Republic of Turkey Ministry of Finance Masak

REPUBLIC OF TURKEY MINISTRY OF FINANCE MASAK

ACTIVITY REPORT 2011

ANKARA – MAY 2012

TABLE OF CONTENTS

PRESIDENT’S STATEMENT ...... 3 I. COMBATING AGAINST LAUNDERING PROCEEDS OF CRIME AND FINANCING OF TERRORISM ...... 5 II. OVERALL INFORMATION ON MASAK ...... 7 A. Vision and Mission ...... 7 B. Power, Functions and Responsibilities ...... 7 C. Administrative Structure Information ...... 8 1. Position in the Ministry and Organizational Structure ...... 8 2. Human Resources ...... 11 III. PURPOSE AND OBJECTIVE ...... 15 A. Purpose and Objective ...... 15 B. Essential Priorities ...... 15 IV. INFORMATION AND ASSESSMENTS ON ACTIVITIES ...... 15 A. Fiscal Information ...... 15 B. Information on Performance...... 17 1. Regulation and Coordination Activities ...... 17 1.1. Regulation Activities ...... 17 1.2. Coordination Activities ...... 18 1.3. Other Activities ...... 18 2. Studies for Detection and Prevention of Laundering and Financing of Terrorism ...... 19 2.1. Data Collection Activities ...... 19 2.1.1. Suspicious Transaction Reports ...... 20 2.1.2. Requests for Evaluations and Examinations made by Public Prosecutor’s Offices and Courts………… ...... 25 2.1.3. Other Reports ...... 26 2.1.4. Information Requests ...... 29 2.2. Analysis, Evaluation and Examination Activities ...... 30 2.2.1. Analysis and Evaluation...... 31 2.2.1.1. Analysis and Evaluation Studies regarding Laundering Offence ...... 31 2.2.1.1.1. Institutions that are informed after the analysis and evaluation works ...... 35 2.2.1.1.2. Subjects of Predicate Offences Revealed After Analysis and Evaluation Works ...... 36 2.2.1.2. Analysis and Evaluations related to Terrorist Financing Offence ...... 38 2.2.1.2.1. Institutions Informed after the Analyses and Evaluations ...... 40 2.2.1.3. General Analysis Works ...... 41 2.2.1.3.1. Strategic Analysis and Evaluation Works ...... 41 2.2.2. Examinations of Laundering Offence ...... 41 3. Activities of Supervision of Obligations ...... 45 3.1. Programmed Supervisions of Compliance to Obligations ...... 45 3.2. Examinations of violations of obligations and administrative fines imposed ...... 46 3.3. Judicial Penalties ...... 47 4. Activities Related to Foreign Relations ...... 47 4.1. FATF -Turkey III. Round Mutual Evaluation Process ...... 47 4.2. The Process of “International Cooperation Review Group (ICRG) in FATF Turkey Relation ...... 48 4.3. Memorandums of Understanding (MOUs) Signed with Counterpart Institutions ...... 50 4.4. Meetings Abroad ...... Hata! Yer işareti tanımlanmamış.0 5. Training Activities and Other Activities for Increasing Public Awareness ... 51 5.1. In-house Trainings ...... 51 5.2. Training Activities for Obliged Parties and Other Public Institutions ...... 52 5.3. Other Activities for Increasing Public Awareness...... Hata! Yer işareti tanımlanmamış.3 6. MASAK Information Systems and Project Activities ...... Hata! Yer işareti tanımlanmamış.3 C. Performance Results ...... Hata! Yer işareti tanımlanmamış.3 1. Table on Performance Results ...... Hata! Yer işareti tanımlanmamış.3 2. Evaluation of Performance Results ...... Hata! Yer işareti tanımlanmamış.3 3. Evaluation of the Performance Information System ...... Hata! Yer işareti tanımlanmamış. V. EVALUATION OF THE INSTITUTIONAL CAPABILITY AND CAPACITY ... Hata! Yer işareti tanımlanmamış. A. Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis ... Hata! Yer işareti tanımlanmamış. VI. CONCLUSION ...... Hata! Yer işareti tanımlanmamış.

PRESIDENT’S STATEMENT

Financial Crimes Investigation Board (MASAK) continued its activities intensively in 2011 as well in combating money laundering and financing of terrorism; analysis, evaluation and referral of data to relevant units obtained in relation to offences of money laundering and financing of terrorism that are main functions of a financial intelligence unit; regulation and coordination; money laundering investigations, inspections of obligations; training obliged parties and law enforcement units and informing them.

Training activities for the purpose of enhancing awareness and effectiveness of employees of obliged parties of obligations known as “preventive measures” in fighting against money laundering and financing of terrorism and in implementing these measures remained in 2011 intensely following establishment of Training Group in MASAK. Furthermore, closer and face- to-face works were performed with banks and other financial institutions in 2011 in order to enhance suspicious transaction report system and evaluate inspection of obligations. In this scope, workshops attended by compliance officers and officials from banks, insurance companies, capital market board brokers, portfolio management companies, factoring and financial leasing companies were organized separately in Ankara and Istanbul in different dates. The workshops were held with broad participation of obliged parties and it was decided to hold workshops periodically. As a result of training activities and workshops, financial institutions besides banks sending suspicious transaction report increased to 91 in 2011 compared to 49 in 2010. Moreover, the workshops realized with participation of examiners firstly in 2011 aimed at evaluating money laundering investigations and inspection of obligations, and effectiveness of inspections.

On the other hand, in 2001, training activities where we passed our experience and background were carried out for TRNC, Turkmenistan and Afghanistan authorities for the purpose of making contribution to their establishment works of institutional and legal substructure in fighting against money laundering and financing of terrorism.

MASAK completed two programs on inspection of obligation in 2011. The first one covered 77 obliged parties and the second one included inspection of 43 obliged parties remained from previous years’ inspection programs initiated.

While the rate of analysis and evaluation files of money laundering offence concluded by Finance Experts of MASAK in 2010 was 58%, it increased to 79% in 2011. On the other hand, as a result of analysis and evaluations of money laundering offence, various institutions were informed of 3.189 persons within the framework of the offences in their field. Furthermore, MASAK referred/denounced 177 persons to Public Prosecutor’s Offices on the ground of commitment of laundering offence as a result of evaluations and examinations completed in 2011.

Following analysis and evaluations carried out by MASAK related to the offence of financing of terrorism, we shared information about 987 natural and legal persons with concerned institutions in 2011.

Activities of promoting cooperation with counterpart units in foreign countries continued in 2011 and MoUs were signed with financial intelligence units of Belarus, United Kingdom, Canada, Monaco, Finland and Austria for the purpose of cooperation in combatting money laundering and financing of terrorism.

Final acceptance procedure of “The Project on Strengthening the Fight against Money Laundering, Information Technologies and Analytic Tools” carried out by MASAK were completed in February 2011. Following final acceptance process, service procurement projects were prepared, updating processes of the versions of security and shelfware systems were concluded and technical support service for available hardware, network equipment and shelfware/special software were finalized.

Furthermore, 13 assistant experts took Office in February 2011 in the framework of the activities promoting capacity of human resources of MASAK.

I hope the 2001 Activity Report covering the information about the actions performed by MASAK will be successful within the context of fulfilling the function of informing public and on this occasion thanks my workmates for their efforts on preparing the report.

Ankara, / /2012

Mürsel Ali KAPLAN President of MASAK

I. COMBATING AGAINST LAUNDERING PROCEEDS OF CRIME AND FINANCING OF TERRORISM

Broadly, laundering means inserting ill-gotten gains into the economic system by legitimizing them via disguising their illegal origin and changing their nature. The main purpose in distinguishing laundering offence from the predicate offence which forms the origin of it is to prevent offences committed to get gains by depriving those who benefit from proceeds of crime from these gains. Therefore, fight against laundering offence is accepted as an important instrument for the fight against predicate offences. to get gains by depriving those who benefit from Broad Fight against money laundering has two dimensions which are preventive and repressive measures. Repressive measures with respect to detection of criminal and proceeds of crime after commission of crime covers criminalization of money laundering, detection, investigation, trial and conviction of launderers, detection, tracing, seizure and confiscation of laundered assets were regulated by the Turkish Criminal Code No. 5237.

Since, developments in IT and variations in financial instruments have caused the economic system, especially financial activities, to become faster, more complex and borderless, which has created opportunities for money launderers and financers of terrorism. Thus, measures for preventing proceeds of crimes from being inserted in the economic system has become more important than ever in the fight against money laundering and the financing of terrorism.

In this framework, effective implementation of preventive measures by obliged parties such as CDD, STR, internal control and internal audit, risk management and assigning compliance officer set forth for the purpose of fighting against laundering of proceeds of crime and financing of terrorism ensures prevention of laundering activities before commission and use of financial system as a means of commission of these offences.

International regulations have also emphasized on the importance of preventive measures in the fight against laundering proceeds of crime and financing of terrorism and the countries have been called to take necessary measures in this scope.

The United Nations Convention against Transnational Organized Crime (Palermo Convention) prepared by the UN in 2000 for the purpose of preventing transnational organized crimes and enhancing cooperation among countries within this framework and to which Turkey became a party on 30.01.2003 is the first instrument prepared for fight against organized crimes and includes preventive measures for combating money laundering. The Convention also deals with preventive measures aspect of the issue by requiring banks, non-bank financial institutions and other bodies particularly susceptible to money-laundering to implement customer identification, record-keeping and suspicious transaction reporting measures and thus required countries to make necessary legal regulations within this framework.

The financing of terrorism means providing or collecting funds willfully and knowingly that they will be used in committing terrorist activities. It is vitally important in the fight against terrorism to eliminate financial sources of terrorist organizations and to prevent distribution channels of the funds acquired. Beside classical measures and implementations in the fight against terrorism which gained an international dimension and has reached significant amounts of funds, financial sources of terrorist organizations should be eliminated as well. This requirement has added the dimension of “the fight against financing of terrorism” to the fight against terrorism.

On the other hand, International Convention for the Suppression of the Financing of Terrorism prepared by the UN in 1999 for the purpose of developing cooperation among countries to adopt and establish effective measures for preventing the financing of terrorism and to which Turkey became a party on 10.01.2002 also deals with preventive measures within the framework of the fight against the financing of terrorism, and countries are called upon to take measures requiring financial institutions and other professions involved in financial transactions to utilize the most efficient measures available for the identification of their usual or occasional customers, as well as customers in whose interest accounts are opened, and to pay special attention to unusual or suspicious transactions and report transactions suspected of stemming from a criminal activity, and states are called upon to audit all fund transfer institutions for the prevention of terrorist financing and to take measures to detect or monitor the physical cross-border transportation of cash and bearer negotiable instruments, subject to strict safeguards to ensure proper use of information and without impeding in any way the freedom of capital movements.

In this respect, essential preventive measures related to money laundering and the financing of terrorism are dealt with in Turkey by the Law No. 5549 on Prevention of Laundering Proceeds of Crime. A general framework for these measures has been drawn by the Law upon a legal basis and detailed legal arrangements has been set forth to be made by secondary legislation considering variations in financial instruments and the number of laundering methods increasing day by day.

Within this framework, the Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism, the Regulation on Compliance with Obligations of Anti-money Laundering and Combating the Financing of Terrorism and MASAK General Communiqués No. 5, 6, 7, 8, 9 were issued. 1999 for the purpose of developing cooperation among countries to adopt and establish effective measures for preventing the financing of terro Preventive measures are defined in detail in the “Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism” which was published in the Official Gazette No 26751 on 09.01.2008. Detecting customers, business relationships and transactions considered to be highly risky in terms of money laundering and the financing of terrorism is listed as a measure required to be taken in addition to customer identification for customer due diligence which is the most important element in the prevention of laundering offence. Also, the requirement of suspicious transaction reporting which is one of the main elements of preventive measures is rearranged in the Regulation, and obliged parties are required to pay special attention to complex and unusually high-amount transactions, thus, ensuring monitoring of this kind of transactions.

