Banking & Finance

Turkey moves out of FATF grey zone

June 28, 2024, 10:52 AM

Turkey off grey list — 'We succeeded': Turkish finance minister Mehmet Şimşek announced the decision on X an hour before the official statement

‘Significant progress’ against illegal financial activity
Met all criteria except crypto regulation
Positive effects ‘already being felt’

Turkey has been removed from an international watch list of countries with lax regulations on international money laundering and countering funding to illegal groups.

The Financial Action Task Force (FATF) announced it was taking Turkey off its grey list at the watchdog’s plenary session in Singapore on Friday.

It said the country had made significant progress in implementing mechanisms for countering illegal financial movements.

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Mehmet Şimşek, the Turkish finance minister, pre-empted the official announcement, posting the message “We succeeded” on social media platform X, an hour before FATF formally issued its statement giving Turkey the all clear.

Turkey was added to the grey list in October 2021, after FATF found Ankara was not in full compliance with most of the agency’s 40 criteria for monitoring and restricting money laundering and counter terrorist financing.

However, ahead of the FATF meeting, Turkey had met 39 out of the 40 criteria for being removed from the grey list, the only shortfall being regulating cryptocurrency trading.

Symbolically, the Turkish parliament passed legislation tightening controls over cryptocurrency on June 27, one day before FATF was due to announce its decision.

The new laws provide for stronger regulatory oversight of crypto trades, imposes fines and prison terms for unlicensed crypto exchanges, and clarifies definitions for crypto assets, wallets and service providers.

The FATF decision has been widely anticipated. The Istanbul stock exchange blue chip 100 index pushed record highs by midday on Friday, shrugging off concerns over a delayed package of tax reforms due out by the end of June and postponed to July or beyond.

The FATF decision opens the way for increased foreign investment inflows and upgrades of Turkey’s credit ratings, and the effects are already being felt, according to Hande Eğilmez Eniş, communications manager for investment firm Dinamik Yatırım.

“The market has already bought into Turkey being lifted from the grey list; it was the good news we expected,” she told AGBI.

“But it will also have a positive impact on the country’s credit rating, and on the economy in the medium to longer term.”

It may take some time before agencies reevaluate Turkey’s credit rating, but it has been moving towards a stronger position for some time.

In March, Fitch upgraded Turkey to B+ with a positive outlook, with Standard and Poor’s making a similar upgrade in May on the back of what it said was improved monetary and fiscal policy.

Though improved, Turkey’s key ratings are still short of investment grade.