Istanbul, Turkey – YouTube videos of Turkish mafia boss convicted Sedat Peker of accusing government officials of corruption and more have captivated millions in recent weeks and renewing review of Turkish law critics say provides convenient opportunity to thrive money laundering and criminal activity.
A “wealth amnesty” law that came into force in November allows people and companies to repatriate cash, gold, foreign exchange, securities and other previously undisclosed assets abroad or declare assets in Turkey, without incurring in a tax penalty.
The amnesty, defended by the ruling Justice and Development Party (AKP), is apparently aimed at boosting the economy affected by Turkey’s pandemic.
Former Economy Minister and AK party MP Mustafa Elitas told Al Jazeera that the government did not anticipate the amount of wealth that would come to light as a result of the amnesty, which would expire at the end of ‘this month. But, he said, the law is still beneficial.
“It is important because it provides additional hidden sources [of wealth] in our economy, “he said, urging Turks to take advantage of the amnesty.
In March, President Recep Tayyip Erdogan urged Turkish citizens to seize the opportunity to pull “our national wealth” out of the shadows and invest it to help the economy.
But financial crime experts and members of Turkey’s opposition say the law is full of loopholes that criminals can use to launder ill-gotten gains.
Under the amnesty, property can be repatriated from abroad without asking any questions. It also allows third parties, including legal representatives, company shareholders or delegated representatives, to declare assets.
This means that assets held abroad in tax havens through commercial companies can reach Turkey with little or no control over how they were acquired or by whom. They can even transport goods to the country with a suitcase and declare them without further investigation into their origins.
Critics say this creates an opening for foreign criminals to use the Turks to launder so-called “black” money.
“Wealth amnesty can create a risk of introducing black money or unrecorded income into the system if it is done in a way that does not take the proper precautions, questions the source of the money or ignores it,” he said. say the chair Transparency International Turkey Oya Ozarslan told Al Jazeera.
“Given that money laundering requires committing other crimes such as drugs, terrorism, etc. and waiting for the opportunity to enter the system to be clarified, that risk is important,” he added.
But supporters of the law say these criticisms are unfounded.
“This is completely false,” former Deputy Prime Minister Cevdet Yilmaz told Al Jazeera. “All these issues were taken into account when drafting these regulations. We focused on issues such as terrorist financing and illicit money. We ruled out these scenarios when drafting the regulation. As a result, they have no right to make such claims. “
Last fall, while the law was being drafted, Deputy Finance Minister Osman Dincbas, who was removed from office in January, pushed back those who opposed the amnesty, noting that systems already existed. to protect against money laundering, including MASAK. – The country’s financial crime investigation commission – and global oversight body, the Financial Action Task Force (FATF).
How much money, gold, jewelry and other valuables were brought into the country?
Loosening of regulations to capture assets
The wealth amnesty, which came into force in November, is the latest iteration of similar laws passed in 2008, 2013, 2016 and 2018. But previous versions imposed a small tax penalty on disclosed assets, while the current law imposes zero taxes.
Critics say AK Party lawmakers have dropped regulations on several occasions not only to attract hidden assets abroad, but to allow wealthy local supporters to repatriate undeclared wealth and disclose assets that remain inside of the country without having been the object of great control.
“Today, if someone arrives at the border and claims to have contributed 30 million euros, all they have to do is fill out a form for the public prosecutor and the Financial Crimes Investigation Board,” said Professor Nedim Turkmen, expert in international financial resources. transactions and Turkish tax law at Galatasaray University.
The Turkmen pointed out that, under current law, a person can deposit money in a Turkish bank one day and withdraw it the next day to clear any criminal affiliation.
“What bothers me the most is that this regulation is not only aimed at incorporating foreign assets, but also allows the laundering of unregistered assets that are already in Turkey and that could be obtained illegally, especially through grafts. , bidding apparatus, etc. “He said.
During the first amnesty of 2008, more than 47 billion lire ($ 5.4 billion at current exchange rates) of assets were recorded, generating tax revenues in excess of 1.5 billion lire ($ 173 million). In a new round of transparency, the amount of wealth declared under the current amnesty is not made public.
