Germany’s financial watchdog appointed a special representative to the Frankfurt-based unit of Turkey’s biggest state-run bank to ensure it followed anti-money laundering rules and other laws.
BaFin said it appointed the executive to Ziraat Bank International AG after the company failed to obey an order to ensure it complied with the German Money Laundering Act.
“The institution violated the requirements for proper business organisation,” BaFin said in a statement on Tuesday. “Ensuring proper business organisation also includes sustained compliance with the obligations to be fulfilled by the bank under the Money Laundering Act.
Ziraat Bank, the unit’s parent company, is controlled by Turkey’s sovereign wealth fund, which is chaired by President Recep Tayyip Erdoğan.
Last year, BaFin entered talks with Ziraat Bank after concerns emerged surrounding some loan transactions and “imbalances” in the company’s balance sheet, Reuters reported in late July citing unidentified sources. BaFin also rejected Ziraat Bank’s appointment of a new general manager in Frankfurt because the person did not meet some requirements, Reuters said.
Ziraat Bank International AG operates in seven cities including Berlin.
Ziraat Bank obtained a banking license in Germany in 1998. It established Ziraat Bank International AG in 2001. The subsidiary specialises in funding corporate and retail customers with short and medium-term loans, providing savings products, clearing, and international money transfers, according to its website.
Ziraat Bank’s loans grew by nearly 30 percent to 778 billion liras ($53.1 billion) in 2021. Net profit dropped by 20 percent to 6.3 billion liras.
Turkey’s government has used state-run banks to lend cheaply to some businesses and to help the central bank defend the maligned lira, which lost 44 percent of its value last year.
In February, the wealth fund boosted Ziraat Bank’s capital by 21.8 billion liras. The fund also spent about $6.7 billion in 2019 and 2020 on two other capital boosting rounds for state-run lenders.
Halkbank, another state-run bank operating under Turkey’s wealth fund, is facing trial in the United States accused of helping Iran evade U.S. sanctions. A Manhattan court jailed a deputy CEO of the bank on the same charges. The banker, Hakan Atilla, was freed in July 2019 and returned to Turkey to serve as head of the Istanbul stock exchange for nearly two years.