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Turkey placed on global financial watchdog's 'grey list', in major blow to economy

Composite logo of the FATF - Financial Action Task Force
Logo of the FATF - Financial Action Task Force

Turkey has been "grey listed" by a global financial watchdog over its alleged failure to fight money laundering and the financing of terror, in a major blow that could see Turkey lose billions in foreign investment.

According to the Financial Times newspaper, two anonymous Western officials revealed to it yesterday that the Paris-based Financial Action Task Force (FATF) was "very likely" to approve the decision to place Turkey on its grey list, following discussions today.

The members of the FATF have now voted to place Ankara on that list, meaning that it is to be subjected to special monitoring by the organisation's International Co-operation Review Group, making it an addition to over 22 other states already on that list, including Morocco, Syria, Albania, Pakistan, Yemen and South Sudan.

Prior to today's decision, the paper cited an unnamed Turkish official as saying that "Turkey has achieved significant progress in terms of compliance with FATF standards, and fulfilled its responsibilities regarding legislation" despite the ongoing Covid-19 pandemic and lockdowns.

In December 2019, the FATF put Ankara on notice that it was at risk from "money laundering and terrorist financing," with there allegedly being "serious shortcomings in the country's framework to combat these crimes."

Read: Turkish lira plummets to new low after central bank slashes rates

The FATF's decision is predicted to harshly impact Turkey's economy and deter foreign investors from entering the Turkish market, especially at a time when foreign investment is already almost at the lowest level ever during the 20-year reign of President Recep Tayyip Erdogan.

It also comes at a time when Ankara is undergoing a serious economic crisis, with the Turkish lira having lost around 20 per cent of its value against the US dollar this year alone.

The watchdog's grey list is reported to greatly impact a country's economic status and reputation in the international community, and the International Monetary Fund (IMF) has previously reported that it costs a nation around 3 per cent of its GDP. In Turkey's case, that decline would be equivalent to approximately $23 billion.

The move is also predicted to potentially influence the European Union (EU) to add Turkey to its own list, which targets money laundering and non-EU countries which it sees as seriously threatening the bloc's financial system.

Erdogan has reportedly responded furiously to the FATF's decision, threatening to expel ten ambassadors of Western nations.

Other countries which were today added to the grey list alongside Turkey were Jordan and Mali.

Read: Erdogan says Turkey will break economic 'triangle of evil' with reforms

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