Combating illegal activities

One area of combating the informal economy is the fight against illegal activities. In the fight against illegal activities, the money obtained as a result of these activities must be prevented from entering the legal system.

The income generated, while varying by country, can be termed money laundering. Money laundering is the portion of informal production that turns into liquidity; in addition to being reused in informal production, it is also widely used in areas that easily absorb laundered money, such as bribery, luxury consumption, and investment in real estate.

For an income to be classified as money laundering, there are two material elements involved in the point of incorporating the laundered money into the system after the conditions are met. The material element is treated in literature as an alternative act. Accordingly, one alternative act of the material element involves taking assets derived from crime abroad. Among money laundering methods, taking money abroad is one of the most well-known. The individual does not transport the money earned through criminal means from the country they are in to a different country via banks, but physically. These transport operations can be carried out using various vehicles, couriers, or cargo, and can also be performed in an electronic environment.

The second method treated as an alternative act constituting the material element here is the way of concealing the source of the financial income obtained from the crime. In this method, individuals seek to enter this money into the existing monetary system by concealing the source of the laundered money they have obtained and making it appear as if it were obtained through legitimate means. The ability to demonstrate that money was obtained through legitimate means requires many different transactions. When the stages of implementing this method are examined, it is seen that with the development of technology today, individuals launder their money through many methods such as showing it as income obtained from websites, or making it appear as if it were proceeds from online sales.

To grasp the laundering process, the subject must be evaluated together with the concepts of predicate offense and proceeds of crime. In general, to speak of laundering:

• A crime must have been committed (Predicate Offense), and any economic value must have been obtained as a result of this crime (proceeds of crime),

• Acts must have been committed to remove these economic values from their illegal nature and to give them a legal appearance.

While it is possible to launder money using an unlimited number of methods, we can list the most commonly used methods that can be instructive for units fighting against it as follows:

• Physical smuggling of funds out of the country,

• Smurfing method,

• Structuring method,

• Tax havens (off-shore),

• Shell (paper or fictitious) companies,

• Loan-back method,

• Currency exchange offices,

• Casinos and gambling halls,

• Operating businesses that use cash (front companies),

• Fake invoicing (fictitious trade),

• Alternative remittance systems (hawala, etc.),

• Internet banking and electronic money.

It is possible to extend this list further. However, the explanations to be made regarding these listed methods, as the most frequently used ones, will be sufficient to have knowledge about the subject.

The crime of laundering assets derived from crime can only be in question if there is a “predicate offense.” For the elements of the crime to be formed, the asset value subject to laundering must have been obtained by committing a “predicate offense,” and it may be necessary to attempt to launder any kind of financial benefit and value (money, automotive, foreign currency such as dollars or euros, etc.) obtained through the commission of predicate offenses. For example, a person who buys 5 apartments from a construction company and makes the payments in cash to launder 1 million dollars obtained by committing the crime of drug export or import commits the crime of money laundering. In our example, the first crime, the crime of exporting or importing drugs, is in the nature of a “predicate offense.”

While predicate offenses were determined by the method of enumeration in our country during the period when the Penal Code No. 4208 was in force, a threshold approach in the form of “crimes requiring a prison sentence with a lower limit of 6 months or more” has been adopted in Article 282 of the Turkish Penal Code No. 5237, where the crime of laundering is regulated.

Proceeds of crime can be expressed as any kind of economic benefit and value obtained from acts deemed criminal by law. Defined in dictionary terms as “earnings obtained through illegal means,” proceeds of crime are also referred to by terms such as dirty money. In international literature, terms such as “proceeds of crime,” “dirty money,” “black money,” or “criminal fund” are used in this context.

The crime of laundering assets derived from crime, formerly known as money laundering, is the transfer of money, gold, stocks, movable property, etc., obtained from a crime requiring a prison sentence with a lower limit of 6 months or more, abroad, or subjecting them to various transactions for the purpose of concealing their illegitimate source and creating the impression that they were obtained through a legitimate method.

Investigation and prosecution have been shown as two different processes. The first is related to money laundering. The second is related to the financing of terrorism.

According to the FATF report of November 2021;

Turkey has a diverse economy consisting of industry (automotive, petrochemical, and electronics), agriculture, and a growing service sector. Located at an intercontinental crossroads, Turkey faces significant money laundering (ML) and terrorist financing (TF) risks. This includes serious threats arising from the illegal activities of criminal organizations, terrorist organizations, and foreign terrorist fighters (FTFs) seeking to exploit local and cross-border vulnerabilities, given Turkey's geographical location.

The main threats generating significant proceeds of crime are illegal drug trafficking, migrant smuggling, human trafficking, and fuel smuggling. In 2016, 68% of all smuggling convictions were directly related to drug trafficking. The commercial activities posing the highest money laundering (ML) and terrorist financing (TF) risks are related to activities involving banking, money and value transfer services, including illegal money changers, real estate, and dealers in precious metals and stones (DPMS).

Turkey also faces serious threats from terrorism and has been subjected to a significant number of terrorist attacks. In addition to being one of the transit routes for foreign terrorist fighters (FTFs), Turkey is a return point for foreign terrorist fighters from neighboring conflict zones.

The 2018 National Risk Assessment (NRA) is an important step for Turkish authorities in improving their understanding of money laundering and financing risks, as it allows authorities to express their existing views in a single report. Relevant authorities have contributed to the National Risk Assessment process with positive contributions from the private sector. This is generally based on various sources of information such as statistics, trend analysis, surveys, reports, and authorities' perception of money laundering and terrorist financing risks in assessing threat levels.

Turkey has made significant progress in strengthening its anti-money laundering (AML) framework since the last assessment. Law No. 6415 (Prevention of Financing of Terrorism) entered into force in 2013. A number of Regulations have been issued or amended to strengthen preventive measures. MASAK has also published General Communiqués determining the procedures and principles regarding issues such as the freezing of assets. However, there are still points that remain missing.

Turkey is criticized in two areas.

1) Developing a national strategy for the significant use of financial intelligence in the field of money laundering and for investigation and prosecution according to different money laundering methods, and 2) Implementing UN designations without delay. Unfortunately, Turkey has not been able to show progress in this area and has entered the grey list.

The fact that the crime economy consists of the production of illegal goods and services naturally brings the judiciary to the agenda. We must not forget that the “mafia” phenomenon, which we complain about as citizens, is one of the important institutions of the crime economy. Undoubtedly, the crime economy is not an event that can be solved or prevented only by security forces or only by the judiciary or tax audit personnel. Within the multidimensionality of the crime economy, public authorities need to work with a healthy coordination along with sufficient legal infrastructure. If this is not done, it is clear that the public will remain inadequate in the fight against the crime economy.