Prepared for ensuring the compliance with obligations within a system to be established by obliged parties and depending on the Law No 5549, Article 5 on “Training, Internal Control, Audit and Risk Management Systems and other measures”, the Regulation on Compliance with Obligations of Anti-money Laundering and Combating the Financing of Terrorism includes provisions for compliance program to be established by each obliged party with a risk based approach. This provision is essentially for ensuring the effectiveness of preventive mechanism in combating money laundering and aims at ensuring that obliged parties pay the necessary attention and care for preventing money laundering and the financing of terrorism.

Issues related to preventive measures defined in the “Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism” and the “Regulation on Compliance with Obligations of Anti-money Laundering and Combating the Financing of Terrorism” are regulated in detail in MASAK General Communiques.

In this respect, ‘simplified measures’ required to be obeyed by obliged parties about CDD principles are defined in MASAK General Communique No.5; explanations for effective, timely and proper ‘suspicious transaction reporting’ by obliged parties under the scope of AML/CFT are defined in MASAK General Communique No.6; explanations regarding making customer identification information of obliged parties’ customers with permanent business relationship in line with the Regulation and other explanations regarding customer identification are defined in MASAK General Communique No.7.

The period for making customer identification information of obliged parties’ customers with permanent business relationship in line with the Regulation determined by the Communique 7 has been expanded with MASAK General Communique No 8. On the other hand, MASAK General Communique No 9 has amended Communique No 5 on “simplified measures.”

II. OVERALL INFORMATION ON MASAK

A. Vision and Mission

MASAK’s vision and mission has been defined as follows.

Vision: The vision of MASAK is to become a leading institution that helps to create an efficient economy and a clean society by effectively combating laundering proceeds of crime and the financing of terrorism.

Mission: For the prevention and detection of money laundering and the financing of terrorism, to contribute to making policies and legal arrangements; to gather information and to analyse it fast and reliably, carrying out research and investigation and to send acquired information and results to relevant authorities.

B. Power, Functions and Responsibilities

After the Law No. 4208 on Prevention of Money Laundering entered into force on 19.11.1996, Financial Crimes Investigation Board (MASAK) was established on 17.021997 and our country became one of those fighting against money laundering. Having started operating on 17 February 1997, MASAK is an administrative unit attached to the Minister of Finance and its powers and functions were initially defined in the Law No. 4208.

Powers and functions of MASAK were redefined in Article 19 of the Law No. 5549 on Prevention of Laundering Proceeds of Crime which entered into force on 18 October 2006 by being published in the Official Gazette No. 26323. Accordingly, MASAK fulfils the following essential services:

• To develop policies and implementation strategies, to coordinate institutions and organizations, to conduct collective activities, to exchange views and information for the prevention of laundering proceeds of crime. • To prepare law, by-law and regulation drafts in accordance with the policies determined, to make regulations for the implementation of Law 5549 and related decisions of Council of Ministers. • To carry out researches on the developments and trends on laundering proceeds of crime and on detection and prevention methods. • To make sector-specific studies, to develop measures and to monitor the implementation for the prevention of laundering proceeds of crime. • To carry out activities to raise public awareness and support. • To collect data, to receive suspicious transaction reports, to analyze and evaluate them in the scope of prevention of laundering proceeds of crime and terrorist financing. • To request for examination from law enforcement and other relevant units in their fields, when required during the evaluation period. • To carry out or to have carried out examinations on the subject matters of Law 5549. • To denounce files to the Chief Public Prosecutor’s Office for the necessary legal actions according to the Criminal Procedure Law in the event of detecting serious findings as a result of the examination that a money laundering offence has been committed. • To examine the cases conveyed from Public Prosecutors and to fulfill the requests related to the determination of money laundering offence. • To convey the cases to the competent Public Prosecutor’s Office in cases where serious suspicion exists that a money laundering or terrorist financing offence has been committed. • To ensure inspection of obligations within the scope of Law 5549 and relevant legislation. • To request all kinds of information and documents from public institutions and organizations, natural and legal persons, and unincorporated organizations. • To request temporary personnel assignment from other public institutions and organizations within the Presidency, when their knowledge and expertise is necessary. • To carry out international affairs, to exchange views and information for the subjects in the sphere of its duties. • To exchange information and documents with counterparts in foreign countries, and for this purpose, to sign memoranda of understanding which are not in the nature of an international agreement.

C. Administrative Structure Information

1. Position in the Ministry and Organizational Structure

According to subparagraph (g) of Article 8 in Decree Law no. 178 on Organization and Duties of Ministry of Finance, MASAK is a “main service unit” within the Ministry of Finance, and according to Article 19 of Law no. 5549 shall work directly attached to Minister of Finance.

MASAK carries out its functions through vice presidents and heads of departments attached to the President of MASAK and departments of Foreign Relations, Monitoring Legislation and Coordination, Training, Data Collection, Data Entry, Inspection of Obligations, Analysis and Evaluation related to Laundering Offence, Examination of Laundering Offence, Analysis and Evaluation related to Financing of Terrorism, General Analysis Groups and branches of Informatics, Human Resources and Administrative and Fiscal Affairs attached to them.

Figure 1- MASAK’s Position within the Ministry of Finance

0.01.2002 also deals with preventive measures within the framework

Financial intelligence units are main organs of fight against laundering proceeds of crime and the financing of terrorism which undertake significant functions in this fight.

In its Recommendation 26, FATF requests countries to establish a national and central authority that receives and analyses STRs and sends them to relevant units.

Within this framework, as the Turkish Financial Intelligence Unit, MASAK undertakes regulatory, supervisory and training functions as well as basic FIU functions. MASAK organization chart is given below in Chart 2.

Figure 2 – MASAK Organization Chart Chart 2 –e measures requiring financial institutions and other professions involved in fi

2. Human Resources Total number of personnel working at MASAK is 174. The following table gives information on dispersion of personnel within the organization.

Table 1 – Dispersion of Personnel (2003-2011)

Years Administrative Finance Finance Tax IT Staff Other Total Staff Expert Assistant Inspector (***) Staff (*) (**) Expert (***) 2003 6 24 27 3 8 45 113 2004 7 35 17 7 8 42 116 2005 7 41 9 7 11 51 126 2006 13 42 15 6 10 52 138 2007 13 40 22 3 12 56 146 2008 12 43 20 4 12 63 154 2009 13 44 21 3 12 68 161 2010 15 54 21 4 13 65 172 2011 15 54 28 4 11 62 174

(*) President, Vice President, Head of Department, Director of Branch (1 Finance Expert is Director of Branch). (**)The title of ‘Financial Crimes Investigation Expert’ was amended as ‘Finance Expert’ under the Decree No: 659 in the Official Gazette published on 02/11/2011. (***) IT Director, Engineer, Analyst, Programmer, Computer Operator. (****) Chief, Translator, Revenue Expert, Data Preparation and Control Operator, Civil servants, Technician, Distributor, Servant.

Chart 1 – Dispersion of the Personnel as per titles

15190001900r0l; 9% 62; 36% 23190001900r0l; 31%

11; 6% 4190001900r0l; 2% 28; 16%

Administrative Staff Finance Expert Finance Ass. Exp. Tax Inspector IT Staff Other Staff

Table 2 – Numbers of Personnel As Per Titles

Title Number of Personnel

President 1 Vice President 2 Head of Department 7 Director of Branch 5 IT Director 1 Finance Expert 54 Finance Assistant Expert 28 Tax Auditor 4 Revenue Expert 15 Translator 4 Engineer 3 Analyst 2 Programmer 3 Computer Operator 2 Data Preparation and Control Operator 26 Chief 4 Technician 2 Driver 1 Distributor 4 Servants 6 174 Permanent Staff 131 Contract Staff 1 Interim Staff at MASAK 42 TOPLAM 174 Staff on Unpaid Leave 4 De facto Available : 170 , as well as customers in whose interest accounts are opened, and t special attention to unusual or suspicious transactions and report transactions suspected of stemming from a criminal Table 3 – Personnel’s Age Profile (31.12.2011)

Age Number 20-29 23 30-39 76 40-49 56 50-59 19 Total 174

Chart 2– Dispersion of the Personnel As Per Their Ages (31.12.2011)

19; 11% 23; 13%

56; 32% 76; 44%

20-29 30-39 40-49 50-59

The following table gives information on Public Staff Foreign Language Knowledge (KPDS) level of MASAK Personnel.

Table 4 - Public Staff Foreign Language Knowledge (KPDS) level of MASAK Personnel*

KPDS A Level KPDS B Level KPDS C Level 5 27 45

(*)= 1 Translator-Interpreter knows English at A level and French at B level.

III. PURPOSE AND OBJECTIVE

A. Purpose and Objective

MASAK’s strategic objective is “to prevent laundering proceeds of crime and the financing of terrorism” under the scope of the strategic purpose of “Preventing Criminal Economy, Corruption and Unrecorded Economy” defined in the revised 2008-2012 Strategic Plan announced in 2008 by the Ministry.

B. Essential Priorities

MASAK will give priority to the following activities in 2011 in order to achieve the strategic purpose and objective:

 To carry out activities for widespread and better electronic suspicious transaction reporting.  To organize activities for enhanced communication and cooperation with examiners for the purpose of increasing effectiveness in money laundering examinations and inspections of obligations.  To accomplish as soon as possible the analysis and evaluation of referrals and STRs related to money laundering and terrorist financing.  To organise trainings for raising awareness of financial institutions and other obliged groups on obligations known as “preventive measures” in the fight against money laundering and the financing of terrorism.  To perform inspection of compliance with obligations within obliged parties for ensuring them to comply with the obligations established under the scope of AML/CFT.  To Carry out activities for improving existing modules and developing new applications for more effective analysis and evaluation of STRs received related to laundering proceeds of crime and the financing of terrorism.  To sign Memoranda of Understanding with FIUs of other countries allowing to exchange information for intelligence in order to ensure international cooperation.

IV. INFORMATION AND ASSESSMENTS ON ACTIVITIES

A. Fiscal Information

The following table gives information on the General Budget and allocated allowances and expenditures of MASAK within the last five years.

Table 5- Economic Classification of Budget Allowance Allocations and Expenditures (Turkish Liras)

2003 2004 2005 2006 2007 2008 2009 2010 2011

Economic Type of Budget Classificati Expenditures on Allowa Expendi Allowa Expendi Allowa Expendi Allowa Expendi Allowa Expendi Allowa Expendi Allowa Expendi Allowa Expendi Allowa Expendi nce ture nce ture nce ture nce ture nce ture nce ture nce ture nce ture nce ture

Expenditures for 01 1.253.600 1.442.590 2.018.800 2.180.382 2.299.000 2.429.195 2.722.500 2.587.895 3.056.500 2.854.782 3.480.428 3.480.427 4.001.300 3.857.398 4.415.800 4.403.254 5.464.000 5.337.029 the Staff

State Premium Payments to 02 313.400 360.647 115.700 126.280 140.000 158.595 198.800 194.382 617.100 251.740 293.020 285.025 338.100 326.949 547.520 544.247 664.000 643.332 Social Security Institution

Goods and 03 Services 826.000 173.596 527.046 255.769 545.000 268.134 568.100 245.794 727.200 372.219 530.500 385.148 671.400 497.195 608.001 566.046 793.000 723.466 Purchase

Current 04 30.000 18.149 20.010 19.346 20.974 19.391 21.000 18.571 31.000 27.937 51.500 51.379 66.500 64.399 78.000 73.723 113.500 107.598 Transfers

Capital 05 1.720.000 521.307 202.066 0 144.525 0 0 0 0 0 0 0 0 0 1.500.000 1.464.333 3.500.000 3.280.400 Expenditures

Capital 06 0 0 1.914.000 1.914.000 321.880 0 0 0 0 0 0 0 0 0 0 0 0 0 Transfers

10.534.50 4.143.000 2.516.289 4.797.622 4.495.777 3.471.379 2.875.315 3.510.400 3.046.642 4.431.800 3.506.678 4.355.448 4.201.979 5.077.300 4.745.941 7.149.321 7.051.603 10.091.825 Total 0

Chart 3 – Percentages of Expenditures between 01.01.2011-31.12.2011

Current Transfers Capital Expenditures of 1,07% Goods and Sevices Expenditures Purchase 32,51% 7,17%

State Premium Payments to Social Security Institutions Personnel 6,37% Expenditures 52,88%

The chart above demonstrates the dispersion of budget expenditures in respect of budget economic codes as of 31.12.2011. The greatest item in the Chart is “the personnel expenditures” which constitutes 52,88 % of the total expenditures. Percentages of other expenditure items are 6,37% for state premium payments to social security institutions; 7,17% for purchases of goods and services; 1,07% for current transfers; and 32,51 for capital expenditures. Current transfers indicate the payments made to international institutions (Financial Action Task Force and Egmont Group) by Turkey for membership annual dues.

