An Interview with CBC Law Discussing Anti-Corruption in Türkiye

1 What are the key developments related to anti-corruption regulation and investigations in the past year in your jurisdiction, and what lessons can compliance professionals learn from them?

The cost of non-compliance is great. If you think compliance is expensive, try non-compliance’, US Deputy Attorney General Paul McNulty. This is applicable to all jurisdictions and companies operating in Türkiye.

Türkiye does not have a separate anti-bribery and anti-corruption (ABAC) law specific to corporations’ liability and mandatory requirement to ABAC compliance programmes. Exceptions to this include Law No. 5549 on Prevention of Laundering Proceeds of Crime, Law No. 6415 on Prevention of Financing of Terrorism, the Regulation on Measures Relating to Prevention of Laundering Proceeds of Crime and Financing of Terrorism and Regulation On Program Of Compliance With Obligations Of Anti-Money Laundering And Combating The Financing Of Terrorism (Compliance Program Regulation).

Article 43/A of Misdemeanors Law No. 5326 also sets out an administrative fine ranging from 10,000 Turkish lira to fifty million Turkish lira for cases where company executives or representatives commit crimes such as fraud, collusive tendering, smuggling, laundering proceeds of a crime, bribery and etc. The provision explicitly states that the fine cannot be less than the interest from the proceeds of the crime.

Turkish Criminal Code No. 5237 sets out a list of white-collar crimes such as fraud, bribery, abuse of trust and misconduct. That being said, bribery and misconduct are stipulated to be specific to public officials, which means that private company employees’ acts are not classified as bribery and misconduct. Except for publicly traded companies, representatives of publicly traded companies are in the status of public officials for the enforcement of bribery crime stipulated under article 252 of Turkish Criminal Code.

The Compliance Program Regulation mandates that certain entities prepare a compliance programme and appoint a compliance officer. According to article 5 of the Compliance Program Regulation, objectives of a compliance programme include establishing corporate policies and procedures, conducting risk management activities, conducting auditing and monitoring activities, appointing a compliance officer and establishing a compliance department, conducting training activities, conducting internal audit activities. Prior to February 2021, the scope of the regulation was limited to banks, intermediary capital market institutions and insurance and retirement companies. In February 2021, the Compliance Program Regulation was amended to cover Group A, authorised establishments specified in the foreign exchange legislation, financing, factoring and leasing companies, portfolio management companies, intermediary institutions for precious mines, electronic money institutions and payment institutions. As of February 2021, the compliance programme must be revised every two years.

Türkiye is now taking extra steps to spread ethical culture and implement compliance programmes as the most important financial institutions are now legally expected to establish a compliance department and report to the Financial Crimes Investigation Board (MASAK).

2 What are the key areas of anti-corruption compliance risk on which companies operating in your jurisdiction should focus?

Third-party involvement is a priority of anti-corruption compliance. Besides other major elements of anti-corruption such as monitoring-auditing and senior management commitment, companies must urge third parties such as agents, consultants, clients, business partners, etc, to ensure that all transactions related payments are in accordance with the law and procedures and if any government official has been involved in the process companies must be wary of bribery risk.

3 Do you expect the enforcement policies or priorities of anti-corruption authorities in your jurisdiction to change in the near future? If so, how do you think that might affect compliance efforts by companies or impact their business?

There is no specific authority established for anti-corruption in Türkiye except MASAK. However, when considering Türkiye’s low Corruption Perceptions Index score in the recent years and Financial Action Task Force (FATF) ’s placement of Türkiye in its Grey-List, it is expected that Türkiye will fulfill its commitments in the international area, and take necessary remedial actions.

MASAK published a strategy document regarding Türkiye’s Strategies for 2021-2025 on Better Implementation of Fight Against Money Laundering and Terrorism Financing and Forfeiture Practices (Strategy Document) on 3 June 2022. The Strategy Document states Türkiye’s priorities and objectives related to its fight against money laundering, corruption and terrorism financing. The first strategical objective is stated as ‘the effective execution of judicial and administrative processes related to combating money laundering and financing of terrorism’, and addresses ‘assembling investigative teams specialized in money laundering and terrorism financing cases against the crimes involving legal person and establishing different working circuits in this manner’ as a priority. It addresses a number of deficiencies to be improved or remediated, and assigns different public agencies and ministries for the addressed actions. The Strategy Document also underlines the importance of a data and risk-based plans: actions include aggravating the legislative framework, ensuring the effective implementation and monitoring of financial sanctions, asset freezing and forfeiture measures.

Türkiye does not require corporations to have compliance programems or oblige corporations to comply with particular compliance liabilities, except the requirements addressed in the Compliance Program Regulation. However, since it is expected from Türkiye to adopt new regulations and to strengthen its ABAC and AML enforcement mechanisms, bringing compliance requirements to all organisations regardless of their industry is anticipated. Türkiye, an attractive destination for investors in various industries, aims to establish a consistent, compliant and trusted environment across all potential investment markets.

In accordance with the aforementioned, all corporations, including family companies, where compliance deficiencies are most frequently observed due to the absence of corporate governance, delegation of authorities and monitoring mechanisms, must prepare for a broader and more rigorous regulatory environment, and establish their internal compliance mechanisms. To prevent and detect corrupt activities, corporations should develop customised compliance programmes, ABAC and AML policies, and tools for implementing and monitoring compliance rules effectively.

