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