B. Information on Performance

1. Regulation and Coordination Activities

1.1 Regulation Activities

Several amendments were made in various articles of the Law No.5549 on Prevention of Laundering Proceeds of Crime by the Decrees No. 646, 659, 662 and 666 issued in 2011. As a result of these amendments, “Insurance Supervision Experts and Actuaries” and “Insurance Supervision Board President” are included into examiners and the Coordination Board for Combating Financial Crimes respectively. Also, they have allowed the functions of investigation and examination of money laundering and supervision of obliged parties to be carried out by examiners who may be assigned to work temporarily under the authority of MASAK.

1.2. Coordination Activities

The Coordination Board for Combating Financial Crimes, established in accordance with Article 20 of the Law No.5549 Regarding Prevention of Laundering Proceeds of Crime amended by the Decrees No.646 and 662, were ordinarily two times and extra-ordinarily once held on in 2011 under the chairmanship of Undersecretary of Ministry of Finance, consisting of President of Financial Crimes Investigation Board, President of Revenue Administration, President of Tax Inspection Board, Deputy Undersecretary of Ministry of Interior, General Director of Laws of Ministry of Justice, General Director of Economic Affairs of Ministry of Foreign Affairs, President of the Board of Treasury Comptrollers, President of Insurance Supervision Board, General Director of Banking and Foreign Exchange of Undersecretariat of Treasury, General Director of Insurance of Undersecretariat of Treasury, President of Inspection Board of Undersecretariat of Customs, General Director of Customs of Undersecretariat of Customs, Vice President of Banking Regulation and Supervision Agency, Vice President of Capital Markets Board and Vice President of Central Bank.

Following issues were discussed in the first meeting of Coordination Board in line with its agenda held on 26.04.2011;

 Activities of MASAK in 2011,  Common activities between institutions for the purpose of enhancing effectivenees in examinations and “Supervision Workshop”,  Harmonization of tax examinations carried out after the Law No.6009 and examinations done within the scope of the Law No.5549,

In line with the agenda of the second meeting of Coordination Board held on 28.09.2011;

 Importance of financing aspect of fighting against terrorism and enhancing effectiveness of the fight against financing of terrorism,

In line with the agenda of the extra-ordinary meeting of Coordination Board held on 28.12.2011;

 The workresults on the issues decided on the second ordinary meeting.

1.3. Other Activities

Within the scope of the studies carried out for the responding of opinion requests from obliged parties and other institutions and establishments regarding Law No.5549 and secondary legislations, 27 opinion requests were responded by MASAK in 2011.

Additionally, 122 information acquisition request and 8 parliamentary requests were responded in 2011 for fulfillment of information acquisition request submitted to MASAK within the scope of Law No: 4982 on Right of Information Acquirement and studies related to responding of parliamentary requests concerning MASAK posed as part of studies of Grand National Assembly of Turkey.

2. Studies for Detection and Prevention of Laundering and Financing of Terrorism

The obliged parties, within the scope of Law No.5549 and secondary legislation related to this Law, report the transactions carried out by themselves or mediated by them in case of a suspicion of terrorist financing or laundering of assets derived from crime to MASAK as Suspicion Transaction Report (STR).

Public Prosecutor’s Office and the Courts may demand legal request from MASAK for identifying whether the offence of laundering of assets derived from crime is committed or not.

Public institutions and organizations, natural and legal persons may also refer the cases to MASAK.

While Financial Crimes Investigation Experts are carrying out analyzing and evaluation studies related to STR, legal request and referrals concerning financing of terrorism or laundering of assets derived from crime; the examiners also carry out investigations regarding laundering offence.

2.1. Data Collection Activities

Most of data collection activities of MASAK are to convert reports into electronic data and to integrate them into MASAK IT System after confirmation process. Due to data collection activities, information in the reports conveyed to MASAK can be converted into clear and distinct data and therefore it allows us to carry out systematic, analytic and statistical analysis on the reports. We have realized exchange of information with our counterpart units in foreign countries within the scope of data collection activities. The reports sent to MASAK might be classified as follows:

a) Suspicious transaction reports sent from obliged parties, b) Evaluation or investigation requests carried out by Public Prosecutor’s Office and the Courts, c) Informative articles and research reports sent from other public institutions, d) Referrals and complaints made by natural or legal persons, e) Referrals and complaints made by natural and legal persons abroad, f) Adopted as direct referral from the news in the national and international press as of their contents.

Table 6- The General Dispersion of the Reports Sent in 2011

Reporting Types 2011 Suspicious Transaction Reports 8.739 Requests of Public Prosecutor’s Office and Courts 71 Other Reports 369 Total 9.179

2.1.1. Suspicious Transaction Reports;

Suspicious transaction reports; they are the reports sent to MASAK in compliance with the standard procedures determined by MASAK where there is any suspicion that the asset, which is subject to the transactions carried out within or through the natural and legal persons stated as “obliged parties” within the scope of the Regulation on Measures Regarding Laundering Proceeds of Crime and Financing of Terrorism and in accordance of article 4 of Law No.5549, is acquired through illegal ways or used for illegal purposes.

Table 7- The Numbers of STRs and the dispersion of them in respect of their sources

Sources of STRs 2005 2006 2007 2008 2009 2010 (*) 2011 Banks 351 1133 2903 4889 9480 9968 8141 Brokers 1 7 40 9 168 28 117 Financing, Factoring, Financial Leasing and - - - 15 32 70 164 Investment Companies

Insurance and Pension - - 3 10 129 148 286 Companies

Notaries - - - 1 6 1 4 The General Directorate of Post and Telegraph - - - - 6 25 11 Organization Foreign Exchange 14 - - - - 2 11 Offices Public Accountants and 1 Certified Public ------Accountants General Directorate of 1 ------National Lottery

Total 352 1.140 2.946 4.924 9.823 10.251 8.739

Chart 4- Numeric Trend of Suspicious Transactions Reports

12000

10251 9823 10000 8739

8000

6000 4924

4000 2946

2000 1140 352 0 2005 2006 2007 2008 2009 2010 2011

As seen in the table and chart below, although number of STRs decreased in 2011, there was an increase in terms of awareness in reporting obligation of financial institutions operated in financial markets.

Table 8- Dispersion of Number of Financial Institutions Sending STRs in Financial Sector as per years

Financial Institution 2005 2006 2007 2008 2009 2010 2011 Banks 24 31 28 28 31 26 29 Insurance and Pension - - 1 5 24 18 27 Companies Factoring Companies - - - 2 6 14 26 Brokers 1 1 2 5 15 10 17 Financial Leasing - - - - 4 4 14 Companies Financing Companies - - - 1 2 2 5 Foreing Exchange - - - - 2 1 2 Offices Total 25 32 31 41 84 75 120

With respect to dispersion of number of financial institutions sending STRs in financial sector as per years, it is apparent that reporting level in the financial sectors other than banks increased dramatically in 2011. As a result of training activities and workshops for financial institutions organized by MASAK, the number of financial institutions other than banks sending STRs increased to 91 in 2011 compared to 49 in 2010.

Chart 5- Numerical Trend of Financial Institutions Sending STRs as per years

Number of Financial Institution Sending STR 140 120 120

100 84 75 80

60 41 32 30 40 25 20

0 2005 2006 2007 2008 2009 2010 2011

When obliged parties report suspicious transactions to MASAK, they choose among 115 suspicious transaction types which have been stated in the General Communiqué No. 6 and which are classified in terms of the nature of the suspicion, and describe the suspicious case in concern.

14.460 suspicious transaction types were selected in 8.739 suspicious transaction reports sent in 2011 and the table below shows the dispersion of suspicious transaction types in respect of the nature of the suspicion:

Table 9- Suspicious Transaction Types as to the Nature of Suspicion (2011) Item No Suspicious Transaction Types Number of Types 1 Carrying Out Transactions Incompatible With Financial Profile 3.181 2 Carrying Out Transactions Not Having Reasonable Grounds 2.972 3 Suspicious Cash Transactions 2.094 4 Inconsistency In Declarations And Documents Of The Customer 1.614 5 Suspicious Electronic Transfers Into or Out Of Country 1.451 6 Transactions Related To Risky Countries 793 7 Concrete Findings on Illegal Activities 658 8 Establishing Financial Relations With Risky Persons 494 9 Suspicious Credit Transactions 445 10 Carrying out Transactions with people who are not clearly relevant 240 11 Suspicion Related To Financing of Terrorism 219 12 Structuring of High Amount Transactions 146 13 Concealing That The Transaction Is Carried out for the Benefit of Someone Else 121 14 Suspicious Safe-Deposit Box Transactions 32 Total 14.460

Chart 6: Suspicious Transaction Types as to the Nature of Suspicion (2011)

Suspicious safe-deposit box transactions 0,20% Concealing that the transaction is carried out for the… 0,80% Structuring of high amount transactions 1,00% Suspicion related to financing of terrorism 1,50% Carrying out transactions with people who are not… 1,70% Suspicious credit transactions 3,10% Establishing financial relations with risky persons 3,40% Concrete findings on illegal activities 4,60% Transactions related to risky countries 5,50% Suspicious electronic transfers into or out of country 10,00% Inconsistency in declarations and documents of the… 11,20% Suspicious Cash Transactions 14,50% Carrying out transactions not having reasonable… 20,60% Carrying out transactions incompatible with… 22,00%

A major part, namely 78.2%, of the suspicious transactions encountered in 2011 was made up of the following suspicious cases:

a) customers conducting transactions disproportionate to their financial profile b) transactions not having any legal or economic ground or reasonable explanation c) carrying out suspicious cash transactions d) false or inconsistent points in the declarations, actions or submitted documents of the customer e) conducting suspicious wire transfers in and out of the country.

Table 10 – Suspicious Transaction Reports related to Terrorist Financing and Their Sources Source of the STR 2011 Banks 205 Financing, Factoring, Financial Leasing and Investment 4 Companies Insurance and Pension Companies 8 Notaries 2 Total 219

Table 1- Suspicious Transaction Reports related to Terrorist Financing as of years

Years 2004 2005 2006 2007 2008 2009 2010 2011

Number of 3 6 13 217 228 49 186 219 STRs

2.1.2 Requests for Evaluations and Examinations made by Public Prosecutor’s Offices and Courts

Public Prosecutor’s Offices and Courts send their requests to MASAK in order to detect whether the Offence of Laundering Proceeds of Crimes defined in Article 282 of the Turkish Criminal Law No.5237 is committed or to find out about the situations involving financial benefit related to this crime.

