Türkiye's recent removal from the Financial Action Task Force's (FATF) "grey list" marks a significant milestone in the country's economic landscape.

The FATF's decision, announced after its plenary meeting in Singapore, recognizes Türkiye's substantial progress in enhancing its anti-money laundering (AML) and combating the financing of terrorism (CFT) framework.

Positive Economic Impacts

Experts and analysts predict that this development will attract increased foreign investment, improving Türkiye's international standing. Moody's, a leading credit rating agency, highlighted the potential for enhanced relations with European and U.S. institutions. Mohamed Daoud of Moody's stated, “This development is expected to boost Türkiye's reputation internationally, potentially boosting foreign investment.”

Business Sector Reactions

The Turkish business community, including the banking and fintech sectors, welcomed the FATF's decision. Ufuk Bilgetekin, President of the Türkiye Payments and Electronic Money Institutions Association (TÖDEB), emphasized that the removal from the gray list would accelerate capital flows and enhance foreign investor confidence. “Our removal from the gray list will enhance foreign investors' confidence in Türkiye and accelerate capital flows,” he noted.

Ahmet Uluhan from NCM Securities Inc. and Professor Erhan Aslanoğlu of Istanbul Topkapı University also underscored the decision's significance for attracting international investment and facilitating economic growth. The FATF's acknowledgment of Türkiye's efforts aligns with broader economic reforms, contributing to a positive investment environment.

Government and Financial Reforms

Finance Minister Mehmet Şimşek celebrated the achievement on social media, signaling a new chapter in Türkiye's economic policy aimed at curbing inflation and building reserves. The FATF's decision follows Türkiye's extensive efforts to meet international AML/CFT standards, enhancing its credibility and stability in the global financial system.

Future Prospects

Last year, foreign direct investment (FDI) inflows to Türkiye reached $10.6 billion. With the removal from the gray list, this figure is expected to grow as international funds become more comfortable investing in Türkiye. The positive perception fostered by this development is likely to spur mergers and acquisitions, boosting economic activity.

Rifat Hisarcıklıoğlu, chair of the Union of Chambers and Commodity Exchanges of Türkiye (TOBB), commented, “The decision is a confirmation that the country's economy is progressing on the right path. It will contribute to the formation of positive perceptions and opinions about our country.”

Implications for TRNC

The Turkish Republic of Northern Cyprus (TRNC) stands to benefit from Türkiye's enhanced financial standing. As Türkiye strengthens its economic ties and attracts more foreign investment, the TRNC could experience a spillover effect. Increased investment in Türkiye may lead to more business opportunities and economic collaborations in the TRNC, particularly in sectors like tourism, real estate, and finance.

Strengthening Economic Ties

The improved perception of Türkiye’s financial stability and compliance with international standards may encourage investors to consider the TRNC as a viable investment destination. The close economic and political ties between Türkiye and the TRNC mean that economic improvements in Türkiye often translate into positive outcomes for the TRNC.

Encouraging Direct Investments

With Türkiye no longer on the FATF gray list, international investors might feel more confident about engaging in projects within the TRNC. This could lead to an increase in direct investments, particularly in infrastructure and development projects, which are crucial for the TRNC’s economic growth.

Enhancing Financial Collaboration

The removal from the gray list might also facilitate smoother financial transactions and collaborations between Turkish and TRNC banks. This can enhance the financial sector in the TRNC, providing better services and more robust financial products to businesses and individuals.

TCE Conclusion

Türkiye's exit from the FATF gray list is a testament to its commitment to international standards in financial regulations. This milestone is poised to enhance Türkiye's attractiveness as an investment destination, promoting economic growth and stability. The country's proactive measures in AML/CFT are paving the way for increased foreign capital inflows, reflecting a robust and forward-looking economic strategy. For the TRNC, this development heralds potential economic benefits, reinforcing its economic ties with Türkiye and attracting more foreign investments.