The corruption scandal in Turkey has pulled back a curtain, revealing the country's ties to the shadowy world of terrorism finance. If left unchecked, this NATO ally risks being blacklisted by the international community for its illicit activities. The Obama Administration has expressed mild concern about the scandal and the government's response, but it is disinclined to step into the middle of what appears to be a domestic spat between two political rivals. This is the wrong time to step back, however. Troubling questions linger about Ankara's relationship with Iranian gold traders, Hamas leaders, al Qaeda in Syria, and persons designated under the U.S. sanctions regime. Turkey's open ties to these actors are a direct challenge to the U.S.-led sanctions infrastructure, and they raise troubling questions about Turkey's commitment to its alliance with the West.
BACKGROUND: Ankara last year scrambled to adopt terrorism finance legislation to evade a blacklisting by the Financial Action Task Force. FATF, the international body for combating terrorism finance, last year threatened to add Turkey to an ignominious list that only includes Iran and North Korea. Remarkably, Turkey failed to address its shortcomings for six years, following a mutual evaluation in 2007. The Turkish parliament narrowly passed a law allowing Turkey to buy time. But Turkey's problems are far from over. The corruption scandal has made that abundantly clear.
Prime Minister Recep Tayyip Erdoğan has framed the scandal as a purely political attack, blaming the Pennsylvania-based Islamist leader Fethullah Gülen for launching a "treacherous plot" from exile. He has launched a counter-offensive that includes purging investigators, re-assigning police and prosecutors.
Among those targeted by the probe that was launched on December 17, 2013, is an Iranian-Azeri businessman known as Reza Zerrab. Released from Turkish custody in February 2014, Zerrab, was "accused of being involved in irregular money transactions, mostly from Iran, that total some 87 billion euros," Today's Zaman reported. According to Bloomberg, using his connections in Iran and Turkey, Zerrab moved "almost a metric ton of gold to Iran every day for 1 1/2 years," which amounted to more than $28 billion. As the Turkish daily Hürriyet notes, Zerrab "allegedly transferred gold to Iran…with the help of his relations with a number of top politicians." Specifically, according to Bloomberg, Zerrab gave ministers and their families "millions of dollars in cash and gifts, including a $37,000 piano and a watch costing at least $350,000 for one minister, and sped around Istanbul with a police escort arranged by another." At least two other high-profile Iranian figures stand accused of financial crimes intersecting with Turkey's elite.
This all comes on the heels of revelations last year that Turkey exported some $13 billion in gold to Tehran directly, or through the United Arab Emirates, between March 2012 and July 2013. Through this illicit "gas-for-gold" scheme, the Turks received Iranian natural gas and oil. The arrangement was an illicit one. The Turks allowed Tehran to buy gold with Turkish lira, reporting that the gold was going to private entities in Iran (legal), not the government of Iran (illegal). Thus, the gold found its way back to Iranian coffers. This helped Iran circumvent the sanctions regime designed to help prevent Iran from acquiring the cash that would help it advance in its illicit nuclear program.
IMPLICATIONS: Looking back now, Turkey's sanctions-busting support to Iran makes little sense, particularly in light of Turkey's vehement opposition to the Bashar al-Assad regime in Syria, which is an Iranian client. Indeed, Turkey is among the Assad regime's staunchest opponents. Ankara has backed this position in both word and deed. As terrorism expert Thomas Hegghammer recently quipped, "Turkey is to Syria now what Pakistan was to Afghanistan in the 1990s."
According to the Wall Street Journal, in May 2013 President Obama chided Prime Minister Erdoğan for "letting arms and fighters flow into Syria indiscriminately and sometimes to the wrong rebels, including anti-Western jihadists." An October 2013 report from Human Rights Watch noted, "Many foreign fighters operating in northern Syria gain access to Syria via Turkey, from which they also smuggle their weapons, obtain money and other supplies, and sometimes retreat to for medical treatment." That same month, the Telegraph reported that al-Qaeda recruits are "kept in safe houses in southern Turkey" prior to entering Syria to fight in the ongoing conflict.
In other words, despite the fact that it is a NATO ally and a strategic partner to the United States for combating terrorism, Turkey has become one of the top supporters of the jihadi networks in Syria.