Table 2- Requests for evaluations and examinations made by Public Prosecutor’s Offices and Courts as of years

Years 2005 2006 2007 2008 2009 2010 2011 Requests for evaluations and examinations made by 178 93 84 74 69 107 71 Public Prosecutor’s Offices and Courts

Chart 1- The Numerical Trend of Requests for Evaluations and Examinations made by Public Prosecutor’s Offices and Courts

200 178 180

160

140

120 107 100 93 84 74 80 69 71 60

0 2005 2006 2007 2008 2009 2010 2011

2.1.3 Other Reports

Public institutions and organizations send the issues which they consider to fall under the duties of MASAK through a report drawn up by their own institution or through official communication to MASAK so that these issues can be evaluated in terms of money laundering or terrorist financing. Referrals/denunciations to MASAK by natural persons and legal persons within the scope of private laws, and press articles are also considered as reports when they are related with the duties of MASAK, and are integrated into our system. Referrals/denunciations not related with MASAK are sent to relevant public institutions.

Table 3- Number of Other Reports and Dispersion of Them as to Their Sources

Other Reports 2005 2006 2007 2008 2009 2010 2011 Public Institutions 157 117 120 115 100 91 87 Banks 18 38 8 - - 1 - Press 8 4 5 3 2 2 - Natural Person / Legal Persons within the scope 135 304 284 359 350 331 270 of private laws Abroad 4 7 5 3 6 8 12 Total 322 470 422 480 458 433 369

Chart 8 - Other Reports received in 2010 as to Their Sources

Abroad; 3,3

Public Institutions; 23,6

Natural Person / Legal Person under the scope of Private Law; 73,2

When 71 judicial requests by Public Prosecutor’s Offices and Courts and 369 referrals/denunciations by other persons and institutions made to MASAK in 2011 are assessed together, the subjects of the reports are grouped as follows:

Table 14- The number of Judicial Requests and Other Reports sent in 2011 and Dispersion of them as of Their Subjects

Number of Subjects of the Reports in 2011 Reports Tax Evasion 99 Fraud 54 Money Laundering 49 Usury 40 Smuggling at Customs 29 Suspicious Money Movements 22 Violations of Insurance Legislation 20 Forgery of Documents 17 Corruption 13 Violations of Tender Legislation 7 Cash seized at Ports of Customs 7 Bribe 6 Drug Trafficking 5 Theft 6 Terror or Terrorist Financing 4 Human Trafficking 4 Manipulation 3 Offences by Public Officials 2 Embezzlement 2 Other 51 Grand Total 440

Chart 9- The number of Judicial Requests and Other Reports sent in 2011 and Dispersion of them as to Their Sources

120

100

It is seen that the judicial requests and other referrals/denunciations made to MASAK are mostly related to activities of tax evasion. Besides that, fraud, money laundering, usury and smuggling at customs are also among the prominent subjects.

2.1.4 Information Requests

Article (19)(1)(l) of the Law No 5549 gives MASAK the duty and power to exchange information and documents with counterparts in foreign countries. In this scope, MASAK can exchange information with counterparts that have undertaken the same mission as financial intelligence units. Major part of the information exchange is carried out with other financial intelligence units that are members of Egmont Group.

Egmont Group was established in 1995 to help countries improve their national systems with the purpose of anti-money laundering and terrorist financing and eliminate the obstacles before the international information exchange to that end. MASAK became a member of the Egmont Group on 29 June 1998. As of 31.12.2011, financial intelligence units of 127 countries are members of the Egmont Group.

The information exchanges by MASAK are usually carried out in a fast way through Egmont Secure Web, which is the special and secure communication network among financial intelligence units. In addition to that, MASAK also exchanges information with foreign counterparts which are not a member of the Egmont Group through mail and telefax.

Table 15 – Exchange of Information with Foreign Counterparts

Year Requests received from Request sent abroad

abroad 2006 136 132 2007 196 59 2008 143 46 2009 169 162 2010 188 63 2011 202 38

Graphical display of foreign counterparts making the highest number of requests to MASAK in 2011 is given below. The total number of information requests from abroad is mostly from the financial intelligence units of Belgium, Germany and the United Kingdom

Chart 10 – Foreign Counterparts Sending the Highest Number of Requests in 2011

30,00% 27,00% 25,00%

18,90% 20,00% 16,20% 15,00%

10,00%

5,40% 5,40% 5,40% 4,70% 4,70% 4,10% 4,10% 4,10% 5,00%

0,00%

In 2011, MASAK made 38 information requests to 25 foreign financial intelligence units. 31,6% of these requests were made to financial intelligence units of Belgium, France, the United Kingdom and Luxembourg.

2.2. Analysis, Evaluation and Examination Activities

MASAK carries out analysis and evaluation works for prevention and detection of financing of terrorism and laundering proceeds of crime. It also carries out examinations for detecting laundering proceeds of crime.

Analysi: It is the work carried out for obtaining qualified financial intelligence from various data collected, and referrals/denunciations and reports received within the scope of Law No.5549 by using statistical and analytic methods and processing them with the help of technical instruments.

Evaluation; It is the work carried out for detecting serious suspicions and indications about the assets and persons in relation to laundering offence pursuant to the cases which fall under the duties of MASAK or the analyses performed.

Examination; It is the work carried out for detecting the facts indicating that the laundering offence has been committed.

In accordance with Article 19 of Law No. 5549, MASAK carries out analysis and evaluations through MASAK Experts and examinations through Tax Inspectors, Customs and Trade Inspectors, Sworn-in bank Auditors, Treasury Comptrollers, Insurance Supervision Experts and Actuaries, Banking Regulation and Supervision Agency Experts and Capital Markets Board Experts.

The analysis, evaluation and examinations carried out by MASAK may be initiated based on various sources and the primary ones are requests submitted by Public Prosecutor’s Office, referrals/denunciations received from public institutions or organizations and the natural or legal persons at home or abroad, and the suspicious transaction reports conveyed by obliged parties designated to report suspicious transactions according to Law No.5549.

2.2.1. Analysis and Evaluation

The Financial Intelligence Units are the most important organizational structures in combating laundering proceeds of crime and financing of terrorism. The Egmont Group, established for the cooperation between financial intelligence units, identifies the FIUs as follows;

“A Financial Intelligence Unit (FIU) is a central, national agency responsible for receiving (and, as permitted, requesting), analyzing and disseminating to the competent authorities, disclosures of financial information concerning suspected proceeds of crime and potential financing of terrorism, or required by national legislation or regulation, in order to counter money laundering and financing of terrorism”.

Today, financial intelligence units exist in every country combating laundering proceeds of crime and financing of terrorism and even though each of them has different administrative structure, location and authority, they basically carry out functions of receiving financial information, analyzing it and disseminating to the relevant units.

MASAK, as the financial intelligence unit of Turkey, gives information to the relevant institutions and organizations about the issues that it deems necessary after the analyses it carries out.

2.2.1.1. Analysis and Evaluation Studies regarding Laundering Offence

Out of the referrals/denunciations and suspicious transaction reports conveyed to MASAK, evaluation files are opened for the ones that are considered as qualified in respect of laundering offence after the analysis.

Table 16 – Analysis and Evaluation Files Concluded as of years (2002-2011)

Number of Files with in the scope of Year Number of Concluded Files Analysis and Evaluation 2002 212 125 2003 279 142 2004 407 221 2005 369 283 2006 692 275 2007 590 353 2008 400 324 2009 211 152 2010 159 93 2011 127 100

Chart 11 – Conclusion Rate of Analysis and Evaluation Files (2002 -2011)

Number of Files Concluded/Number of Files Evaluated 0,9

0,8 0,81 0,77 0,79 0,7 0,72

0,6 0,59 0,6 0,58 0,54 0,5 0,51

0,4 0,4

0,3

0,2

0,1

0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

When the analysis and evaluation files related to money laundering and concluded between years 2007 and 2011 are considered, it is seen that although there are diversities in terms of predicate offences, there are certain offences such as drug trafficking, fraud and usury that are higher in number.

Table 17 - Subjects of the concluded analysis and evaluation files (2007 – 2011)

THE SUBJECT OF THE PREDICATE NUMBER OF YEAR TOTAL OFFENCE FILES Drug 52 Fraud 13 Smuggling at Customs 13 Forgery of documents 10 Smuggling of precious metals 3 CMB offences 3 2007 Usury 3 353 Unjust enrichment 2 Organized crime 2 Fuel smuggling 1 Migrant smuggling 1 Illegal Gambling 1 Illegal financial transactions 245 other 4 Drug trafficking 61 Fraud 35 Smuggling at Customs 21 CMB offences 11 Organized Crime 10 Illegal gambling 10 Forgery of Documents 6 Smuggling of Precious Metals 4 Embezzlement 4 2008 Unjust enrichment 3 324 Fuel smuggling 2 Trading of organs and tissues 2 Receiving Bribe 2 Usury 2 Cigarette smuggling 1 Encouraging, aiding and mediating prostitution 1 Bid rigging 1 Illegal financial transactions 141 Other 7 Drug trafficking 25 Fraud 13 Organized Crime 10 Smuggling at Customs 9 Unjust enrichment 9 2009 Fuel smuggling 6 152

Bid rigging 6 Usury 5 Bribe 5 Forgery of Documents 4 Encouraging, aiding and mediating 4

prostitution Embezzlement 4 Migrant smuggling 1 CMB offences 1 Illegal gambling 1 Illegal financial transactions 48 Other 1 Drug trafficking 19 Fraud 13 Smuggling at Customs 9 Usury 8 Organized Crime 6 Forgery of Documents 6 Bid rigging 4 2010 Bribe 4 93 Migrant/human smuggling 3 Unjust enrichment 3 Embezzlement 2 Smuggling of Precious Metals 1 CMB offences 1 Illegal gambling 1 Illegal financial transactions 7 Other 6 Usury 24 Drug trafficking 15 Fraud 11 Fuel smuggling 5 Embezzlement 4 Smuggling at Customs 4 Organized Crime 3 Migrant/human smuggling 3 2011 Unjust enrichment 2 100 Bid rigging 2 Commercial counterfeiting 2 Bribe 2 Forgery of Documents 2 Cigarette Smuggling 2 CMB offences 1 Illegal financial transactions 13 Other 5

When laundering offence is detected as a result of the evaluation carried out by Finance Experts, the case is referred/denounced to authorized Public Prosecutor’s Office; the subject matters in which serious indicators have been detected about money laundering but are not sufficient for referral/denunciation are subject to examination by the examiners listed in Article 2 of the Law No.5549. In this context, 29 % of the evaluations concluded in 2011 were conveyed to examination.

2.2.1.1.1 Institutions that are informed after the analysis and evaluation works

In the event that different subjects falling into the duty fields of different institutions are encountered in analyses and evaluations related to laundering offence, relevant institutions are also informed of the subjects. In this scope, various institutions were informed of 3189 persons as a result of the analyses and evaluations conducted in 2011 related to laundering offence

Table 18 – Institutions provided with intelligence during the year as a result of the analyses and evaluations (01.01.2011 – 31.12.2011)

Institution Number of Persons NATIONAL POLICE 1305 REVUNUE ADMINISTRATION 552 JUDICIAL AUTHORITIES 516 NATIONAL INTELLIGENCE ORGANIZATION 240 THE TURKISH GENDARMERIE 232 TAX INSPECTON BOARD 210 MINISTRY OF CUSTOMS AND TRADE 80 OTHER MINISTRIES 34 UNIVERSITES 10 SOCIAL SECURITY INSTITUTION 6 OTHER 4 TOTAL 3189

Chart 12 - Institutions provided with intelligence during the year as a result of the analyses and evaluations (01.01.2011 – 31.12.2011)

Insitutions Informed

1305

552 516 240 232 210 80 34 10 6 4

2.2.1.1.2 Subjects of Predicate Offences Revealed After Analysis and Evaluation Works

Dispersion of the activities of providing information revealed after the analyses of laundering offences is shown the table below.

