The inclusion of Turkey in the so-called list of grey countries that need increased monitoring once again raises eyebrows over the watchdog’s conduct.

The FATF decision to downgrade Turkey to a list of countries required to undertake sweeping measures to curb terror financing has once again raised a red flag about the impartiality of the Paris-based organisation. 

The Financial Action Task Force announced on Thursday that Turkey had been included in FATF’s so-called grey list, a move that can scare off foreign investors. 

Analysts say that the global financial watchdog has become selective in targeting countries where banks have weak compliance or controls to stop the illicit flow of funds.

“If they were fair in their treatment of all the countries, they would have put the UK in the FATF grey list,” said Hassan Aslam Shad, a Middle East-based lawyer who has studied the watchdog for years. 

“But they will not do it. They have made up their mind and preconceived notions drive their decisions," he told TRT World

The recently leaked Pandora Papers, a trove of documents from offshore companies, showed that two-thirds of the firms that corrupt politicians and bureaucrats use to hide their wealth are registered in the British Virgin Islands. 

In its decision, the FATF said Turkey needs to enhance the oversight of its anti-money laundering laws and prosecute UN-designated terror groups. 

Ankara said its inclusion in the grey list was “unfair” but insisted that it will work closely with the organisation to address its concerns in a bid to come out of  the “unwarranted list within the shortest time.”
FATF’s decision matters as it increases the risk profile of a country under monitoring, making it costly for the government and private sector to raise funds from international capital markets.

Being on the grey list also means that domestic and multinational banks have to spend more resources on compliance and money laundering staff, who have to be extra vigilant in detecting fraud and terror financing transactions. 

When geopolitics comes into play

In 2018, when cash-strapped Pakistan was struggling to avoid being included in the grey list, Turkey was the only country that supported it. 

Turkey’s ties with its traditional western allies including the US have strained in recent years.
Washington barred the sale of F-35 jets to Turkey after Ankara decided to install the Russian surface-to-air S-400 missile system.

Turkey’s efforts to enforce its maritime rights in the Mediterranean Sea has angered Greece, a EU member state. 

Turkey is also on the opposite side of some of its western allies in Syria and Libya. Despite spending billions of dollars on its own to host around 4 million Syrian refugees, Turkey is regularly targeted by European leaders for not doing enough to protect human rights. 

The EU's interference in Turkey’s internal affairs is nothing unusual. Earlier this week, ambassadors of ten countries, including the US and Germany, issued a joint statement, calling for the release of Osman Kavala, a Turkish businessman facing terrorism charges.

“Looking at the way the geopolitical system is working these days, I wouldn’t be surprised if Turkey continues to remain on the grey list for quite a period of time,” said Shad. 

FATF’s decision on Pakistan has highlighted how powerful countries are influencing the global money-laundering monitor. 

“I was an ardent believer in global institutions. I was the biggest critic of Pakistan, saying how the country was late in addressing deficiencies in its system,” said Shad. 

“But over the years I realised every time Pakistan was close to meeting the requirements to get out of the FATF list, they would add another condition.” 

In June, FATF said it will keep Pakistan on the grey list even though Islamabad had complied with 26 of the 27 demands that were set out in an action plan such as making it harder for criminals to move illicit funds. 

Then just a few weeks later India’s foreign minister S Jaishankar publicly acknowledged that New Delhi used its influence at FATF to keep Pakistan in the grey list. 

“FATF has become deeply politicised,” said Shad. 

Source: TRT World