KYC Requirements in Türkiye

In order to prevent financial crime, maintain regulatory compliance, and promote confidence in global financial systems, Know Your Customer (KYC) procedures are essential. The same is true in Turkey. KYC requirements, which are governed by a strong framework, constitute a crucial compliance layer intended to stop financial crimes such as money laundering and terrorism financing. This guide covers the main aspects of KYC in Turkey, including its procedures, regulatory framework, and particulars for companies doing business there.

What Is Know Your Customer (KYC) in Türkiye?

KYC, also known as "Müşterini Tanı" in Turkish, is a basic principle that aims to reduce the risk of financial crime by confirming customers' identities and comprehending their financial activities. KYC, which has its roots in Turkey's Law No. 5549 on the Prevention of Laundering Proceeds of Crime, makes sure that financial and associated institutions efficiently keep an eye on and handle customer activity. 

The Financial Crimes Investigation Board (MASAK) is the main regulatory body in charge of monitoring KYC compliance in Turkey. To stay in compliance, entities must adhere to stringent guidelines enforced by MASAK.

Key Regulatory Frameworks Governing KYC in Türkiye

Businesses must comprehend and abide by the following important legal and regulatory frameworks in order to successfully implement KYC:

• Law No. 5549 (AML Law): The cornerstone of Turkey's efforts to fight money laundering and terrorism financing is this fundamental piece of legislation. This law lays out the legal foundation for identifying, stopping, and punishing actions related to the laundering of illegal funds.
• Regulation on Measures for Prevention of Laundering of Proceeds of Crime and Financing of Terrorism (January 9, 2008, Official Gazette No. 26751) outlines specific actions that organisations must take to meet their KYC and AML requirements. This regulation contains clauses pertaining to risk assessments, customer identification, reporting suspicious transactions, and record-keeping obligations.
• MASAK General Communiqués: It published General Communiqués, such as Series No. 5, 13, 19, and 21, which offer regulated entities, including banks and financial institutions, as well as other obligated parties, precise and useful guidance. To guarantee compliance with AML and KYC regulations, they delineate protocols and provide clarification on compliance requirements.
• MASAK Guidelines on Crypto Assets (2021): By specifically extending AML and KYC requirements to Virtual Asset Service Providers (VASPs), these guidelines make sure that Turkey's regulatory framework covers the quickly expanding cryptocurrency industry. In order to stop the misuse of virtual assets for illegal purposes, the guidelines require VASPs to monitor transactions, conduct customer due diligence, and report suspicious activity.

When Is KYC Mandatory in Türkiye?

KYC procedures are not always necessary, but they are in some situations, like:

Customer onboarding or account opening, before beginning any business relationship, KYC (Know Your Customer) procedures are crucial since they guarantee that all required client data is gathered and validated up front.

High-value transactions are another item on this list. KYC checks are required for any transaction that exceeds ₺75,000 or its equivalent in foreign currency. In order to comply with AML regulations and guarantee the legitimacy of significant financial activities, you should follow this step.

Wire transfers are also indicators for this. KYC procedures are automatically initiated when wire transfers from the sender or the recipient total ₺7,500 or more.

Suspicious activities are the second-to-last item on our list. Prompt KYC action must be taken if there are any doubts or suspicions regarding the legitimacy of a customer's financial behaviour or the authenticity of their identity. 

Periodic reviews, finally, are when Türkiye requires KYC. Organisations must update client data on a regular basis, especially for high-risk individuals. These reviews are conducted at predetermined intervals to guarantee that records stay correct and current.

KYC Process in Türkiye Step-by-Step

There are several steps involved in implementing KYC in Turkey:

1. Identity Verification (Kimlik Tespiti)

It is the first and most important step in creating a safe and legal business relationship, which involves thorough identification: 

• For individuals, a current Turkish ID card, passport, or residency permit is needed for verification. Every document needs to be up to date, and further confirmation could entail using biometric information or comparing it to national databases. 
• For legal entities, to maintain transparency, businesses must submit tax certificates, trade registry documents, and other pertinent business records, like board resolutions or shareholder data. 
• Compliance with Data Storage: Companies must register with VERBIS and securely store customer data in order to comply with Turkey's Personal Data Protection Law (KVKK).

2. Address Confirmation

In order to confirm the legitimacy of customers' addresses, entities must use trustworthy documentation: 

Utility bills, lease agreements, and official correspondence from the previous three months are examples of acceptable documents. Businesses may require notarised copies for high-risk clients or cross-check these documents with pertinent databases for additional security.

3. Establishing the Purpose of Business Relationship 

Customers must fill out comprehensive declaration forms detailing the nature of their business operations, funding sources, and expected transaction patterns in order to better understand customer intentions and stop service misuse. 

