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Istanbul, Turkey – In recent weeks, the convicted Turkish gang leader Sedat Peker accused government officials of corruption and other YouTube videos that attracted millions of people, and is reviewing the loopholes that Turkish law critics say facilitate money laundering and criminal activities.
A “wealth amnesty” law that came into effect in November allows individuals and companies to repatriate previously undisclosed cash, gold, foreign currency, securities, and other assets held abroad, or declare assets held in Turkey, without Incur tax penalties.
The amnesty, supported by the ruling Justice and Development Party (AKP), ostensibly aims to boost Turkey’s economy hit by the pandemic.
Former Minister of Economy and current AK Party Member Mustafa Elitas told Al Jazeera that the government did not predict in advance how much wealth the amnesty will result in exposure. The amnesty will expire at the end of this month. However, he said that the law is still beneficial.
“This is important because it brings additional hidden sources [of wealth] Into our economy,” he said, calling on the Turks to take advantage of the amnesty.
In March of this year, President Recep Tayyip Erdogan urged Turkish citizens to seize the opportunity to cast the shadow of “our national wealth” and invest it to help the economy.
But financial crime experts and members of the Turkish opposition said the law is full of loopholes that criminals can use to cleanse ill-gotten wealth.
According to the amnesty, assets can be repatriated from abroad without asking any questions. It also allows third parties (including legal representatives, company shareholders or proxy representatives) to declare assets.
This means that overseas assets held in tax havens through shell companies can enter Turkey, with little review of how or by whom they were acquired. Assets can even be carried into the country in a suitcase and can be declared without further inquiry about their source.
Critics say this creates an opportunity for foreign criminals to use Turks to launder so-called “black” money.
“If adequate precautions are not taken, the source of funds is questioned, or the source of funds is ignored, wealth pardons may lead to the risk of introducing black money or income obtained through unregistered methods into the system,” Oya Ozarslan, President of Transparency International Turkey, told Al Jazeera.
“Considering that money laundering requires committing other crimes, such as drugs, terrorism, etc., and waiting for the opportunity to enter the system to be cleared, this risk is very important,” she added.
But supporters of the law say that such criticism is unfounded.
“This is totally wrong,” former Deputy Prime Minister Cevdet Yilmaz told Al Jazeera. “All these issues were taken into consideration when drafting the regulation. We focused on issues such as terrorist financing and illicit funds. We ruled out this situation when drafting the regulation. Therefore, they have no right to make these requirements.”
Last fall, when the law was being drafted, the Deputy Finance Minister Osman Dincbas was removed from office in January. He opposed those who opposed the amnesty and pointed out that a system to prevent money laundering had been established, including MASAK-the country The Financial Crime Investigation Committee – and the Financial Action Task Force (FATF) of the global regulator.
How much money, gold, jewelry and other valuables were brought into the country?
Deregulation to attract assets
The Wealth Amnesty came into effect in November and is the latest version of similar laws passed in 2008, 2013, 2016 and 2018. However, previous versions impose small tax penalties on disclosed assets, while the current law imposes zero tax.
Critics say that AK party legislators have repeatedly relaxed the rules not only to attract assets hidden abroad, but also to allow wealthy local supporters to repatriate undeclared wealth and disclose assets held in the country without being subject to strict rules. Review.
“Today, if someone comes to the border and claims to have 30 million euros with them, all they have to do is fill out a form for the prosecutor and the Financial Crime Investigation Commission,” said Professor Nedim Turkmen, an international financial expert. Galatasaray University transactions and Turkish tax law.
Turkmenistan pointed out that under current laws, a person can deposit money in a Turkish bank on one day and then withdraw the money on the next day to clear any criminal relationship.
“What troubles me the most is that this regulation not only aims to import assets from abroad, but also allows whitewashing of unregistered assets that may have been obtained illegally in Turkey, especially those obtained by bureaucrats and government officials through corruption and bid rigging. Assets,” he said.
During the first amnesty in 2008, more than 47 billion lire ($5.4 billion at current exchange rates) of assets were registered and more than 1.5 billion lire ($173 million) in taxes were generated. A further blow to transparency is that the amount of wealth announced under the current amnesty has not been made public.
