23rd August 2021
Turkey Sanctions: What You Need To Know
What You Need To Know
While Turkey has been an ally to Western countries since the mid-20th century, recent geopolitical developments have created tensions with the United States (US), the United Kingdom (UK), and the European Union (EU). Turkey is a member of a number of global security organizations including the United Nations and NATO, but has faced criticism for alleged human rights abuses and for breaches of international law – issues that have rendered the country’s once-promising bid to join the EU a distant prospect. Most recently, the US, the UK, and the EU, imposed sanctions on Turkey in response to its violation of international sovereignty laws and for illegal arms sales.
The sanctions imposed on Turkey include trade and business prohibitions, asset freezes, and travel bans. In order to comply with the relevant sanctions rules and regulations, firms that do business in Turkey, or with Turkish customers, should understand their screening obligations.
The US imposed sanctions on Turkey in December 2020 in response to the Turkish government’s acquisition of military technology from Russia. The violation in question occurred when the Turkish Presidency of Defense Industries (SSB), a civil institution set up to manage the supply of military equipment, bought a surface-to-air missile system from Rosoboronexport, a Russian state-owned weapons exporter. Turkey’s transaction with Russia violated secondary sanctions that prohibit third countries from dealing with countries that are directly sanctioned by the US government.
Imposed under Section 231 of the Countering America’s Adversaries Through Sanctions Act (CAATSA), the US government’s 2020 Turkey sanctions prohibited exports of technology to SSB, and a range of financial dealings with SSB by US financial institutions. The sanctions measures also targeted four Turkish individuals that work for or are connected to SSB, imposing travel bans, asset freezes, and a prohibition on business dealings with US persons.
The US’ sanctions regime targeting Turkey focuses on the SSB, meaning US persons may continue to conduct transactions with other Turkish firms and individuals. Although the sanctions were imposed by the Trump administration, President Biden has continued to take a hard line against Turkey, indicating that the restrictive measures are set to continue.
The EU imposed sanctions against Turkey in response to its gas drilling activities in the eastern Mediterranean. The sanctions reflect ongoing tensions between Turkey and Greece, and in particular disputes over the sovereignty of certain Greek islands. In 2019, Turkey began gas drilling efforts off the coast of Cyprus which the EU judged to be a violation of the island’s sovereignty. The EU’s Turkey sanctions were introduced in November 2019, and targeted persons ‘planning, preparing … participating in, directing, or assisting’ drilling activities not authorized by Cyprus – along with persons providing financial assistance for those activities.
The sanctions imposed asset freezes and travel bans against their targets and, since their introduction, have seen two members of Turkey’s state-owned Turkish Petroleum Corporation (TPAO) added to the EU’s sanctions list. In November 2020, the EU Council agreed to extend its sanctions measures against Turkey for 12 months, until November 2021.
While the UK previously adopted EU sanctions (including measures against Turkey), following Brexit the government adopted an autonomous sanctions regime. The UK implemented its autonomous sanctions against Turkey on 31st December 2020, introducing The Unauthorized Drilling Activities in the Eastern Mediterranean (Sanctions) (EU Exit) Regulations 2020, which revoked and replaced the previously applicable EU sanctions regime.
Mirroring the EU’s restrictive measures, the UK’s Turkey sanctions provide for the imposition of asset freezes, financial prohibitions, and travel bans on persons connected to unauthorized drilling activities off the coast of Cyprus. The UK has not yet made designations under the scope of the regime.
The sanctions that are in place against Turkey mean that firms doing business with Turkish customers, or with customers that have connections to Turkey, must understand their regulatory obligations. In practice, this means integrating a sanctions screening solution within their AML/CFT compliance program, informed by the latest Turkey sanctions data. The screening solution should also be capable of managing the specific challenges of doing business with customers from Turkey, including the use of Turkish naming conventions and spellings, and the use of characters from the Turkish alphabet. Similarly, firms should seek to establish their customers’ identities with a high degree of confidence and accuracy through suitable due diligence measures, and monitor their transactional behavior for potential sanctions violations.
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