“Politically Exposed Person” has finally been defined under the Financial Crimes Investigation Board Legislation

Introduction

As per the Financial Crimes Investigation Board General Communiqué No. 21 (the “Communiqué“) published in the Official Gazette dated 17 November 2022 and numbered 32016, which has taken immediate effect, the concept of politically exposed person (the “PEP”) has been introduced to Turkish law for the first time under the secondary legislation of the Law No. 5549 on the Prevention of Laundering Proceeds of Crime. The changes brought about by the Communiqué will be briefly explained within the scope of this note.

Background of and Changes brought about by the Communiqué

According to the standards of the Financial Action Task Force (the “FATF”) as well as the European Union’s directive 2015/849 of 20 May 2015, PEP refers to individuals/natural persons who are or have been entrusted with a prominent public function. FATF recommends that financial institutions be required, in relation to foreign PEPs whether as customer or beneficial owner, to put certain additional measures in place.

Though being a member state of the FATF, Türkiye did not follow the recommendations of the FATF standards on PEP and did not introduce the recommended regulations under its national legislation. Having said that, this issue has finally been cleared up and tightened measures in relation to PEP have been brought under the Communiqué. Newly introduced significant provisions in this regard are as follows:

• High-level real persons to whom an important public duty is/has been entrusted by election or appointment in Türkiye or in a foreign country, as well as the board members of international organisations, senior executives and other persons who have an equivalent duty, will be considered as PEP.

• Financial institutions, certain non-financial businesses or professions, and crypto-asset service providers will be considered as “obliged parties” under the Communiqué.

• Obliged parties under the Communiqué will be responsible for putting reasonable measures in place to determine whether the customer or beneficial owner is a PEP. If determined as such,

• If business relationships and transactions with PEPs elected or appointed by a foreign country, or their spouses, first degree relatives or close associates; in any case,

• If PEP is a person elected or appointed by Türkiye or is/has been entrusted with a prominent function by an international organisation; only if the business relationships and transactions which are performed by PEP herself/himself or their spouses, first degree relatives or close associates, are considered as highly risky,

the following measures will be applied in minimum:

• Obtaining senior management approval for establishing a business relationship, or continuance of a current business relationship or carrying out a specific transaction;

• Taking reasonable measures to detect the source of assets and funds owned by these persons or subject to the relevant transaction; and

• Keeping a close watch on the business relationship by increasing the number and frequency of controls applied and identifying the transaction types that require additional control.

• In the event that PEPs leave their respective duties or lose these qualifications, the implementation of the measures summarised above will remain for at least one year from the date of their leave from duties or loss of these qualifications. This period may be extended if the transactions or business relationships with these persons pose a risk.

Conclusion

Bearing in mind that the Communiqué has imposed new requirements on the obliged parties under the Communiqué and that such requirements have already come into effect, it is crucial for the relevant obliged parties to put immediately the necessary measures in place with a view to complying with the aforesaid obligations. Therefore, the compliance programs of the relevant obliged parties should be adjusted, and obligations relating to know your customer procedures and suspicious transaction reports should be fulfilled in accordance with the measures mentioned above.

Finally, we recommend that the obliged parties keep a close eye on the upcoming legislative developments since the Financial Crimes Investigation Board is expected to issue a guideline relating to the implementation of the Communiqué.

Yours sincerely,

Vardar Şanlı

This note has been prepared in accordance with the legislative developments occurred until 17 November 2022 for general information purposes only and not for advertising purposes, and it does not contain any case-specific legal advice.