Foreign investors willing to invest in Turkey and Turkish companies listed on foreign stock exchanges or which have a business relationship with foreign companies are under the obligation to comply with high-level international compliance requirements. As a result, these investors and Turkish companies are required to implement compliance programs which assist them and their employees to conduct transactions and actions in conformity with ethical principles, legislation, and regulatory provisions.
The US Foreign Corrupt Practices Act (FCPA) and UK Bribery Act are the main compliance regulations with cross-border effects. The FCPA was made effective by the US Department of Justice and the Securities and Exchange Commission (SEC) on December 19, 1977. The UK Bribery Act entered into force in July 2011. Turkish companies which have business relationships with US and UK companies are obliged to comply with these acts.
In addition, Turkey has ratified several international anti-corruption conventions, such as the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, the United Nations Convention against Transnational Organized Crime, the United Nations Convention against Corruption, and several European Conventions on Criminal and Civil Law.
Current Status in Turkey
Turkish Criminal Code No. 5237 is the primary regulation dealing with corruption in Turkey. The relevant provision criminalizes bribery, misuse of trust, fraud, laundering asset values arising from criminal activities, rigging the performance of an obligation, exposing commercial secrets, and forgery. Article 252 of the Turkish Criminal Code defines “bribe” as a benefit illegally secured by a public officer in negotiation with a person to perform or not to perform a task beyond his or her responsibility. Accordingly, any public officers who take bribes will be punished, along with the person offering the bribe. In addition, bribery is committed where a benefit is provided, offered, or promised directly or through intermediaries; or where the relevant individuals request or accept such a benefit directly or through intermediaries.
In addition, the Turkish Civil Servants Law strictly prohibits civil servants from requesting and accepting gifts. In accordance with this Law, the Public Officials Ethics Board (the “Ethics Board”) is authorized to determine the scope of this prohibition.
The Ethics Board was established pursuant to the Ethics Rules Law, which was created to adopt rules and monitor public officials’ implementation of principles related to transparency, impartiality, honesty, accountability, and obligation to observe the public interest.
Compliance Challenges of the Turkish Companies
Today, although Turkish companies are more willing than ever to establish business relationships with overseas countries which have anti-bribery and corruption legislation; they face several significant obstacles on their way to compliance.
The first of these obstacles is the international corruption perception of Turkey; which, according to the Corruption Perception Index (CPI) of Transparency International, has declined over the last four years from 50 in 2013, to 45, 42, and ultimately 41 in 2016.
As the index is one of the primary indicators foreign investors consider prior to investing in a country, the decline means that Turkish companies have a greater challenge to overcome in attempting to demonstrate their willingness for international cooperation.
Unfortunately, applicable local legislation is not specific and clear in terms of what companies need to do in order to comply with anti-bribery and anti-corruption prohibitions. Therefore, Turkish companies would definitely need a solid compliance guide.
The second obstacle is that even those Turkish companies which do have a strong anti-bribery and anti-corruption company culture often transmit it verbally instead of in written policies, procedures, or codes of conduct.
Anti-corruption and anti-bribery trainings that would communicate important policies and procedures and third party due diligences are essential mechanisms that Turkish companies need to implement. In addition, although a significant compliance program component is a whistleblowing mechanism that employees can use to report violations anonymously, reporting a serious issue about a co-worker still comes up against a cultural barrier in Turkey, although this barrier could perhaps be eliminated with the help of effective trainings.
One last element of an effective compliance program that Turkish companies need to implement is a corruption and bribery risk analysis of processes to address the specific risks they face.
Turkish companies face certain difficulties in achieving compliance with anti-bribery and anti-corruption legislation. They also have two very important factors working in their favor, however: their economic potential and their strong desire for business partnerships with overseas companies. These will lead their efforts on compliance.
By Semih Metin and Cigdem Gurer, Partners, Nazali Tax & Legal
This Article was originally published in Issue 4.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.