4 Have you seen evidence of continuing or increasing cooperation by the enforcement authorities in your jurisdiction with authorities in other countries? If so, how has that affected the implementation or outcomes of their investigations?

Yes. In particular, money laundering-related investigations and prosecutions with the involvement of high-profiles may require extensive cooperation and exchange of information and evidence with foreign authorities. Generally, the authorities contact the foreign public and private institutions through letters related to international anti-corruption cases, asking to freeze the perpetrator’s assets.

5 Have you seen any recent changes in how the enforcement authorities handle the potential culpability of individuals versus the treatment of corporate entities? How has this affected your advice to compliance professionals managing corruption risks?

Under Turkish criminal law, only real persons have criminal responsibility; legal persons are not included in the scope of criminal liability. Legal persons can only be subject to security measures and administrative fines where it is regulated under particular crimes. However, with the amendment made on article 43/A of the Misdemeanours Law, the administrative fines applied to legal persons are increased, provided that a real person entitled to represent the legal person committed a crime and the legal person received monetary benefit for specific crimes, including fraud, bid-rigging, bribery and laundering the proceeds of crime. Also, it is regulated that administrative fines can be imposed on legal persons even without the prerequisite to complete an investigation or prosecution of real persons representing or acting on behalf of the legal persons. Therefore, it can be said that the enforcement authorities will separate the culpability of corporate entities from the involvement and culpability of individuals. On the other hand, the Strategy Document addresses ‘a better, more effective and risk-based implementation and monitoring of the security measures’ as a priority.

6 Has there been any new guidance from enforcement authorities in your jurisdiction regarding how they assess the effectiveness of corporate anti-corruption compliance programmes?

MASAK has been publishing suspicious transaction reporting guides for different kind of sectors such as banks, agents of buying/selling real estate, factoring, finance and leasing companies. The latest of these was published on 18 April 2022 as a guide for crypto asset service providers.

Although the guide does not exactly set out the criteria for the assessment of the effectiveness of compliance programmes, it regulates principles and procedures for reporting suspicious transactions and lays down a number of examples as to the suspicious transaction types and encourages the crypto asset service providers to report to MASAK as soon as possible. How the reporting should take place and the reporting process are also explained.

7 How have developments in laws governing data privacy in your jurisdiction affected companies’ abilities to investigate and deter potential corrupt activities or cooperate with government inquiries?

In its decision dated 28 December 2021 published in the Official Gazette dated 11 February 2022, and numbered 31747, the Constitutional Court determined concrete criteria for keeping a fair balance in employer and employee interests regarding the inspection of employees’ communication tools. In the aforementioned decision, the Constitutional Court ruled that terminating an employee’s employment contract for good cause based on WhatsApp correspondence, constitutes a violation of the right to privacy and freedom of communication. This decision determined the concrete criteria required for the restriction of fundamental rights and freedoms and emphasised the general principles that an employer should pay attention to when processing personal data to control an employee’s communication tools, the obligations regulated for the data controller and the data processing conditions.

The Inside Track

What are the critical abilities or experience for an adviser in the anti-corruption area in your jurisdiction?

A lawyer specialising in compliance should be a proactive and ‘outside-the-box’ thinker, recognising that compliance is a multidisciplinary profession drawing not only from law but also from other fields such as governance, finance, management and psychology. Compliance advisers must always consider the ‘human’ factor. Therefore, merely advising the ‘compliant’ or drafting policies and procedures is not sufficient. An experienced adviser should also provide guidance on how to implement the compliance programme, policies and procedures in a customised manner tailored to the specific ‘audience’, who must adhere to these rules.

Furthermore, in addition to possessing comprehensive, up-to-date legal knowledge and expertise, compliance advisers should draw upon insights from other disciplines, including psychology, sociology, finance, and governance.

What issues in your jurisdiction make advising on anti-corruption compliance challenging or unique?

Türkiye is currently grappling with economic turmoil resulting from a dramatic decrease in the value of the Turkish lira. Purchasing power has significantly eroded for the working class,and companies are struggling to adjust employee compensation packages accordingly. As a result, without effective controls in place, the potential for employee misconduct has substantially increased.

Furthermore, there is a pressing need to address several critical issues. These include insufficient awareness of binding extraterritorial anti-corruption regulations, the absence of robust local anti-corruption legislation and enforcement, and a prevalent reliance on cultural governance methods, particularly within family holdings, instead of embracing corporate governance principles.

What have been the most interesting or challenging anti-corruption matters you have handled recently?

Recently, we supported our client in one of the biggest fraud cases resulting in millions of US dollars of employee misconduct and enrichment, as well as company losses, identified through effective speak-up and digital forensic partnerships facilitated by our firm. Root cause analysis has been conducted and further actions to foster a human-centric culture have been implemented.

On another matter, we have represented our client, a construction giant, in their internal investigations stemming from employee misconduct and embezzlement in Türkiye and neighboring countries. We have revised the risk assessment, monitoring, and training modules as part of a Corrective and Preventive Action after conducting root cause analysis.

This article was initially published on Lexology. You may access the article on Lexology by following this link.