The

Current Legal Landscape and Major Areas of Risk Exposure Based on Practical Experience

As an emerging market,

Turkey is rightly considered to be a business and commercial hub for the EMEA

region, as well as an important market for many multinational companies. In

2017, Turkey received a score of 40 points in Transparency International's

Corruption Perceptions Index, on a scale of 0 ("highly corrupt") to 100 ("very

clean"). As this score is relatively closer to the lower end of the scale and

since Turkey's anti-corruption efforts are an ongoing progress and its related legislation

is continuously evolving, multinational companies that are currently active in

Turkey (or will be in the future) should keep themselves well-informed about

the local anti-corruption climate and strive to stay up-to-date about any new

developments. This will enable multinationals to take precautionary measures

that could mitigate their liabilities under extraterritorial legislative anti-corruption

regimes, such as the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery

Act (UKBA), as well as relevant domestic laws in Turkey.

Firstly, in order to keep pace

with the recent international developments in this field, Turkey has passed up-to-date

anti-corruption legislation and it has also signed and ratified all

territorially applicable international treaties regarding anti-corruption,

including the OECD Anti-Bribery Convention. The main domestic legislation that

is applicable to acts of corruption is the Turkish Criminal Code No. 5237

(Criminal Code), which prohibits bribery, malversation, malfeasance and

embezzlement. Apart from the Criminal Code, there are also a few other

legislative regulations dealing with the prevention of corruption, such as the Turkish

Criminal Procedure Law No. 5271, the Law No. 657 on Public Officials, and the Law

No. 5326 on Misdemeanors. Furthermore, in 2016, Turkey finally ratified the

Council of Europe Convention on Laundering, Search, Seizure and Confiscation of

the Proceeds from Crime and on the Financing of Terrorism. Additionally, to

bolster the fight against corruption, the Turkish Prime Minister published

Circular No. 2016/10 on Increasing Transparency and Strengthening the Fight

Against Corruption in 2016, following the expiration of the Strategy on

Increasing Transparency and the Strengthening of the Fight Against Corruption. This

Circular sets forth a number of precautions aimed at increasing prevention, as

well as certain precautions aimed at strengthening the enforcement of sanctions.

Moreover, the Circular introduces various provisions that focus on enhancing

social awareness. Overall, the Circular's directives and precautions mainly seek

to regulate the rules of ethical behavior for public officials and attempt to

remove the obstacles to their adjudication.

Turkey also participated in several

international anti-corruption initiatives through its membership in the Group

of States against Corruption, which oversees the compliance of these states with

the anti-corruption standards put forth by the Council of Europe. As a result,

Turkey's anti-corruption legislation was amended to bring it in line with

international standards in this regard. Consequently, Turkey has since (i)

increased sentences for the crime of bribery; (ii) criminalized offering,

promising, or requesting bribes, directly or indirectly; (iii) criminalized

bribery of foreign public officials; (iv) broadened the scope of the definition

of "foreign public officials"; and (v) imposed administrative liabilities on

corporations whose representatives or persons acting on their behalf commit the

offence of bribery.

Currently, only real persons

are considered to be the main perpetrators of a crime under the Criminal Code,

as Article 20 of the Criminal Code plainly states that criminal liability is

personal and further declares that criminal sanctions may not be imposed

against legal persons. In other words, the Criminal Code accepts the principle

of "personal criminal liability," which has been challenged and debated over

the years, although any relevant amendments are yet to be enacted. Moreover, it

should be noted that the Turkish legal system does not accommodate

non-prosecution or deferred prosecution agreements, nor does it allow compliance

programmes to serve as mitigating factors.

However, this is not to

suggest that companies are entirely off the hook when it comes to

anti-corruption. As mentioned above, under Turkish law, companies can be held

civilly or administratively liable. Accordingly, the Law No. 5326 on

Misdemeanors foresees and sets forth administrative fines against firms whose corporate

organs or representatives commit the crimes of bribery or bid-rigging (among

other prohibited acts listed under the relevant article) for the benefit of the

corporation while they were acting within the scope of the activities of the

corporation. Furthermore, various security measures can also be imposed upon

corporations, such as (i) invalidation of a license granted by a public

authority, (ii) seizure of goods used in the omission of (or that result from)

a crime committed by the representatives of the legal entity, or (iii) seizure

of pecuniary/financial benefits arising from (or provided for) the commission of

the crime.

Schemes

Multinationals May Consider to Prevent or Mitigate Corporate Risk

Turkey is a sensitive region

for conducting business when it comes to compliance issues. It is important to

note that there is no specific government agency that is tasked with and responsible

for enforcing anti-corruption laws in Turkey; therefore, the judiciary has full

and exclusive powers to apply the provisions stipulated under the relevant laws

in relation to anti-corruption laws and regulations.

Under Turkish law, companies

are not required to set up compliance programmes and the existence of a

compliance programme is not considered to be a mitigating factor. However, keeping

Turkey's distinctive cultural context in mind, maintaining such a programme

would always be prudent and considered an asset for a multinational company. As

such, companies are advised to adapt their compliance programmes to the Turkish

jurisdiction, as it is critical to understand that the culture, as well as the business

environment, of the relevant jurisdiction plays a significant role in determining

the shape of its anti-corruption scene. For example, there is a long-standing

and widespread culture of hospitality and gift-giving in Turkey and this

culture cannot be changed or transformed by merely instructing employees not to

engage in such acts when doing business. Rather, a company that seeks to

prevent such gift-giving would need to lay down written rules on the subject, carefully

train its employees, conduct comprehensive audits and enforce disciplinary

measures when the applicable rules are broken, in order to foster a culture of

compliance. In this respect, it is highly advisable to use the local language

in the employee training sessions, as what employees could consider to be

cultural practices (i.e., gift-giving

and paying for entertainment expenses) may constitute corruption under the

relevant laws and it is important to avoid any language-related

misunderstandings in this regard. Acquiring companies should also carefully

review the gift-giving, travel and meal expenses that are incurred in relation

to third parties and dig deeper to uncover the exact nature of such expenses where

necessary. (This is particularly

important since the Criminal Code

does not differentiate in any way between facilitating payments and bribes.