Table 19 – Subjects of intelligence provided after the analysis and evaluations (01.01.2011 – 31.12.201)

NUMBER OF SUBJECT OF THE PREDICATE OFFENCE PEOPLE Drug trafficking 1023 Usury 965 Suspicious money movements 425 Fraud 189 Tax evasion 180 Organized crime 118 Smuggling at customs 100 Corruption 51 Bid rigging 30 Professional misconduct 20 Immigrant/Human smuggling 14 Fuel smuggling 9 Bribery 6 Embezzlement 5 Cigarette smuggling 4 Counterfeiting 4 Other 46 TOTAL 3189

Chart 13 - Subjects of intelligence provided after the analysis and evaluations (01.01.2011 – 31.12.201)

Subjects of the provided intelligence 1,60% 3,14% 4,33%

3,70% Drug trafficking Usury 5,64% 32,08% Suspicious money movements 5,93% Fraud Tax evasion

13,33% Organized crime Smuggling at customs Corruption

30,26% Other

2.2.1.2. Analysis and Evaluations related to Terrorist Financing Offence

Out of the referrals/denunciations and suspisicious transaction reports, the ones that have been analyzed and found out to be qualified in terms of terrorist financing offence are subject to evaluation. Statistics on the files opened and completed between 2007-2011within the scope of financing of terrorism is shown in the table below.

Table 20 – Analysis and evaluation files concluded as of years (2007 – 2011)*

Number of files within the scope of year Number of files concluded analysis and evaluation

2007 2 1 2008 40 12 2009 59 37 2010 70 30 2011 77 36

* Group of Analysis and Evaluation of Financing Terrorism was founded and started its activities on 08.11.2007, pursuant to Law No. 5549 which entered into force on 18.10.2006. 38

Chart 14 – Conclusion ratio of the analysis and evaluation files (2007-2011)

Number of Files Concluded/Evaluated 0,7

0,63 0,6

0,5 0,5 0,47 0,43 0,4

0,3 0,3

0,2

0,1

0 2007 2008 2009 2010 2011

Table 21 – Number of Persons referred/denounced

Being a member Terrorist Aiding a terrorist YEARS of a terrorist TOTAL Financing organization organization 2009 2 2 4 2010 223 119 12 354 2011 7 7 14 TOTAL 225 128 19 372

Chart 15 – Percentage distribution of the persons referred/denounced (2009 – 2011)

0,61 0,7

0,6

0,5 0,34 0,4

0,3

0,2 0,05 0,1

0 Being a member of a Terrorist Financing Aiding terrorist terrorist organization organization

2.2.1.2.1. Institutions Informed after the Analyses and Evaluations

As a result of analyses and evaluations carried out within MASAK into terrorist financing offence, we shared information on 987 natural/legal persons with various institutions in 2011. Dispersion of the institutions which MASAK has shared information (qualified information and intelligence) is shown below. Table 22 - Institutions that were informed during the year as a result of the analyses and evaluations (01.01.2011 – 31.12.2011)

NUMBER OF NAME OF THE INSTITUTION PERSONS Turkish National Police 286 National Intelligence Organization 274 Public Prosecutor’s Offices/Courts 216 The Turkish Gendarmerie 157 Revenue Administration 47 Ministry of Foreign Affairs 5 The Presidency of Tax Inspection Board 2 TOTAL 987

Chart 16 - Institutions that were informed during the year as a result of the analyses and evaluations (01.01.2011 – 31.12.2011)

286 300 274 250 216 200 157 150 100 47 50 5 2 0

2.2.1.3. General Analysis Works

2.2.1.3.1 Strategic Analysis and Evaluation Works

Analyses were carried out to find out whether natural persons or entities were awarded with contracts by public institutions or municipalities, with the purpose of revealing the apparently legal elements of the terrorist organizations or entities supporting them. According to the results of those analyses, MASAK informed Turkish National Police and National Intelligence Agency about 5 natural and 15 legal persons winning the contracts by public institutions and municipalities and 11 other persons associated with them. Furthermore, MASAK also informed Revenue Administration for a financial examination into those 5 natural and 15 legal persons winning contracts.

2.2.2 Examinations of Laundering Offence

Taking the expertice the work requreis into account, the files which are considered to need further examination as a result of the evaluations carried out within the scope of laundering offence stated in Article 282 of the Turkish Criminal Law No.5237 and the files which are decided by MASAK to be sent directly for examination due to their nature are conveyed to the examiners stated in Article 2 of the Law No.5549.

The files subject to examination process are shown below as of years.

Table 23 – Concluded Examination Files related to Laundering Offence (2007-2011)

Number of Files under Year Number of Concluded Files Examination

2007 363 112 2008 319 201 2009 181 76 2010 148 73 2011 124 58

Chart 17 - Concluded Examination Files related to Laundering Offence (2007-2011)

400 363 350 319

300

250 201 181 200 148 124 150 112 76 73 100 58 50

0 2007 2008 2009 2010 2011

Number of Files within the Scope of Examination Number of Concluded Files

MASAK makes referrals/denunciations based on the examination of laundering offence by examiners and the analyses and evaluations. Those referrals/denunciations are shown all together below:

Table 24 – Number of Persons Referred/Denounced based on the Analysis and Evaluation Files/Examination Files related to Laundering Offence (2007-2011)

Analysis and Examination of Total Number of Year evaluation Laundering Offence Referrals/Denunciations

2007 39 288 327

2008 3 228 231

2009 - 115 115

2010 30 356 386

2011 72 105 177

Total 144 1092 1236

Chart 18 - Number of Persons Referred/Denounced based on the Analysis and Evaluation Files/Examination Files related to Laundering Offence (2007-2011)

400 356 350 288 300

250 228

200

150 115 105 100 72 39 30 50 3 0 0 2007 2008 2009 2010 2011

Analysis and Evaluation Examination of Laundering Offence

Table 25 - Number of Persons Referred/Denounced as to predicate offences (2007-2011)

Predicate Offence 2007 2008 2009 2010 2011 Total

Drug Trafficking 47 97 53 26 34 257 Smuggling at 145 14 - 69 - 228 Customs Fraud 62 29 10 56 32 189 Illegal Betting and - - - 165 5 170 gambling Forging official and 57 18 34 15 8 132 private documents

Fuel smuggling 10 25 - 30 8 73 Embezzlement - 5 1 10 30 46 Usury - - 3 4 31 38 Cigarette smuggling 5 24 - - 3 32 Other 1 19 14 11 26 71 Total 327 231 115 386 177 1236

Chart 19 - Number of Persons Referred/Denounced as to predicate offences (2007-2011)

300 257 250 228 189 200 170 132 150

100 73 71 46 38 32 50

Between 01.01.2007 and 31.12.2011, 1236 persons were referred/denounced on grounds of laundering offence and the predicate offences of those denouncements comprised 257 offences of drug trafficking, 228 offences of smuggling at customs, 189 offences of fraud and 170 offences of illegal betting and gambling.

3. Activities of Supervision of Obligations

3.1 Programmed Supervisions of Compliance to Obligations

According to the Law no 5549 on Preventing the Laundering of Proceeds of Crime and related legislation, activities of supervision of obligations are carried out separately or based on a supervision program. In 2011, MASAK prepared and implemented two programs for supervision of obligations. Supervisions were conducted in terms of customer identification, suspicious transaction reporting, assigning compliance officers (limited to obliged parties liable to assign compliance officers) and retaining and submitting and 77 obliged parties were supervised in this scope.

As for the ongoing supervisions, supervision of 43 intermediary institutions in terms of the obligation of drawing up a compliance program was completed in 2011.

Supervisions of obligations have been carried out systematically by MASAK since 2009 and statistical realization in terms of obliged parties is given in the table below.

Table 26 - Programmed Supervisions of Compliance to Obligations (2009 -2011)

Number Number of Dispersion as to Years of Supervised Obliged Party Obliged Obliged 2009 2010 2011 parties Parties Banks 36(*) 36 36 - - Capital Markets Brokerage 87 21 23 43 87 Houses Insurance and Pension 53 53 - - 53 Companies Factoring Companies 77 36 - 16 20 Financial Leasing Companies 47 21 - 3 18 Financing Companies 10 10 - 10 - Portfolio Management 12 - 7 5 23 Companies Asset Management Companies 6 6 - - 6 Money Lenders 25 20 - 10 10 Precious Metals Market - - 11 29 11 Intermediaries Istanbul Gold Exchange 1 1 - - 1 Operators of Lottery and Bet 7 6 - - 6 Games Total 401 299 110 69 120 *investment and development banks are not included.

3.2 Examinations of violations of obligations and administrative fines imposed

Examination of violation of obligation is an individual supervision carried out by the examiners listed in the Law No. 5549 in relation to violations of obligations detected during the supervision of compliance, or reported to or detected by MASAK.

In the event that an act contrary to obligations is detected during the examinations, an administrative fine pursuant to Article 13 of the Law No. 5549 and Misdemeanor Law or a judicial penalty pursuant to Article 14 of the Law is applied depending on the type of the obligation.

Administrative fines are applied to obliged parties violating any of the obligations of customer identification, periodical reporting and suspicious transaction reporting stated in the Articles 3 and 6 of the Law and in addition to that, in cases of violation of the obligations of customer identification and suspicious transaction reporting, an administrative fine is also applied to officials not abiding by the obligations.

When the obligations listed in the Article 5 of the Law no. 5549 are not complied with, MASAK gives obliged parties at least 30 days so that they can remove the deficiencies and take necessary measures. An administrative fine is applied, based on the mentioned Article, to obliged parties not removing the deficiencies or not taking the necessary measures in the given time.

In 2011, number of contradictory acts subject to administrative fine was detected as 89. The distribution of administrative fines applied between 2007 and 2011 as to contradictory acts and the amounts of administrative fine are given in the tables below.

Table 27 – Acts Subject to Administrative Fine (2007 – 2011)

Year 2007 2008 2009 2010 2011 Customer Identification 41 355 17 127 66

Suspicious Transaction Reporting 18 13 10 5 23

Total Number of Acts 59 368 27 132 89

Table 28 - Amounts of Administrative Fines (2007-2011)

Year 2007 2008 2009 2010 2011 Total Amount of Fine 120.700 2.337.210 341.004 1.452.441 1.292.284 5.543.639 (TL)

3.3 Judicial Penalties

Judicial penalties are imposed, under Article 14 of the Law No. 5549, on persons who violate any of the obligations which are stated in the Articles 7, 8 and 4(2) of the said law and which are about providing information and documents; retaining and submitting; and not disclosing to anybody, including the parties of the transaction and excluding the examiners assigned to conduct supervision of obligations and the courts during legal proceedings, that an STR has been filed.

The obligations of customer identification and suspicious transaction reporting which are regulated within the scope preventive measures for anti-money laundering and terrorist financing underpin both preventive measures and supervision of obligations. Therefore, these issues are prioritized in the supervision of obligations and the act contradicting the obligations are punished with administrative fines. On the other hand, the acts punishable with judicial penalties are not the kind of acts that can often be encountered in the supervisions. For this reason, the number of persons punished with a judicial penalty is low compared to ones punished with administrative fines.

In this scope, two persons were referred/denounced to Public Prosecutor’s Office by MASAK in 2011 due to violating the obligations of retaining and submitting, and providing information and documents.