“We don’t know how much wealth has been legalized by recent amnesties and regulations,” said Erdogan Toprak, an opposition member of the Republican People’s Party (CHP).
“How much money, gold, jewelry and other valuables have been brought into the country? The total value of these assets is no longer open to the public,” he told Al Jazeera.
Fragile economy
The Erdogan government is indeed facing an urgent need for foreign exchange and other hard assets.
Like the rest of the world, Turkey’s economy has been hit by COVID-19 lockdowns and restrictions. But it entered a pandemic on a relatively fragile basis, thanks to debt-driven growth policies that make Turkey heavily dependent on external financing and become vulnerable whenever investor sentiment is not favorable to its currency lira.
Since Erdogan fired a market-friendly central bank governor in March, the lira has depreciated by nearly 20% [File: Nicole Tung/Bloomberg]
Although Turkey was one of the few countries that actually achieved positive growth last year, the International Monetary Fund recently stated that “growth-promoting policies have also exacerbated pre-existing vulnerabilities.”
Turkey’s foreign exchange reserves have been hollowed out, and the annual inflation rate exceeds 16.5%. Since Erdogan fired a market-friendly central bank governor in March-this is his third governor in two years and shocked investors, the lira has depreciated by nearly 20%.
The rule of law issues and Erdogan’s dispute with NATO allies (especially the United States) also put pressure on the lira.
Corruption and hooliganism
Although the wealth amnesty is seen by its supporters as a way to support the Turkish economy, some critics believe that it exacerbates the country’s financial difficulties by fostering corruption among those close to the government.
Garo Paylan, a member of the opposition People’s Democratic Party (HDP), told Al Jazeera: “These are actually assets stolen from the country and the people by companies and individuals allied by the government. They transfer billions of dollars in wealth. To a tax haven.”
“Corruption, nepotism, corruption and bid manipulation are used to obtain them. The AK Party is trying to whitewash these illegal assets because it knows it will be rejected soon,” he said.
The latest amnesty also comes at a time when more and more people worry that foreign gangs are gaining a foothold in Turkey.
Headlines of murders and armed conflicts between foreign mafia organizations, especially in Istanbul, are often reported heavily in the country’s newspapers.
But the problem is not necessarily limited to foreign criminals. According to former Istanbul police chief Adil Serdar Sacan (Adil Serdar Sacan), with the help of local gangs, international gangs are gaining a foothold in Turkey.
“Without the knowledge, guarantee and support of local partners, foreign mafia members would never come to Turkey,” he told Al Jazeera.
“What we are seeing today tells us that certain circles within the existing government cooperate with the Mafia. Even the leaders of the Mafia speak so publicly,” he added.
The person accused of the crime by Peikko denied any wrongdoing.But these videos further tarnished Turkey’s already damaged image [File: Umit Bektas/Reuters]
Sedat Peker, a former underworld leader in Turkey, began posting videos in May, in which government officials including Interior Minister Suleyman Soylu were charged with unsubstantiated corruption and other criminal acts.
All those accused by Peker have denied any wrongdoing. But when it comes to illegal activities, these videos have further tarnished Turkey’s already damaged image.
For a long time, Turkey has seen heroin and human beings and weapons being trafficked from Afghanistan to Europe. The billions of dollars from these illegal companies usually end up in offshore accounts, and critics suspect that some of the funds are flowing into Turkey through the country’s wealth pardons.
Turkey is facing pressure from the FATF and needs to combat money laundering more effectively. FATF did not respond to Al Jazeera’s request for an interview.
But some people want to see the global sheriff put more pressure on Ankara.
“Independent international agencies should be more outspoken on these issues,” a senior official from the Turkish Ministry of Finance told Al Jazeera on condition of anonymity.
“I really don’t count these amnesties anymore. Enough,” he added.
Former Minister of Economy Ufuk Soylemez said that Turks who obey the law on a daily basis are also dissatisfied with the amnesty.
“Those who live an honest life and pay taxes will be offended by these amnesties,” he told Al Jazeera.
Some say that the benefits of the law pales in comparison to the damage it has caused to Turkey’s long-term economic health.
“Due to lack of transparency, democratic deficits and other negative factors, Turkey is no longer a country to invest in,” Toprak said. “This has further damaged our country’s already damaged image and scared away foreign investors.”
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