With the constant barrage of news related to Covid-19, it is sometimes easy to forget about the complex geo-political world  we live in and the difficult and seemingly intractable problems that fill it.

One reminder of those complex problems came in late November with the inclusion of Turkey on the Financial Action Task Force (FATF) greylist alongside Syria, Yemen, and Zimbabwe. There are now 23 countries on the officially-named list of “jurisdictions with strategic deficiencies.” Coincidentally, many congratulations go to Botswana and Mauritius for being promoted off the list.

Although many may not be totally surprised by the classification, it is still remarkable that a country thatstarted to seek full European Union membership back in the 1990s is in such a position. If you’ve been to Istanbul, you’ll know it is a beautiful, charming, vibrant city with more in common with Paris or London than its southern and eastern neighbours - Syria, Iraq, Iran, Azerbaijan and Georgia. 

Anyone who’s been exposed to Turkey’s banking industry and worked with organisations such as Yapi Credi, Garanti, Akbank or Isbank will recognise a professional and highly-skilled industry observing global best practices. 

Turkey has been investing heavily to become an attractive and desirable place to work and transact. It’s massive new glitzy airport only just opened in 2019.

All of Turkey’s hard earned status as a business and financial centre is now in serious jeopardy. As Pinar Karacinar-Gehweiler from msg Rethink Compliance points out in her excellent article, the ramifications are likely to prove extremely painful.

Because of the inclusion on the FATF grey list, any international companies looking to invest in Turkey or do business there will have to re-consider their counterparty risk and undertake significantly more scrutiny and due diligence. That applies to direct counterparties but also to companies in the supply chain. It’s a massive headache. Is any investment or trade safe? What happens next? Could the greylist be a precursor to more serious sanctions against the country or specific institutions?

Are these really risks that a company wants to take if they have choices elsewhere?

The International Monetary Fund (IMF) estimates that greylisting cuts capital inflow by 7.6% of gross domestic product (GDP). In 2020, Turkey’s GDP was $720B, so the impact could be $54.5B.

Understandably, the Turkish government is upset and believes the greylisting is an “underserved outcome.” However, it is clear from the detail provided by FATF that this is no knee jerk reaction. They highlight multiple areas where improvements are needed. Ultimately, they do not see the right steps being taken to counter money laundering and terrorist financing (including ISIL and al Qaeda). These are serious shortcomings with incredibly serious potential impacts that could ultimately affect any of us. 

The message to Turkey’s political elite is loud and clear. If you want to enjoy the benefits of international trade and finance, real political action is required immediately. Greylisting is a powerful tool and it has been seen to drive real change in countries such as Pakistan. I hope Turkey pays attention to this wake up call and acts swiftly to drive improvements.