4. Risk Assessment 

Assessing each customer's risk level according to their profile is a basic component of KYC: 

• Based on variables like location, transaction type, or business type, customers are divided into three risk categories: low, medium, and high. 
• Higher-risk clients, including Politically Exposed Persons (PEPs), those with high-value accounts, and offshore entities, are required to undergo enhanced due diligence (EDD). EDD may entail more thorough examination of financial transactions, the gathering of more documents, and continuous compliance monitoring.

5. Ongoing Monitoring (Sürekli İzleme) 

KYC is a continuous procedure to guarantee compliance over time, not just after the initial verification: 

• KYC profiles should be updated often, particularly for customers classified as high-risk; businesses must routinely monitor customer transactions to identify suspicious activity, such as unusual transaction volumes or patterns that diverge from the customer's initial profile. This entails utilising automated systems to identify possible red flags, monitoring modifications in business relationships, and re-verifying documentation.
• Keeping a strong monitoring system that guarantees compliance and the security of the financial system also requires regular audits and reporting to regulatory bodies.

Institutions Required to Conduct KYC in Türkiye 

In order to maintain transaction integrity, prevent financial crimes, and ensure transparency, a wide range of industries and institutions in Turkey are subject to KYC (Know Your Customer) requirements. Among these sectors are: 

• Banks (Bankalar): Handling a large percentage of both domestic and foreign transactions, banks are the foundation of the financial system. They must set up comprehensive KYC procedures to guard against threats like fraud and money laundering. 
• Payment and E-Money Institutions (Ödeme ve E-Para Kuruluşları): These organisations are essential to the growth of contactless and digital payments. KYC measures are necessary to guarantee safe and authentic transactions in this industry.
• Crypto Exchanges (Kripto Varlık Hizmet Sağlayıcıları): As the cryptocurrency market has grown quickly, it is now crucial to guarantee the security and legitimacy of transactions. Risks like fraud, illegal activity, and tax evasion are addressed by KYC regulations. 
• Portfolio Management and Investment Firms: These companies are in charge of looking after large sums of money for their customers. Investor protection and adherence to financial regulations are enhanced by KYC procedures. 
• Designated Non-Financial Businesses and Professions (DNFBPs): This group comprises experts like jewellers, attorneys, accountants, auditors, and real estate brokers. KYC regulations are in place to stop money laundering and other financial crimes because these occupations frequently deal with high-value transactions.

KYC for Crypto Platforms in Türkiye 

In 2021, Turkey implemented regulations to improve accountability in the cryptocurrency industry in response to the increasing use of cryptocurrencies, such as: 

• Mandatory verification, before users can activate accounts or start transactions, they must confirm their identities. 
• KYC compliance threshold is ₺75,000, including transfers between cryptos, in order to guarantee traceability and stop illegal activity. 
• Data collection to guarantee full adherence to anti-money laundering (AML) laws.

Penalties for KYC Non-Compliance 

Institutions that disregard KYC regulations in Turkey face harsh penalties, such as: 

• Administrative fines can range from ₺30,000 to ₺4,000,000, depending on the frequency and severity of non-compliance. 
• License suspension is what may happen when serious or recurring infractions happen, which would have a major effect on the institution's capacity to operate. 
• Criminal Accountability, since under Article 282 of the Turkish Penal Code, institutions or individuals may face criminal charges for wilful or egregious non-compliance.

Beneficial Ownership Requirements 

Türkiye enforces stringent laws pertaining to the identification of Ultimate Beneficial Owners (UBOs). These regulations guard against corporate entity abuse and guarantee increased transparency in ownership structures. 

• Disclosure Requirement: Organisations are required to reveal those who directly or indirectly own 25% or more of the company's shares. This guarantees that the ultimate ownership is always evident. 
• Needs for Reporting: Both the Financial Crimes Investigation Board (MASAK) and the Turkish Revenue Administration (GİB) must receive reports on UBOs. This encourages accountability and openness across industries. 

Data Retention Rules for KYC Documentation 

In order to support regulatory compliance and aid in any investigations, institutions in Turkey are legally required to keep accurate records of all KYC documentation.

• Retention period to guarantee that institutions can produce the required paperwork if authorities request it, KYC records must be safely kept for a minimum of eight years. 
• Acceptable formats, since to guarantee the data's confidentiality, integrity, and accessibility during the retention period, appropriate safeguards must be implemented. 

By tackling these crucial facets of KYC compliance, Türkiye hopes to fortify its regulatory and financial structures, lowering risks and boosting confidence among sectors.

How Sanction Scanner Supports KYC in Türkiye

Sanction Scanner can expedite KYC procedures for companies doing business in Turkey by offering:

• Real-time screening involves comparing names and IDs to FATF and MASAK watchlists.
• PEP and UBO detection are specialised instruments for locating high-risk individuals.
• Audit-Ready Recordkeeping makes sure there is complete compliance with KVKK and MASAK regulations.
• Custom risk scoring, modifications to local thresholds to improve detection accuracy.