Jan. 24 (Bloomberg) -- Turkey will pass a law outlawing terrorism financing before a February deadline, though the new rules may not satisfy international demands, said Hakki Koylu, deputy chairman of the parliament’s Justice Committee.
Turkey risks being blacklisted, along with Iran and North Korea, if it doesn’t pass the law by Feb. 22, Justice Minister Sadullah Ergin said today during a debate. He made the remarks as the committee discussed the legislation for the first time since May as it seeks to accelerate the process before the deadline set by the Organization for Economic Cooperation and Development’s Financial Action Task Force.
Being blacklisted would cause serious problems for Turkish trade and the economy, Ergin said. “It could cause problems in money transfers; foreign countries may increase scrutiny for transfers from Turkey and delay the process.” Turkey may also face hurdles in “cash flow and credits, which could lead to higher interest rates and inflation. The economy may face a complete deterioration.”
The task force told Turkey on Oct. 19 to tighten laws blocking the financing of terrorist groups or face suspension from the OECD. Turkey and Indonesia are the only members of the 36-member organization that haven’t passed terror-financing legislation, Ergin said, and suspension could impede transactions with Western banks.
“Potentially, this would be a crippling blow to Turkish banks as they look to be more international in outlook, and have been active in seeking to finance themselves increasingly offshore,” Tim Ash, head of emerging-market research at Standard Bank Group Ltd. in London, said in e-mailed comments today. “Maybe all the attention on the tightening of the sanctions against Iran and criticism of the gold for oil/gas trade which has been booming over the past year between Turkey and Iran has added a little more impetus for the Turkish side.”
Turkey can already freeze terrorists’ assets and “the law is not something we are happy to pass,” Koylu said.
“We will meet the Feb. 22 deadline, but when foreigners start studying the law, they will realize that it does not meet requirements,” he said. “Then we will try to defend it and if that doesn’t work out, we may have to amend it.”
The draft law foresees the establishment of a government commission to respond to demands from foreign countries based on the rule of reciprocity.
Murat Basesgioglu, a nationalist opposition lawmaker, accused Western countries of failing to prevent the Kurdistan Workers’ Party, or PKK, from raising funds. Turkey has been fighting the autonomy-seeking PKK, which is classified as a terrorist group by the European Union and the U.S., since the 1980s.
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