There are many Turkish actors alleged to be involved in the Syria jihadi pipeline. Many have managed to remain out of the public eye. But the Turkish media have zeroed in on the IHH, a Turkish charity that enjoys special ties to the Turkish government. On New Year's day, Turkish media first reported that the charity was transporting weaponry to Syria. The IHH denied the allegations. Two weeks later, however, Turkish anti-terror units conducted raids in six cities against people suspected of financing and arming al-Qaeda and other jihadists in Syria. Among the locations targeted was an IHH office near Syria's border. One suspect was arrested at the IHH office in the south-central town of Kilis. Now Serbian news agencies report that IHH is under investigation in Bosnia-Herzegovina for exporting weapons to jihadis in Syria.
IHH, it should be noted, first made headlines in 2010 for sponsoring the ill-fated "flotilla" to the Hamas-controlled Gaza Strip that led to a deadly clash with Israeli commandos. When subsequently asked about IHH's admittedly close ties to Hamas, IHH officials insisted they had done nothing illegal. But according to at least one leaked classified cable, the Treasury Department has expressed concern to Turkish officials that IHH provided Hamas with material assistance.
Erdoğan has not wavered in his support for IHH. Nor has he been shy about supporting Hamas itself. There are disputes over whether Erdoğan provides Hamas with large sums of cash, but he undeniably hosted Hamas leader Khaled Meshal in a highly publicized meeting in Ankara last year. Attending that meeting with Meshal was a senior Hamas operative known as Saleh Aruri. Multiple sources identify Aruri, the founder of Hamas' armed operations in the West Bank, as being based in Turkey. He is believed to be fund-raising there, which would make Turkey a hub for Hamas financial operations.
The Turkish media have also reported recently about Turkey's ties to Saudi businessman Yasin al-Qadi, who was designated by the U.S. Treasury for al-Qaeda finance in 2001. Turkish press reports suggest that al-Qadi entered Turkey at least four times between February 2012 and October 2012 without a visa or passport, and that he met with various business leaders. To be clear, al-Qadi successfully overturned the United Nations sanctions against him. However, the U.S. Treasury maintains its sanctions, noting to daily Hürrriyet that it is "confident in [the] designation." The most recent Turkish newspaper reports now allege that officials and businessmen with close links to the Turkish government allegedly tried to sell al-Qadi land in Istanbul belonging to state-run broadcaster Turkish Radio and Television Corporation.
Such reports have done little to bolster the recent flagging investor confidence in Turkey. In early February, Bloomberg reported that the Turkish lira weakened and stocks dropped resulting from concern over a possible blacklisting of Turkey at the aforementioned Financial Action Task Force (FATF), which met in February to assess Turkey's performance, among other agenda items.
In reality, the troubling headlines had little to do with FATF's very technical and legislative criteria. But the market jitters underscored how the corruption scandal has served to highlight Turkey's terror finance exposure.
In the end, FATF reported that Turkey would not be added to the black list of countries requiring "counter-measures" – a list that includes only Iran and North Korea. Nevertheless, Turkey remains a jurisdiction of concern. FATF noted the challenges "regarding Turkey's framework for identifying and freezing terrorist assets" in accordance with United Nations Security council resolutions, and encouraged "Turkey to address these remaining strategic deficiencies and continue the process of implementing its action plan."
CONCLUSIONS: Turkey's omission from the black list was both predictable and appropriate. Turkey does not belong on the same list as Iran or North Korea. However, troubling questions remain about Ankara's relationship with Iranian gold traders, Hamas leaders, al Qaeda in Syria, and persons designated under the U.S. sanctions regime. Turkey's open ties to these actors are a direct challenge to the U.S.-led sanctions infrastructure, and they raise troubling questions about Turkey's commitment to its alliance with the West.
The current corruption scandal, because it intersects with many of these terrorism finance charges, presents a natural window of opportunity for Washington to address these problem with Ankara. To be sure, Turkish officials will argue that it is difficult to address these issues in the current political environment. However, there is more danger in letting these problems fester. If left unchecked, Turkey's terrorism finance problems could worsen, endangering a partnership that was forged after the end of World War II and that Washington has valued ever since.
Jonathan Schanzer, a former terrorism finance analyst at the U.S. Department of the Treasury, is vice president for research at Foundation for Defense of Democracies. He is the author of a new report titled Terrorism Finance in Turkey: A Growing Concern (FDD Press, February 2014).