4. Activities Related to Foreign Relations

4.1 FATF -Turkey III. Round Mutual Evaluation Process

FATF, which was founded in 1989 for the purpose of anti-money laundering and which later included combating against terrorist financing into its activity field published 49 (40+9) Recommendations3 to that end and evaluated the anti-money laundering and terrorist financing systems of the countries in respect of these recommendations. FATF, which operates in OECD headquarters, has 34 members composed of 32 countries including Turkey and 2 regional organizations.

Up to now, Turkey has been evaluated three times by the FATF, which were in years 1994, 1998 and 2006. Third Round Evaluation Report of Turkey was discussed and adopted in the FATF Plenary held in Strasbourg on 21-23 February 2007.

Since the evaluation date, Turkey which was rated non-compliant for 11, partially compliant for 22, largely compliant for 12, compliant for 3 and not-applicable for 1 Recommendation out of FATF’s 40+9 Recommendations in the III. Round Evaluation Report has made significant progress in terms of legislation and implementation related to remediation of the issues which were criticized and considered as deficiency in the report.

The progresses made relating to the matters criticized in FATF Turkey Evaluation Report are evaluated by follow-up reports presented to FATF. According to this, it was decided in 2007

3 The 40 Recommendations published by FATF in 1990 within the scope of anti-money laundering were revised in 1996 and 2003. Besides, FATF published 8 Special Recommendations on terrorist financing in 2001 and published Special Recommendation 9 in 2004. Thus, the total number FATF Recommendations has reached 49.

FATF Plenary Meeting held in February that, within the scope of regular follow-up4, the First Follow-Up Report of Turkey in which Turkey’s progresses concerning the deficiencies stated in the Report would be discussed in 2009 FATF Plenary Meeting to be held in February. On an ongoing basis, the Second Follow-up Report of Turkey was discussed in the FATF Plenary in February 2010, the Third Follow-up Report of Turkey was discussed in the FATF Plenary in June 2011, the Fourth Follow-up Report of Turkey was discussed in the FATF Plenary in February 2011 and the Fifth Follow-up Report of Turkey was discussed in the FATF Plenary in June2011.

In the General meeting, in which the Fifth Follow-Up Report of Turkey was discussed, it was decided that Turkey would be subject to enhanced follow-up as the Draft Law on Prevention of The Financing of Terrorism was not enacted yet as committed in Action Plan of Turkey5 and consequently the deficiencies were not removed within the scope of Special Recommendation II which sets out terrorist financing offence and Special Recommendation III which sets out freezing procedure regarding terrorist assets. In line with this decision, the Sixth Follow-up Report of Turkey was discussed in the FATF Plenary in October 2011. In the Plenary, it was decided that the enhanced follow-up would continue as there was no progress in removing existing deficiencies within the scope of Special Recommendation II and III and Turkey would submit its seventh follow-up report to FATF Plenary in February 2012. .

4.2 The Process of “International Cooperation Review Group (ICRG) in FATF Turkey Relation

In G-20 Leaders Summit held in London on 2 April 2009, it was decided that FATF would determine the risky countries in terms of anti-money laundering and terrorist financing and take necessary measures in this respect.

It was decided in the G-20 Leaders Summit held in Pittsburgh on 20-25 September 2009 that FATF would publish the list on countries that it determined to be risky in terms of anti-money laundering and terrorist financing, until February 2010.

The countries that were determined as risky according to the criteria6 set by FATF within the scope of ICRG process were included in a pool of review and the countries under this scope

4 In accordance with FATF procedures, countries which do not adequately comply with Recommendations 1,5,10 and 13, and Special Recommendations II and IV which are considered as core recommendations by FATF and the countries which do not significantly comply with other recommendations in spite of complying with the core ones are subject to monitoring which is called “regular follow-up”. In follow-up method, the relevant country submits, at the end of the second year following the adoption of mutual evaluation report in the Plenary Meeting, a “progress report” on recommendations which have been assessed as inadequate. After the discussion of progress report at the Plenary Meeting, if it is decided that the country has not made sufficient progress, the country is put under an enhanced follow-up and in this scope, a sanction mechanism is applied. This sanction mechanism may include submission of progress reports by the country within periods shorter than a year (for example every four months), writing an official letter to relevant Minister explaining the gravity of the situation, paying a high-level visit to the country for the same purpose, applying Recommendation 21 which regulates the relations with risky countries; and may go so far as to terminate FATF membership. 5 The subject of “Action Plan” is given in the “International Cooperation Review Group (ICRG) in FATF-Turkey Relations” section of the report. 6 The criteria used for subjecting countries to a review process within the scope of ICRG are as follows: a) being nominated by FATF or FATF Style Regional Bodies (FSRB), b) automatic referral if, according to the Mutual Evaluation Report of the Country, the ratings of ten or more of the 16 Recommendations which are called “core” and “key” recommendations (Recommendation 1, 3, 4, 5, 10, 13, 23, 26, 35, 36, 40 and Special Recommendation I, II, III, IV and V) are partially compliant (PC) or non-compliant (NC), c) automatic referral based on non-participation in FATF or FSRBs, or not agreeing to publish its Mutual Evaluation Report 48 were divided into Africa-Middle East, America, Asia-Pacific and Europe-Eurasia Regional Observation Groups based on their geographical location.

Turkey, having 9 partially complaint and 1 non-compliant ratings out of 16 core and key principles according to the III-Round Mutual Evaluation Report of Turkey published by FATF in 2007 and thus, having a total of 10 ratings that are either partially compliant or non- compliant, has automatically been referred to pool of review based on the referral criteria and was included in the Europe-Eurasia Regional Review Group.

The review report drawn up in this scope states that “the arrangements regarding the scope and elements of the terrorist financing offence in the current legislation of Turkey are deficient and insufficient, and there is not any arrangement with regard to freezing procedures for terrorist assets.”

In order to remedy the deficiencies stated in the report, Turkey drew up an action plan and submitted it to FATF on 18 January 2010. In the action plan; it was stated that a draft law would be drawn up to remedy the deficiencies regarding terrorist financing and freezing procedure and, that draft was expected to be sent to Turkish Great National Assembly until June 2010 and become a law until the end of 2010.

In accordance with the action plan submitted to FATF; under the coordination of Ministry of Justice, a draft law on terrorist financing was published by efforts of the authorities from Ministries of Justice, Interior and Foreign Affairs, MASAK and Undersecretariat of Treasury, and the scholars and the draft was sent to Prime Ministry by Ministry of Justice in June 2010.

Since some of the articles of the draft needed to be revised in legal and technical terms, some amendments were made in the draft by the joint work of the authorities from Ministries of Justice, Interior and Foreign Affairs, MASAK and Undersecretariat of Treasury, and the scholars and the revised draft was sent by Ministry of Justice to the Prime Ministry on 20.12.2010. The Draft Law submitted to Turkish Great National Assembly by the Prime Ministry on 01.02.2011 was not enacted as the Turkish Great National Assembly was closed in April 2011 due to general elections to be held in June 2011.

After Turkish Great National Assembly (TGNA) started its new legislative session on 01.10.2011, the concerning Draft Law was sent to TGNA once more on 21.10.2011.

In 2011 FATF Plenary Meeting held in Mexico in June, with regard to the Action Plan Turkey submitted to FATF, it was decided that Turkey should be put into Public Statement7 as the Draft Law was not enacted although one year passed after its commitment and for this reason there were no progresses made.

7 Public Statement is a document that FATF publishes the list of ;jurisdictions subject to a FATF call on its members and other jurisdictions to apply countermeasures to protect the international financial system from the on-going and substantial money laundering and terrorist financing (ML/TF) risks emanating from the jurisdictions (1.group list) and jurisdictions with strategic AML/CFT deficiencies that have not made sufficient progress in addressing the deficiencies or have not committed to an action plan developed with the FATF to address the deficiencies (2. Group list). These jurisdictions are; 1. group: Iran and North Korea, 2.group: Cuba, Bolivia, Ethiopia, Kenya, Myanmar, Nigeria, Sao Tome and Principe, Sri Lanka, Syria and Turkey. 49

4.3. Memorandums of Understanding (MOUs) Signed with Counterpart Institutions

Under the Article 12 of the Law No.5549, President of MASAK is authorized to sign the memoranda of understanding, which are not in the nature of international agreement, with foreign counterparts and to amend the memoranda of understanding signed in order to ensure exchanging information within the scope of duties of the Presidency and the signed memoranda of understanding and their amendments enter into force by the Decision of Council of Ministers.

In this framework, MOUs were signed with the financial intelligence units of the following countries. In 2006 ; Turkish Republic of Northern Cyprus In 2007 Indonesia, Portugal and Sweden

In 2008 ; Mongolia, Afghanistan, Georgia, Albania, Syria and Romania

In 2009 ; Croatia, Macedonia, South Korea and Bosnia Herzegovina

In 2010 ; Japan, Ukraine, Norway, Jordan, Senegal and Luxembourg

In 2011; Belarus, United Kingdom, Canada, Monaco, Finland, Australia

4.4. Meetings Abroad

MASAK participated in the following meetings held abroad in 2011:

• ICRG Meeting held in Strasbourg by FATF • “First regional conference on combating laundering and terrorist financing” held in Baku by Organization For Security and Cooperation in Europe (OSCE) • Workshop on “Technical Surveillance, Crime Examination and Intelligence Support Systems” held in Dubai by ISS World • Plenary and Working Group Meetings held in Paris by FATF • Conference Regarding “UN International Combating Corruption and Incorporating Powers on Recovery of assets” held in Almaty by UNODC and Kazakhstan Financial Police • WGEI Experts Meeting held in Cape-Town by FATF • Task Force meeting on “Tax Crimes and Other Crimes” held in Oslo by OECD • ICRG meeting held in Paris by FATF • WGTM meeting held in Paris by FATF • “Anti-Terrorism Consultations with Germany” held in Berlin jointly organized by Foreign Ministries of Turkey and Germany • Presidents Meeting of Anti-Corruption Organizations held in Tehran by Economic Cooperation Organization • Plenary and Working Group meetings held in Moscow by EAG

• Plenary and Working Group meetings held in Mexico City by FATF • Turkey-EU Anti-Terrorism Consultations held in Brussels by EU • “Investigation of Terrorist Financing” meeting held in Belgrade by UN • Egmont Plenary Meeting held in Yerevan by Egmont Group • WGTM meeting held in Paris by FATF • ICRG meeting held in Paris by FATF • Conference on “Research Systems of Georgia and Other Countries Relating to Economic Crimes” held in Tbilisi by TAIEX • WGEI Meeting held in Rome by FATF • Seminar on “The Use of Anti-Money Laundering Methods in Combating Human Trafficking” held in Vienna by OSCE • Plenary and Working Group meetings held in Paris by FATF • EAG Plenary and Working Group meetings held in Xiamen by EAG • Working Group meeting on “Tax Crimes and Other Crimes” held in Paris by OECD • Consultation meeting with Italy on Combating Terrorism held in Rome by Ministry of Foreign Affairs • Consultation meeting with England on Combating Terrorism held in London by Ministry of Foreign Affairs • Sub-committee meeting No.8 held in Brussels by EU

5. Training Activities and Other Activities for Increasing Public Awareness

Execution by obliged parties of preventive measures introduced with regard to anti-money laundering and terrorist financing is very important in terms of revealing and preventing the laundering acts, and preventing the use of financial system as an instrument in commission of these crimes. In order to increase obliged parties’ awareness of preventive measures and ensure that they implement these measures, MASAK carries out training activities for obliged parties. Furthermore, the activities for ensuring cooperation and coordination between regulatory and supervisory bodies participating in combating terrorist financing and the law enforcement bodies and activities for informing examiners continue to be carried out intensely.

Information regarding the training activities for obliged parties and other public institutions and for MASAK experts and assistant experts given by MASAK in 2011 is stated below.

