Istanbul, Turkey – YouTube videos of Turkish leader Sedat Peker accusing government officials of corruption and more have captivated millions in recent weeks and have renewed scrutiny over a Turkish law that critics say provides a convenient loophole for the money laundering and criminal activity to thrive.
A “amnesty for wealth” law that went into effect in November allows individuals and businesses to repatriate cash, gold, foreign currency, securities, and other assets held abroad, or declare assets held in Turkey, without incurring a tax penalty.
The amnesty, defended by the Justice and Development Party (AKP), aims to boost the pandemic-affected blue economy.
Mustafa Elitas, a former economy minister and member of the AK Party, told Al Jazeera that the government did not anticipate in advance the amount of wealth that would come to light due to the amnesty, which would expire. at the end of this month. But, he said, the law is still beneficial.
“It’s important because it brings additional flat sources [of wealth] in our economy, ”he said, inviting the Turks to take advantage of the amnesty.
In March, President Recep Tayyip Erdogan ordered Turkish citizens to seize the opportunity to cast out of the shadows “our national wealth” and to invest in helping 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 badly earned profits.
Under the amnesty, the goods can be repatriated from the outside without questions. It also allows third parties, including legal representatives, company shareholders, or proxy representatives, to declare assets.
This means that assets held abroad in tax havens by shell companies can find their way into Turkey with little or no scrutiny on how they were acquired or by whom. The assets can also be carried home in a suitcase and declared without further investigation into their origins.
Critics say this creates an opening for foreign criminals to use Turks to launder so-called “black” money.
“Wealth amnesty can create a risk of introducing black money or income obtained through systems not registered in the system if it is done in a way that does not take adequate precautions,” the source said. the money or ignore it, ”Turkey’s International Transparency Chair Oya Ozarslan 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 released, this risk is important,” he added.
But proponents of the law say such 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 this regulation. We focused on issues such as terrorist financing and illicit money. We discarded such scenarios when drafting the regulation. Consequently, they were not entitled to it. to make these claims ”.
Last fall, while the law was being drafted, Deputy Finance Minister Osman Dincbas, who was fired from his post in January, dismissed those who opposed the amnesty, noting that they already exist. systems in place to safeguard against money laundering, including MASAK – the country’s financial crime investigation council – and global watchdogs Financial Action Task Force (FATF).
How much money, gold, jewelry and other valuables were brought into the country?
Loosening regulations to attract assets
The amnesty for wealth, 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 assets disclosed while the law current imposes zero levies.
Critics say AK Party lawmakers have repeatedly loosened regulations not only to attract hidden goods abroad, but to allow wealthy local supporters to repatriate undeclared wealth and disclose assets held in the country without face a lot of scrutiny.
“Today, if someone comes to the border and claims to have brought 30 million euros, all they have to do is fill out a form for the public prosecutor and the Financial Crimes Investigation Council,” said Professor Nedim Turkmen, an expert in international financial transactions and Turkish tax law at Galatasaray University.
The Turkmen said that, under the current law, a person can deposit money in a Turkish bank one day and withdraw it the next to clean it from any criminal affiliation.
“What bothers me the most is that this regulation is not only intended to bring in assets from abroad, but also allows assets not already registered in Turkey that could be obtained illegally, mainly due to grafts, tender armor, etc. From bureaucrats and government officials to be whitewashed, ”he said.
During the first amnesty in 2008, more than 47 billion lire ($ 5.4 billion at current exchange rates) of assets were recorded, generating more than 1.5 billion lire (173 million dollars). ) in tax revenue. In a further blow to transparency, the amount of wealth declared under the current amnesty is not made public.
“We don’t know how much wealth has been legalized because of recent amnesties and regulations,” said Erdogan Toprak, an opposition MP with the Republican People’s Party (CHP).
“How much money, gold, jewelry and other valuables have been brought into 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 change and other hard assets.
Like the rest of the world, Turkey’s economy has been hit by COVID-19 blocs and restrictions. But it has entered the pandemic on a relatively fragile level, thanks to debt-fueled growth policies that have made Turkey highly dependent on external financing and vulnerable whenever investor sentiment turns against it. its currency, the lira.
Although Turkey was one of the few countries to record positive growth last year, the International Monetary Fund recently noted, “the same policies that stimulated growth have also exacerbated pre-existing vulnerabilities.”
Turkey’s foreign exchange reserves have been gutted, and annual inflation runs north of 16.5 percent. The lira has lost nearly 20 percent of its value since March when Erdogan shocked investors by firing a market-friendly central bank governor – the third head he had slammed the door on in two years.
Questions about Erdogan’s rule of law and shoulders with NATO allies, particularly 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 support Turkey’s economy, some critics argue that it exacerbates the country’s financial troubles by facilitating corruption by those who have close ties to the government. .
“These are actually goods stolen from the country and its people by companies and individuals allied with the government who have transferred their billion-dollar wealth into tax havens,” Garo Paylan told Al Jazeera , MP for the opposition People’s Democratic Party (HDP).
“Corruption, nepotism, grafting and tender armor were used to get them. The AK Party is trying to whitewash those 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 relying on Turkey.
The headlines of murders and armed clashes between foreign mafia groups, particularly in Istanbul, are regularly circulated 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 mafias are taking a place 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 his local comrades,” he told Al Jazeera.
“What we see today tells us that some circles in the existing government are working with the mafia. Even mafia leaders openly say that,” he added.
Sedat Peker, the former head of the Turkish gang, began posting videos in May, making incorrigible accusations of corruption and other criminal acts against government officials, including Interior Minister Suleyman Soylu.
All those accused by Peker have denied any wrongdoing. But the videos have also tarnished Turkey’s already battered image when it comes to illegal activities.
Turkey has long seen heroin trafficked across its borders from Afghanistan to Europe, as well as people and weapons. Billions of dollars from these illegal companies often end up in offshore accounts and critics suspect that some of these are finding their way into Turkey via the country’s wealth amnesties.
Turkey has faced pressure from the FATF to fight more effectively with money laundering. The FATF did not respond to Al Jazeera’s request for an interview.
But some would like to see world sheriffs bring more pressure to bear on Ankara.
“Independent international institutions need to be more vocal on these issues,” a senior official of Turkey’s finance minister told Al Jazeera, speaking anonymously.
“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 stand in comparison to the damage it is causing to Turkey’s long-term economic health.
“Because of the lack of transparency, a democratic deficit, and other negative factors, Turkey is no longer a country where to invest,” Toprak said. “This also damages the damaged image of our country and scares foreign investors.”