The Presidential Decree “The Amendment to the Regulation on Measures Regarding Prevention of Laundering Proceeds of Crime and Financing of Terrorism” was published in Turkey's Official Gazette on 1 May 2021 and entered into force the same day. The Regulation places crypto asset service providers and savings finance companies under specific obligations within the scope of the Law on Prevention of Laundering Proceeds of Crime.
Following the introduction of the Regulation, the Financial Crimes Investigation Board (FCIB) published the following Guide, providing detailed information regarding the mentioned obligations: “The Main Principles on Obligations regarding the Prevention of Laundering Proceeds of Crime and Financing Terrorism for Crypto Asset Service Providers”.
The Regulation is Turkey's second legislation regulating crypto assets and service providers. Details on the first legislation can be found here.
Crypto Asset Service Providers
The recently published Regulation on the Disuse of Crypto Assets in Payments defines crypto assets as “intangible assets virtually created by use of distributed ledger technology or a similar technology and distributed over digital networks but not classified as fiat money, registered money, electronic money, payment instrument, security or other capital market instrument.” While crypto asset service providers are not defined by the legislator, the FCIB provides the following definition under the Guide: “Crypto asset service providers intermediate the trading of crypto assets through electronic trading platforms”.
Obligations of Crypto Asset Service Providers
The Crypto Asset Service Providers’ obligations arising from the Law are mainly identifying users, reporting suspicious transactions, providing information and documents on a regular basis, and preserving records for submission to relevant authorities upon request.
Article 3 of the Law obliges crypto asset service providers to identify the persons carrying out transactions and the persons on behalf of or for the benefit of whom the transactions are conducted before the transactions are executed. Regardless of the transaction amount, crypto asset service providers must obtain user ID information within the context of permanent business relationships for the subscriptions. In addition to permanent business relationships, crypto asset service providers must identify their users in the following circumstances:
- Transactions, which raise suspicion of money laundering or the funding of terrorist activities (regardless of the amount) in case there is any doubt regarding the adequacy and accuracy of the previously obtained customer identification information;
- In the event the transaction amount or the total amount of more than one related transaction is TRY 75,000 or greater.
Pursuant to Article 4 of the Law, crypto asset service providers must report to the FCIB Presidency any transactions that raise suspicion of money laundering or the funding of terrorist activities. The period for reporting such suspicions is ten days from the date of the initial suspicion, and immediately in cases where delay is detrimental.
Article 7 of the Law obliges crypto asset service providers to provide, upon request, to the FCIB all information, documents, related records (digital or otherwise), and passwords required to access such records.
Furthermore, Article 8 of the Law stipulates that crypto asset service providers must preserve for a term of eight years and submit to authorities upon request all documents from the date of issuance, books and records from the last registration date, and identification documents from the last transaction date.
According to Article 6 of the Law, transactions exceeding a certain amount, to be determined by the Ministry of Treasury and Finance, must be reported to the Presidency of the FCIB by the crypto asset service providers, which are a party to the transaction or act as an intermediary.
Crypto asset service providers will face the following sanctions if found in violation of the obligations under the Law:
- Violation of identification obligation: for each transaction between TRY 30,000 and TRY 4 million;
- Violation of reporting suspicious transaction: for each transaction between TRY 50,000 and TRY 4 million;
- Violation of continuous reporting: for each transaction between TRY 30,000 and TRY 4 million;
- Violation of providing information and document obligation, and preserve and submission obligation: imprisonment from one to three years and a judicial fine of up to 5,000 days (i.e. between TRY 100,000 and TRY 500,000) and security measures for legal entities.
Placing crypto asset service providers under strict disclosure obligations is a crucial step in preventing the crypto markets from becoming an intermediary for money laundry and the financing of terrorism. It appears that the Turkish legislator will continue to regulate the crypto markets; watch this space for updates.
For more information on this regulation, contact your CMS client partner or local experts: [email protected], [email protected] and [email protected]