Accordingly, any gifts, travel expenses, or payments for meals or entertainment

could potentially be deemed as bribery under Turkish laws.)

Therefore, multinational companies

(especially acquiring companies) are encouraged to devise and implement compliance

programmes aimed at detecting and preventing possible unlawful acts, which will

raise awareness among employees about combating corruption. Moreover, such

companies should bear in mind that one of the biggest mistakes they can make is

to simply adopt and incorporate a global compliance programme without adapting

it first to the particular needs and characteristics of the local compliance

climate in which the company operates. As a result, the global compliance

programme may fail to serve as a sufficient robust deterrent against corruption

or as an adequate tool for detecting and preventing such corrupt activities. Another

crucial step towards securing a corruption-free business environment, which

goes hand-in-hand with the compliance programme, is proper employee training. Employee

training should include a clear definition of what constitutes corruption, explain

the risks and consequences of corrupt acts, and incorporate real-life examples

to deter employees from engaging in such acts. Finally, employee training

programmes should also inform employees about the various requests and offers

that they might receive from third parties (i.e.,

bribes, gifts, kickbacks, etc.) and how to deal with such requests and offers,

which they should ignore/decline and also consider reporting to their

supervisors, where appropriate.

Companies would also be

well-advised to set up control and monitoring mechanisms to supervise the

implementation of their anti-corruption policies. Periodic audits and implementing

whistleblower protection procedures are some of the methods that can be used to

control/monitor whether anti-corruption policies are being carried out in an

effective manner. It is also advisable that corporate guidelines clearly indicate

how and whom to approach in case of a suspected act of corruption.

Currently, there is no

legislation or guideline in Turkish law that mandates self-disclosure as a

mitigating factor for either real persons or legal persons. Thus, whether or

not a judicial authority should consider the voluntary disclosure of facts as a

mitigating factor is left entirely to the discretion of the judge adjudicating

the case file. Companies should also keep in mind that self-disclosure itself carries

the risk of "spillover" to other jurisdictions where the disclosure may pose

certain legal hazards. Therefore, companies should take utmost care when transmitting

such sensitive information to the public authorities. Having said that, it

should be noted that the Turkish criminal system does provide a leniency

mechanism, which allows and incentivizes companies to self-disclose violations

in exchange for reduced penalties. For the crime of bribery, the Turkish

criminal system suggests that a person who gives or receives a bribe, but who then

informs the investigating authorities about the bribe before an investigation

has been launched, should not be punished for the crime of bribery. However,

this rule does not apply to persons who offer a bribe to a foreign public

official.

Case

Studies: Recent Anti-corruption Cases and Decisions

Within the past year, a

number of anti-corruption cases and investigations have been initiated against individuals

rather than private companies. In one case relating to the charge of bribing public

officials, a total of 46 people (including 15 public officials) were taken into

custody due to bribery allegations. According to the allegations, the suspects had

paid bribes between the amounts of 200 Turkish Lira (approx. 40 EUR) and 10,000

Turkish Lira (approx. 2,000 EUR) in order to facilitate the processing of their

requests at the Title Deed Directorate (the Turkish equivalent of the Land

Registry). The suspects used coded phrases such as "I brought the fig" and "I

left your goods at the bakery" to signal and indicate the bribe payments. 14

people, including six public officials, were subsequently arrested in

connection with the case.

In another investigation, an

inspector at the Istanbul Provincial Directorate of the Social Security Administration

was arrested on the grounds of requesting bribes from a shoe manufacturing

company. Upon inspecting the shoe factory and finding a number of violations,

the inspector had allegedly offered to cover up (i.e., not to report) these violations in exchange for a bribe of 2,000

EUR. Furthermore, the inspector had allegedly proposed to provide the company

with monthly consulting services for the same payment amount. After the owner

of the company notified the Public Security Branch Office of these events, the

authorities arrested the inspector in question, after verifying that he had

received the bribe money on his second visit to the factory.

A different investigation involved

bribery allegations against public officials at the Istanbul Courthouse

Execution Offices. The investigation was also conducted by using hidden cameras

and it was determined that certain individuals had offered cash payments varying

between 100 Turkish Lira (approx. 20 EUR) and 10,000 Turkish Lira (approx. 2,000

EUR) by using envelopes placed inside the case files. Accordingly, a criminal case

was initiated against 34 suspects regarding bribery and misconduct charges.

In October 2017, a network of public servants who

were allegedly engaged in corrupt activities has been uncovered at the Turkish

Standards Institute (TSI), as a result of a letter that was received by the Ankara

Police Department from certain TSI employees, notifying the authorities about

the corrupt activities taking place inside the TSI. Allegedly, this group was

receiving bribes in the form of cash, valuable gifts, scholarships for

relatives and paid off holiday expenses, in exchange for providing certain

documents to companies. Upon receipt of the notification letter, the Ankara Police

Department monitored the suspects by using technical and physical methods, gathered

evidence and substantiated the allegations, and 12 people were taken into

custody shortly thereafter.

Article prepared

by Gönenç Gürkaynak Esq., Ceren Yıldız and Nazlı Gürün for the 12th

International Conference on Anti-Corruption London held on June 27 and 28, 2018