For any financial services company, knowing your customers is no longer merely an operational best practice — it is a statutory obligation. Under Law No. 5549 and MASAK regulations, obligated institutions in Turkey must rigorously implement customer identity verification processes. In this article, we explain KYC and KYB, who is subject to these obligations, and how to build an effective programme.
KYC is the process of verifying the identities of individual customers and classifying them on a risk basis. It goes beyond identity verification to encompass understanding the customer's area of activity, transaction profile and source of funds.
KYB is the identity verification process for legal entity customers — companies, associations, foundations. KYB goes beyond confirming the legal existence of an entity; it involves identifying the ownership structure, control mechanisms and ultimate beneficial owners (UBOs).
Why it matters: Criminal organisations frequently use complex corporate structures and shell companies to launder money. Effective KYB eliminates this anonymity.
For individuals: identity document verification, address confirmation. For legal entities: trade registry records, signature circulars, tax certificates and beneficial owner declaration.
Each customer is classified as low, medium or high risk. Politically exposed persons (PEPs) and sanctioned individuals are automatically placed in the high-risk category.
Transaction patterns are monitored throughout the relationship. Transactions inconsistent with the customer profile or of unusual size or frequency are flagged as suspicious.
High-risk customers require additional documentation and more frequent monitoring.
MASAK's General Communiqué No. 30, effective 1 January 2026, introduced tiered declaration and monitoring requirements for EFT, remittance and high-value cash transactions. Financial institutions must now monitor customer cash flows more closely.
Contact Koru Legal for a tailored KYC/KYB policy and procedure design, risk classification model and MASAK compliance advisory.
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