential to wreak havoc. They were quick to respond politically through the "war on terror" and financially through "FATF", which included terrorism financing in its assessment schemes. The realization dawned upon the world leaders that to combat terrorism, it is crucial to unearth and cut down the financial roots that help this nexus grow. Furthermore, it was believed that the time has come to hold states and not organizations alone to curb the menace of terrorism. The then President, Ms Clarie Lo, announced that "FATF would lend its expertise and assistance to the battle against terrorism".
In addition, the UNSC passed a resolution in September 2001 that approved a list of hundreds of designated terrorists and organizations. This became a resource list for FATF, and ever since then, it has been in the news for chasing countries for their credit to the terrorists. The FATF is officially not a part of the United States Organizations. However, it still functions out of the Organization for Economic Cooperation & Development headquarters situated in Paris. Moreover, unlike the UNSC that has a veto power that is often politically driven, FATF has a 39-member body with a majority veto of 3 that is operated on "technical" grounds and not political. This makes the body efficient as it doesn't allow bilateral issues penetration at the form and strictly assess the countries on the designed parameters.
The decisions are made based on "Mutual Evaluations" accounting for "Anti-Money Laundering" (AML) and Combating the Financing of Terrorism (CFT). After that, countries are put into categories generally denoted using colours, the most troublesome being grey and black, which implies "high-risk jurisdiction" or "call for action category." India became its observer in 2006 and a full member in 2010. It was only when Pakistan was put on the grey list that the news around it gained much prominence in India. Furthermore, it is the inclusion of Pakistan's all-weather ally Turkey in the list that has raised eyebrows everywhere alike.
The FATF concludes three Plenary meetings annually with rotating presidencies. The outcome of its Plenary held recently under the Presidency of Germany’s Dr Marcus Pleyer enlisted Turkey in the grey list, implying increased monitoring. Turkey would need to resolve the stated deficiencies within the defined timeframe. President Player said that Turkey needs to keep an eye on its banking and real estate units and dealers of gold and precious stones. Although it expressed its discomfort from the listing and called it an "underserving outcome", Turkey has committed to strengthening its institutions and working on getting the country out of the list. The FATF has mentioned eight tasks that Turkey would need to work on. These include an increase in on-site inspection and more supervision of AML/CFT compliance by risk-prone sectors; strict actions and sanctions for non-compliance of AML/CFT; increased support of financial intelligence to combat money laundering investigations; including complex investigations and rigorous prosecutions; demarcating responsibilities, and calculative objectives for anti-terror finance authorities; increased research in terrorism cases; pursuing strict actions against terrorist organizations listed by the UN; supervision of non-profit organizations to keep them away from being used for terrorist financing.
The greylisting has unintended consequences on the Turkish Economy that was already suffering blows. The listing affects the country's global standing and creates a roadblock in receiving financial assistance from international funders. An IMF report stated that the list brings down capital inflow by an estimated 7.6% of GDP, plus FDI and portfolio flows are also degraded. Hence, the Turkish Lira would further suffer. Furthermore, the foreign ownership bonds have gone down from 25% to merely 5%, and the currency's value has depreciated two-third against the dollar. Foreign investors are escaping Turkey, stating that political interference, double-digit inflation, low foreign currency reserves, and the state's economic policy make it difficult to invest in the country.
Turkey has promptly started working on the recommendations of FATF. However, its law that aims to curb weapons financing has come under the radar. It is being argued that it affects the civil society groups as they are being increasingly penalized, and there's continued scrutiny of fundraising. This concern has been raised by Amnesty International and has come to the notice of President Player as well. He has asked Turkey to “implement a truly risk-based approach to NPOs and ensure authorities don't disrupt or discourage legitimate activity”.
The FATF has come a long way, and its timely actions have helped keep a tight hold on the terrorist funding. However, not every country is accepting of these listings. Turkey's Interior Minister, Suleyman Soylu, went on to say that, “We are a country where terrorism inflicts the most costs. The one, who finances and empowers terrorism, is Europe. There can be such brazenness. It can be made contrary to the facts.” It indicates that though states are compelled to take the necessary measures due to the problematic situation of their Economy, they are still in denial of the problems. This is perceived as a supportive stance by terrorist organizations that have made Pakistan and Turkey safe havens.
There are measures that the FATF lists for a state. Nevertheless, an equal if not more number of challenges faces the FATF as well. As the global economic sphere is transforming, new methods and modes of transactions are coming up on the surface. E-transaction, BitCoins, ivory being used as a source of payment, etc. Therefore, FATF would need to level up its measures and inculcate the changing modes in its parameters of assessments.
References
1. Turkey joins Pakistan in FATF Grey list in a double blow for Islamabad, The Economic Times, October 2021.
https://economictimes.indiatimes.com/news/international/world-news/turkey-joins-pakistan-in-fatf-grey-list-in-a-double-blow-for-islamabad/articleshow/87196574.cms
2. Explained: Why has the global terror finance watchdog put Turkey under the lens? Indian Express, October 2021.
https://indianexpress.com/article/explained/financial-action-task-force-turkey-7584633/
3. Finance watchdog 'grey lists' Turkey in threat to investment. Reuters, October 2021.
https://www.reuters.com/business/finance-watchdog-grey-lists-turkey-threat-investment-2021-10-21/
4. FATF grey-listing caused ‘$38b losses’. The Express Tribune, November 2021.
https://tribune.com.pk/story/2286167/fatf-grey-listing-caused-38b-losses
5. Why Turkey joins Pakistan on the FATF grey list and how it is a big blow for 'best buddies’. Firstpost, October 2021.
https://www.firstpost.com/world/why-turkey-joins-pakistan-on-fatf-grey-list-and-how-it-is-a-big-blow-for-best-buddies-10083731.html
6. Turkey Joins Pakistan in FATF Grey List. Details Here. India.com, October 2021.
https://www.india.com/news/world/turkey-joins-pakistan-in-fatf-grey-list-anti-terror-financing-watchdog-5064129/
Pic Courtesy-Meg Jerrad at unsplash.com
(The views expressed are those of the author and do not represent views of CESCUBE.)