“We don’t know how much wealth was legalized as a result of the recent amnesties and regulations,” said Erdogan Toprak, a Republican People’s Party (CHP) opposition MP.
“How much money, gold, jewelry and other valuables were brought to the country? The total value of the assets is no longer available to the public, “he told Al Jazeera.
A fragile economy
The Erdogan government faces an urgent need for foreign exchange and other strong assets.
Like the rest of the world, Turkey’s economy was affected by the blockades and restrictions of COVID-19. But it entered the pandemic on a relatively fragile basis, thanks to debt-driven growth policies that have made Turkey heavily dependent on external financing and vulnerable whenever investor sentiment turns against its currency, the lira.
While Turkey was one of the few countries to record positive growth last year, the International Monetary Fund recently noted that “the same policies that drove growth also exacerbated pre-existing vulnerabilities.”
Turkey’s foreign exchange reserves have been wiped out and annual inflation extends north of 16.5 percent. The lira has lost nearly 20 percent of its value since March, when Erdogan surprised investors by ousting a market-friendly central bank governor, the third head who had shown the door in two years.
Issues of the rule of law and Erdogan’s disputes with NATO allies, most notably the United States, have also put pressure on the lira.
Corruption and gangsters
While the amnesty for wealth is framed by its supporters as a way to boost Turkey’s economy, some critics argue that it exacerbates the country’s financial problems by facilitating the corruption of those who have close ties to the government.
“They are, in fact, property stolen from the country and its people by companies and allies of the government who transferred the wealth of their millions of dollars to tax havens,” Garo Paylan, a member of the Peoples Democratic Party, told Al Jazeera ( HDP) of the opposition.
“Corruption, nepotism, grafting and tender mating were used to obtain them. The AK Party is trying to launder these illicit assets because it knows it will be voted on soon, ”he said.
The latest amnesty also comes amid growing concern that foreign gangsters are increasingly based in Turkey.
The headlines of assassinations and armed clashes between foreign mafia groups, especially in Istanbul, are regularly spread in the country’s newspapers.
But the problem is not necessarily limited to foreign criminal elements. According to former Istanbul police chief Adil Serdar Sacan, international mobsters are settling in Turkey with the help of local gangsters.
“A member of the foreign mafia would never come to Turkey without the knowledge, guarantee and support of its local partners,” he told Al Jazeera.
“What we see today tells us that certain circles of the existing government work together with the mafia. Even mafia leaders say so openly, ”he added.
Sedat Peker, the former head of Turkish gangs, began posting videos in May, making unsubstantiated allegations of corruption and other criminal acts against government officials, including Interior Minister Suleyman Soylu.
All the accused by Peker have denied any offense. But the videos have further tarnished Turkey’s already battered image when it comes to illicit activities.
Turkey has long seen heroin trafficking across its borders, from Afghanistan to Europe, as well as people and weapons. Billions of dollars of these illegal companies often end up in offshore accounts and critics suspect that some are heading to Turkey through the country’s wealth amnesties.
Turkey has faced pressure from the FATF to combat black money laundering more effectively. The FATF did not respond to Al Jazeera’s request for an interview.
But some would like the world sheriffs to put more pressure on Ankara.
“Independent international institutions should be more vocal on these issues,” a senior Turkish finance ministry official told Al Jazeera, speaking on condition of anonymity.
“I really stopped counting the number of these amnesties. That’s enough, “he added.
Former economy minister Ufuk Soylemez said the amnesty is also frowned upon by law-abiding Turks.
“People who earn an honest living and pay their taxes feel offended by these amnesties,” he told Al Jazeera.
And some say the benefits of the law are pale compared to the damage it is causing to Turkey’s long-term economic health.
“Due to lack of transparency, democratic deficit and other negative factors, Turkey is no longer a country to invest in,” Toprak said. “This further harms the already damaged image of our country and scares foreign investors.”