The Financial Action Task Force has removed Turkey from its “grey list” of countries requiring increased scrutiny of money laundering and terrorist financing because the country has made “significant progress” in fighting illegal activities in this area.
The move is expected to boost investor confidence in Turkey’s economy, which is struggling with high inflation and pressure on the currency.
“Turkey has strengthened the effectiveness of its AML/CFT [anti-money laundering and combating the financing of terrorism] “We call on the FATF to deliver on its commitments in its action plan on the strategic deficiencies it identified in October 2021,” the Paris-based organization said in a statement on Friday.
Turkey last month held talks with the FATF, an international body that fights money laundering and terrorist financing, to evaluate its strategy on tackling illicit financial activities after the FATF said in February that “Turkey has substantially completed its action plan.”
However, the country “must continue to work with the FATF to improve its AML/CFT systems, including continuing to monitor NPOs.” [non-profit organisation] “The sector is risk-based and compliant with FATF standards.”
Turkish Vice President Cevdet Yilmaz told XTV the move would bolster international investors’ confidence in the country’s financial system.
He added that the decision would have “highly positive outcomes” for the financial sector and “will accelerate international resource inflows and have a positive impact on borrowing costs.”
Rania Güle, a market analyst at XS.com, agreed that the move could improve Turkey’s economic outlook and make the country more attractive to foreign investment.
“This will have a positive impact on China’s status and economic strategy through improved reputation, increased foreign direct investment, improved credit rating, lower borrowing costs and facilitated international trade,” she said.
Money laundering and terrorist financing are among the biggest problems in the financial world, and criminal activity in one country can have serious cross-border and sometimes global repercussions, according to an International Monetary Fund report last year.
The FATF was established in 1989 by the G7 countries to lead global efforts to combat money laundering, terrorism and proliferation financing.
The 39-member organization sets international standards to enable national authorities to effectively combat finances linked to drug trafficking, illicit arms trade, cyber fraud and other serious crimes.
More than 200 countries and jurisdictions have committed to adopt the FATF’s standards, which are evaluated with the help of nine associate member organizations and other international partners such as the IMF and the World Bank.
According to data from the European Union’s law enforcement agency Europol, money laundering activities have tainted between 715 billion euros ($765.7 billion) and 1.87 trillion euros of global GDP, equivalent to 2% to 5% of total global economic activity.
Getting off the FATF grey list was crucial for Turkey, which is facing chronic inflation after years of unorthodox policies under President Recep Tayyip Erdogan, who after winning elections last year set up a new team to stabilize the economy and curb consumer prices.
However, Turkey’s National Statistics Agency reported this month that inflation had jumped to 75.45 percent last month, although the Turkish government expects the economy to improve steadily and for inflation to fall to around 36 percent by the end of the year.
The Turkish lira is one of the worst-performing emerging market currencies tracked by Bloomberg.
On March 21, Turkey’s central bank made an unexpected interest rate hike, raising the benchmark rate to 50% from 45%, further tightening monetary policy to combat high inflation.
In May, S&P Global Ratings raised its credit rating outlook for Turkey, expecting the government’s more balanced approach to its strategy to boost confidence in the Turkish economy.
“Being on the grey list has made it harder for the Turkish government to attract foreign investment, especially at a time when the country is already facing financial and economic challenges,” Güle said.
The FATF on Friday removed the Caribbean island nation of Jamaica from its grey list, citing progress the country has made in combating money laundering.
“Jamaica has strengthened the effectiveness of its AML/CFT regime to meet its commitments in its Action Plan on strategic deficiencies identified by FATF in February 2020,” the FATF said.
Updated: June 28, 2024 12:49 PM