5.1. In-house Trainings

A “Basic Training” program was held between 17.02.2011-22.04.2011 for newly recruited XIV. Term Finance Assistant Experts. In the scope of the training program, experts from relevant institutions trained the assistant experts on issues of anti-money laundering and terrorist financing legislation, banking, foreign exchange, capital markets, tax and customs legislation, and criminal and commercial law. 13 assistant experts received a total of 3971,5 hours of training within the scope of the mentioned training program.

Within the scope of “Plan and Application Principles of 2011 In-house Training”, a total of 518 hours of training was given to 9 people comprised of Finance Expert, Revenue Expert, Chief and Data Preparation and Control Operator; a total of 360 hours Financial Services Training was given to Finance Experts and Assistant Finance Experts comprised of 24 people between 27.05.2011-20.06.2011; a total of 300 hours of Internal Auditor Certificate Training

51 was given to 7 people between 24.01.2011-29.04.2011 and 19.12.2011-30.12.2011; a total of 2373 hours of carrier development seminar concerning Law No.5549 and its implementations was given to 113 people comprised of Tax Inspector, Finance Expert and Assistant Expert, Revenue Expert, Chief, Data Preparation and Control Operator and Clerk; a total of 157,5 hours of training for Adapting to Amendments was given to 7 people comprised of Tax Inspector and Finance Experts and Assistant Experts; a total of 917 hours of refresher Training was given to 108 people comprised of Vice President, Heads of Department, Finance Expert and Assistant Expert

5.2. Training Activities for Obliged Parties and Other Public Institutions

Activities for training the personnel of financial institutions and other obliged parties about anti-money laundering and terrorist financing obligations introduced by Law No. 5549 and related secondary legislation continued intensely in 2011 as well.

In this scope; MASAK provided training on AML/CFT obligations in Ankara, Istanbul and Kuşadası for Istanbul Stock Exchange, General Directorate of Post, courier companies and jewellery dealers. MASAK also carried out training activities for relevant law enforcement units involved in the fight against money laundering and terrorist financing. Additionally, MASAK provided trainings including its experiences and knowledge for the authorities of Turkish Republic of Northern Cyprus, Turkmenistan and Afghanistan in order to make contributions to the creation of necessary institutional and legal infrastructure in combating laundering and terrorist financing. On the other hand, workshops for the purpose of making the suspicious transaction reporting system more efficient and evaluating supervisions regarding compliance with the obligations were carried out by MASAK for the officials and authorities of banks, insurance companies, capital market intermediary institutions, portfolio management companies, factoring companies and leasing companies in Ankara and Istanbul. Also workshops were held for the evaluation of laundering offence examinations and obligation supervisions with the participation of examiners in Antalya and Adapazarı.

In this scope, information on training activities provided in 2011 by MASAK is given below.

Table 29- Training Activities and Participants (2011) The Agencies Number of Participated in Training Training Hours Number of Number of Training Activities Trainers Participants Activities Obliged Parties 17 88 31 942 Law Enforcement 6 19 6 260 Units Examiners 6 63 16 165 Other countries’ financial 3 33 11 53 intelligence units Total 32 203 64 1420

5.3. Other Activities for Increasing Public Awareness

In 2011, the books on “The Obligations in Law No.5549 in the scope of provisions of Misdemeanour Law No.5326” and “The Structure, Functions of Some of FATF Member Financial Intelligence Units and their Comparison with MASAK” were published with MASAK publication numbers 20 and 21 and they were distributed to examiners and other relevant units.

6. MASAK Information Systems and Project Activities

The final acceptance transactions of “the Project on Strengthening the Capacity of Fighting against Money Laundering, Information Technologies and Analysis Tools” were completed in February 2011. After the final acceptance, in the framework of activities for maintenance, operation and continuation of MASAK Information Systems, the service procurement process was designed, the version updates of security and available software systems were made and technical support service procurement relating to existing hardware, network equipment, available and private software were realized.

Within planning, firstly solution proposals were developed in order to make MASAK Information Systems more modern and productive by analysing MASAK’s information and communication systems. As the result of analysing studies; for making the MASAK Information Systems more professional and easily manageable in medium and long term it was concluded that it would be more beneficial to evaluate the hardware, network, security and original software with a reengineering understanding and thereupon MASAK Information Systems were redesigned and studies were started for redeveloping the application modules in the system with the latest software technologies.

Besides, MASAK carried out project designing studies for wholly redevelopment of reporting system which is the basic component of business mind and decision support system processes and for modernization of MASAK Information Technologies infrastructure (hardware, network and security) taking into consideration factors such as uninterrupted service, easy management and compliance between systems.

C. PERFORMANCE RESULTS

1. Table on Performance Results

MONITORING REPORT ON PERFORMANCE INDICATOR REALIZATION

Year 2011 Unit 12.00.35.00 / MASAK Performance Target To ensure efficiency in combating laundering proceeds of crime and terrorist financing

Strategic Purpose To prevent offence economy, corruption and unregistered economy

Strategic Target To prevent laundering proceeds of crime and terrorist financing Realization Deviation Realized Year-end Degree of Attaining Performance Indicator Target Ratio of Target Ratiobof target Realization the Target 1. Quarter 2. Quarter 3. Quarter 4. Quarter (%) (%)

Evaluation period relating to Obligation Violation 2,00 2,00 2,00 2,00 2,00 2,00 100,00 0,00 Target Achieved (Month)

The evaluations concerning the obligation violation reportings submitted to ObligationSupervision Group from MASAK or other institutions in the scope of Regulation regarding Measures are desired to be completed within a reasonable time. Particularly, in case of deciding to convey the issue to the examiners stated in Law No.5549 to be subject to obligation violation examination as the result of evaluation and determining the Definition actions contrary to obligations which administrative fine must be imposed; it is necessary to act immediately as the limitation period for administrative fine is 3 years. Accordingly, the compliance of obliged parties with obligations will be ensured within the scope of deterrence function of punishments.

Source of Indicator ObligationSupervision Group

Analyzing of Performance Results Target effectively attained.

Reason of Deviation

Measures to be taken against Deviation

Performance Realization in Quarterly Periods Performance Target-Year-End Realization 2,50 2,50 2,00 2,00 2,00 2,00 2,00 2,00 2,002,00 1,50 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,001,50 1,00 0,00 0,00 0,00 0,00 0,50 1,00 0,00 0,50 1 2 3 4 1. Quarter 2. Quarter 3. Quarter 4. Quarter 0,00 Target Year-end Realization

MONITORING REPORT ON PERFORMANCE INDICATOR REALIZATION

Year 2011 Unit 12.00.35.00 / MASAK Performance Target To ensure efficiency in combating laundering proceeds of crime and terrorist financing

Strategic Purpose To prevent offence economy, corruption and unregistered economy

Number of Training Programs for Obliged Parties and 25,00 7,00 15,00 17,00 32,00 32,00 128,00 28,00 Target Exceeded Other Public Institutions (Number)

To enhance awareness of obliged parties regarding obligations known as "precautionary measures" in combating laundering proceeds of crime and Definition terrorist financing will make a significant contribution to determine and prevent the concerning offences.

Source of Indicator Training Group

Analyzing of Performance Results Target effectively attained.

Reason of Deviation Deviation is positive.

Measures to be taken against Deviation

Performance Realization in Quarterly Periods Performance Target - Yera-End Realization 7,00 7,00 7,00 7,00 0,00 8,00 8,00 8,00 35,00 35,00 32,00 0,00 0,00 2,00 2,00 30,00 0,00 0,00 0,00 15,0030,00 25,00 25,00 25,00 20,00 20,00 15,00 10,00 15,00 5,00 10,00 0,00 5,00 1 2 3 4 0,00 Target Year-End Realization 1. Quarter 2. Quarter 3. Quarter 4.Quarter

MONITORING REPORT ON PERFORMANCE INDICATOR REALIZATION

Year 2011 Unit 12.00.35.00 / MASAK Performance Target To ensure efficiency in combating laundering proceeds of crime and terrorist financing

Strategic Purpose To prevent offence economy, corruption and unregistered economy

Number of Typologies Published (Number) 2,00 3,00 3,00 150,00 50,00 Target Exceeded

Typologies including the methods and techniques used in laundering proceeds of crime and terrorist financing and new trends emerged in these Definition offences will ensure the increament of awareness of obliged parties and other relevant public institutions.

Source of Indicator Laundering Offence Examination Group

Analyzing of Performance Results Target effectively attained.

Reason of Deviation Deviation is positive

Measures to be taken against Deviation

Performance Realization in Quarterly Periods Performance Target - Year-End Realization 0,00 0,00 0,00 0,00 3,50 0,00 0,00 0,00 0,003,50 0,00 0,00 0,00 0,00 3,00 3,00 0,00 0,00 0,00 3,003,00 2,50 2,50 2,00 2,00 2,00 1,50 1,00 1,50 0,50 1,00 0,00 0,50 1 2 3 4 0,00 Target Year-End Realization 1. Quarter 2.Quarter 3. Quarter 4. Quarter

MONITORING REPORT ON PERFORMANCE INDICATOR REALIZATION

Year 2011 Unit 12.00.35.00 / MASAK Performance Target To ensure efficiency in combating laundering proceeds of crime and terrorist financing

Strategic Purpose To prevent offence economy, corruption and unregistered economy

Strategic Target To prevent laundering proceeds of crime and terrorist financing Realization Realized Year-End Deviation Ratio Degree of Attaining Performance Indicator Target Ratio of Target Realization of Target (%) the Target 1. Quarter 2. Quarter 3. Quarter 4. Quarter (%) Number of obliged parties to be subject to off-site supervision for training and internal audit 150,00 181,00 181,00 181,00 120,67 20,67 Target Exceeded activities(Number) The obliged parties required to establish compliance program shall be subject to off-site supervision after the reports relating to training and internal audit activities within year conveyed to MASAK. The obliged parties that training or internal audit activities deemed insufficient as the result of this Definition supervision may be taken within the scope of next year's "program on obligation compliance" after the last evaluation. Therefore, compliance of obliged parties with obligations will be ensured through off-site supervision by MASAK.

Source of Indicator Obligation Supervision Group

Analyzing of Performance Results Target effectively attained.

Reason of Deviation Deviation is positive.

Measures to be taken against Deviation

Performance realization in Quarterly Periods Performance Target - Year-End Realization

200,00 181,00 200,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 0,00 150,00 150,00 150,00 0,00 0,00 181,00 181,00 0,00 0,00 0,00 0,00 100,00 100,00

50,00 50,00 0,00 1 2 3 4 0,00 Target Year-End Realization 1. Quarter 2. Quarter 3. Quarter 4. Quarter

MONITORING REPORT ON PERFORMANCE INDICATOR REALIZATION

Year 2011 Unit 12.00.35.00 / MASAK Performance Target To ensure efficiency in combating laundering proceeds of crime and terrorist financing

Strategic Purpose To prevent offence economy, corruption and unregistered economy

Strategic Target To prevent laundering proceeds of crime and terrorist financing Realization Realized Year-end Deviation Ratio Degree of Attaining Performance Indicator Target Ratio of Target Realization of Target (%) the Target 1. Quarter 2. Quarter 3. Quarter 4. Quarter (%)

Completion Period of Evaluations Relating To Terrorist 15,00 21,00 17,00 17,00 15,00 15,00 100,00 0,00 Target Achieved Financing Offence (Month)

It is necessary not to pass the limitation period prescribed for terrorist financing offence, in case of finding the assets which precautionary measure imposed, clarify the decision whether implementation of measures will continue or not by concluding the examination as soon as possible. For this reason, the evaluations concerning the denunciations/referrals and reportings relating to terrorist financing offence are desired to be completed Definition within the shortest time after they are written as a report.Within this scope, the evaluation reports, drawn up as the result of correspondences done with both public institutions and obliged parties for obtaining information regarding the real/legal person whom the evaluation belonging to, are targeted to be completed in 15 months.

