Turkey was dowgraded to a so-called ‘grey list’ on Thursday by the Financial Action Task Force (FATF) due to its deficiencies in anti-money laundering, counter terrorist financing and proliferation financing (providing funds used in the manufacture, acquisition, or use of nuclear, chemical or biological weapons in contravention of national laws or international obligations).
Turkey is the largest economy and the only G20 country in the current list which includes tax-haven countries like Barbados, the Cayman Islands, Malta and Panama.
FATF President Marcus Pleyer indicated that Turkey needs to address “serious issues of supervision” in its banking and real estate sectors, and with gold and precious stones dealers.
“Turkey needs to show it is effectively tackling complex money laundering cases and show it is pursuing terrorist financing prosecutions (…) and prioritising cases of UN-designated terrorist organisations such as the Islamic State and al Qaeda,” he said.
The Turkish Treasury reacted to FATF’s decision with a statement and said, “Despite our work on compatibility, placing our country on the ‘grey list’ is an undeserved outcome.”
As the downgrading of Turkey is likely to have a negative impact on foreign investments which have already been in decline within the past couple of years, it could also further weigh on Turkey’s local currency which touched a record low earlier on Thursday.
FATF is the global money laundering and terrorist financing watchdog set up by the G7 group of advanced economies to protect the global financial system through international standards that aim to prevent illegal activities.
The ‘grey list’ of FATF currently includes 23 countries.