Source of Indicator Analyzing and Evaluation Group relating to Terrorist Financing

Analyzing of Performance Results Target effectively attained.

Reason of Deviation

Measures to be taken against Deviation

Performance Realization in Quarterly Period Performance Target - Year-End Realization 15,00 15,00 25,00 16,00 21,00 21,00 21,00 21,0014,00 20,00 0,00 -4,00 -4,00 -4,00 12,00 15,00 0,00 0,00 0,00 0,00 10,00 10,00 0,00 0,00 0,00 -2,00 8,00 5,00 6,00 0,00 4,00 1 2 3 4 -5,00 2,00 -10,00 0,00 1. Quarter 2. Quarter 3. Quarter 4. Quarter Target Year-end Realization

MONITORING REPORT ON PERFORMANCE INDICATOR REALIZATION

Year 2011 Unit 12.00.35.00 / MASAK Performance Target To ensure efficiency in combating laundering proceeds of crime and terrorist financing

Strategic Purpose To prevent offence economy, corruption and unregistered economy

Number of MOUs Signed (Number) 5,00 3,00 5,00 5,00 6,00 6,00 120,00 20,00 Target exceeded

Cooperation between the countries is very important in laundering and terrorist financing offences holding crossborder nature. In this context, the increase Definition in the number of countries which MASAK signed memorandum of understanding for information exchange will facilitate combating these offences.

Source of Indicator Foreign Relations Group

Analyzing of Performance Results Target effectively attained.

Reason of Deviation Deviation is positive.

Measures to be taken against Deviation

Performance Realization in Quarterly Periods Performance Target - Year-End Realization 3,00 3,00 3,00 3,00 7,00 0,00 2,00 2,00 2,006,20 0,00 0,00 0,00 0,00 6,00 6,00 6,00 0,00 0,00 0,00 1,00 5,00 5,80 4,00 5,60 3,00 5,40 2,00 5,20 5,00 1,00 5,00 4,80 0,00 1 2 3 4 4,60 4,40 Target Year-End Realization 1. Quarter 2. Quarter 3. Quarter 4. Quarter

MONITORING REPORT ON PERFORMANCE INDICATOR REALIZATION

Year 2011 Unit 12.00.35.00 / MASAK Performance Target To ensure efficiency in combating laundering proceeds of crime and terrorist financing

Strategic Purpose To prevent offence economy, corruption and unregistered economy

Performing general analyzing studies and preparing 1,00 1,00 1,00 1,00 1,00 1,00 100,00 0,00 Target Attained report (Number)

MASAK carries out mass data analyzing among collected information and documents. It is very important for the prevention of laundering offence Definition to determine the facts of information which does not attract any attention alone although existing in the structured data but having importance, drawing attention and raising suspicion when various criteria are used.

Source of Indicator General Analyzing Group

Analzing of Performance Results Target effectively attained.

Reason of Deviation

Measures to be taken against Deviation

Performance Realization in Quarterly Periods Performance Target - Year-End Realization 1,20 1,20 1,00 1,00 1,00 1,00 1,00 1,00 1,00 1,00 0,00 0,00 0,00 0,00 0,80 0,00 0,00 0,00 0,000,80 0,60 0,00 0,00 0,00 0,00 0,60 0,40 0,40 0,20 0,00 0,20 1 2 3 4 0,00 1. Quarter 2. Quarter 3. Quarter 4. Quarter Target Year-End Realization

MONITORING REPORT ON PERFORMANCE INDICATOR REALIZATION

Year 2011 Unit 12.00.35.00 / MASAK Performance Target To ensure efficiency in combating laundering proceeds of crime and terrorist financing

Strategic Purpose To prevent offence economy, corruption and unregistered economy

Number of STRs Received (Number) 10.000,00 1.918,00 4.100,00 5.487,00 8.739,00 8.739,00 87,39 -12,61 Target Not Attained

Referrals and suspicious transaction reports are some of the important information resources which constitute a ground for initiating analyzing, Definition evaluation and examination activities that MASAK carries out relating to laundering and terrorist financing offence. The increase in the number of referrals and suspicious transaction reports received will also be the indicator of public awareness against these offences.

Source of Indicator Data Collecting and Analyzing Group

Analyzing of Performance Results A result close to target has been obtained.

It has been determined that there is a significant decrease in the number of STRs received from banks in comparison with the other obliged Reason of Deviation parties.

Measures to be taken against Deviation Studies on expanding the qualitative and quantitative scope of STRs submitted from banks will be continued.

Performance Realization in Quarterly Periods Performance Target - Year-End Realization 1.918,00 1.918,00 1.918,00 1.918,00 10.000,00 0,00 2.182,00 2.182,00 2.182,0010.200,00 10.000,00 0,00 0,00 1.387,00 1.387,0010.000,00 8.000,00 0,00 0,00 0,00 3.252,009.800,00 9.600,00 6.000,00 9.400,00 9.200,00 4.000,00 9.000,00 8.739,00 8.800,00 2.000,00 8.600,00 0,00 8.400,00 1 2 3 4 8.200,00 8.000,00 1. Quarter 2.Quarter 3. Quarter 4. Quarter Target Year-End Realization 61

2. Evaluation of Performance Results

DISPERSION OF REALIZATION VALUE OF PERFORMANCE INDICATORS ACCORDING TO THEIR DEGREE OF ATTAINING TARGET

Year 2011 Unit 12.00.35.00 / MASAK 4 3 2 0 Data could Year-End Target Target Target Not No Performance Indicator Target not be Realization Exceeded Attained Attained Obtained 1 Number of STRs received (Number) 10.000,00 8.739,00 n

2 Number of MOUs signed (Number) 5,00 6,00 n

3 Completion period of evaluations regarding laundering offence (Month) 4,00 6,00 n Completion period of evaluations regarding terrorist financing offence 4 15,00 15,00 n (Month) 5 Number of typologies published (Number) 2,00 3,00 n Number of training programs for obliged parties and other public 6 25,00 32,00 n institutions (Number) 7 Performing general analyzing and preparing reports (Number) 1,00 1,00 n Number of obliged parties to be subject to off-site supervision for 8 150,00 181,00 n training and internal audit activities (Number) 9 Evaluation period for obligation violations (Month) 2,00 2,00 n

22% 45%

33%

Target Exceeded Target Attained Target Not Attained Data could not be Obtained

3. Evaluation of the Performance Information System In 2011, realization values of MASAK’s performance indicators were processed in trimesters into the performance budget monitoring and evaluation module of the Finance SGB.net system.

V. EVALUATION OF THE INSTITUTIONAL CAPABILITY AND CAPACITY

A. Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis

The following table presents the evaluation of strengths, weaknesses, opportunities and threats which MASAK experiences during its operation.

Table 30 – SWOT Analysis

Strengths The determinant and regulative role in making policies for prevention of laundering proceeds of crime and drawing up legislation based on the policies determined The ability to carry out the duties of supervision of laundering offence and supervision of obligations also through examiners assigned temporarily by MASAK’s order The power to sign memorandum of understanding that is not in the nature of international agreement for enabling the exchange of information and documents with counterpart institutions in foreign countries. Experienced management personnel Qualified staff Advanced infrastructure of information technologies

Weaknesses Insufficient physical environment Necessity of employing temporary personnel Conducting supervisions of laundering offence and obligations through assignments out of the institution

Opportunities An activity field suitable for international solidarity Training opportunities provided to MASAK staff

Threats Loss of time due to late and insufficient replies to information requests made by MASAK Growing difficulty in examinations of laundering offence and its follow-up due to the high level of black economy Difficulty in determining the nature of the transactions to which the contiguous counties which are going through financial instability are party

VI. CONCLUSION

MASAK, in addition to functions of collecting, analysing data and conveying to relevant units as financial unit of Turkey in the field of anti-money laundering and terrorist financing, intensely continues its regulation, inspection and training activities entitled to itself by Law No. 5549. In 2011, MASAK also precisely performed all primary activities after an intensive working pace determined in line with strategic purposes and targets stated in the 2008-2012 Strategic Plan of Ministry of Finance and 2011 Performance Program.

MASAK also intensely maintained the training activities in 2011 for the staff of obliged parties in order to increase their awareness on obligations known as “preventive measures” in combating laundering proceeds of crime and terrorist financing and ensure that they implement these measures. Within the scope of 17 training activities, a total of 942 employees of obliged parties were trained in Ankara and Istanbul on different dates.

In addition to this, workshops for the purpose of making the suspicious transaction reporting system more efficient and evaluating supervisions regarding compliance with the obligations were carried out by MASAK for the compliance officers and authorities of banks, insurance companies, capital market intermediary institutions, portfolio management companies, factoring companies and leasing companies in Ankara and Istanbul separately on different dates. As the result of these trainings and workshops, the numbers of STRs conveyed to MASAK from financial institutions other than banks were reached to 91 in 2011 while this number was 49 in 2010.

MASAK also continued to carry out training activities for relevant law enforcement units involved in the fight against laundering and terrorist financing in 2011 and within this scope 6 training activities were held for 260 participants. Additionally, two workshops were held for the evaluation of laundering offence examinations and obligation supervisions and for increasing the efficiency in supervisions with the participation of 123 examiners in 2011.

On the other hand, MASAK provided trainings including its experiences and knowledge for the authorities of Turkish Republic of Northern Cyprus, Turkmenistan and Afghanistan in order to make contributions to the creation of necessary institutional and legal infrastructure in combating laundering and terrorist financing in 2011.

The supervision of 77 obliged parties were completed within the scope of two different programs on supervisions regarding compliance with obligations in 2011 and the supervision of 43 obliged parties were also completed in the scope of another program prepared previous years in 2011.

The analysing and evaluation of referrals/denunciations and suspicious transaction reports conveyed to MASAK were also intensely carried out in 2011. In this scope, while the finalization ratio of files on analysing and evaluation relating to laundering offence was %58 in 2010, this ratio increased to %79 in 2011. As the result of evaluations and examinations completed, 177 persons were denounced to Public Prosecutor’s Office for committing laundering offence. On the other side, the analysing and evaluation studies were performed in an effective cooperation with the relevant law enforcement units. In this scope, information were shared with relevant institutions regarding a total of 3189 real/legal persons as the result of analysing and evaluation studies relating to laundering offence and a total of 987 real/legal persons as the result of analysing and evaluation studies relating to terrorist financing offence.

Within the scope of studies for ensuring an effective international cooperation which is one of the essential element of combating laundering and terrorist financing offences, memoranda of understanding were signed with the financial intelligence units of Belarus, United Kingdom, Canada, Monaco, Finland and Australia in 2011. Thus, target of signing MOUs with five countries was exceeded as stated in 2011 performance indicators.

On the other hand, the final acceptance of “the Project on Strengthening the Capacity of Fighting against Money Laundering, Information Technologies and Analysis Tools” were completed in February 2011. After the final acceptance, in the framework of activities for maintenance, operation and continuation of MASAK Information Systems, the service procurement process was designed, the version updates of security and available software systems were made and technical support service procurement relating to existing hardware, network equipment, available and private software were realized.

Furthermore, 13 assistant experts started working at MASAK in February 2011 within the scope of activities for increasing the capacity of human resources.

Activities of regulation and coordination, data collection, analysis and evaluation, examination, supervision of obligations, foreign relations, training, MASAK information systems and projects done in 2011 within the scope of the strategic target of “prevention of laundering proceeds of crime and financing of terrorism” have been explained in detail through table and charts in the relevant parts of the Activity Report. In order to reach the strategic aim and target, MASAK will pertinaciously continue its activities for realizing all the activities which are still being carried out and which are prioritized for 2012.