In April 2017, at the initiative of the President of Turkey, a nationwide referendum was held to change Turkey’s parliamentary system to a presidential system. The authoritarian rule of President Erdogan has not always encouraged foreign entrepreneurs to cooperate with companies in the country across the Bosphorus. Since the Ukrainian-Russian war broke out, Polish companies have become even more cautious about cooperating with Turkish entities due to Turkey’s proximity to Ukraine on the Black Sea. To conduct economic intelligence and verify a company in Turkey, what steps can be taken?
Economic Relations with Turkey
Turkey is a strong country and is a member of international organizations such as the European Bank for Reconstruction and Development, the G20 Group, the International Monetary Fund, the Organization for Security and Co-operation in Europe, the United Nations, the North Atlantic Treaty Organization, the Organization for Economic Cooperation and Development, the Council of Europe, and the World Trade Organization. However, it is not a member of the European Union.
Since May 1, 2004, when the Republic of Poland joined the European Union, Poland has been a party to agreements concluded by the EU with Turkey, primarily the Free Trade Agreements. According to a report by the Ministry of Development and Technology, Turkey remains Poland’s main partner in the Middle East. As of 2021, it ranks 23rd among Poland’s most important export destinations and 35th among Poland’s most important import sources. Turkey ranks 18th in terms of trade turnover. In 2021, trade turnover amounted to EUR 7,905.9 million, representing a 27.3% increase compared to 2020. Polish exports amounted to EUR 2,648.3 million (an 18.7% increase year-on-year), and imports from Turkey amounted to EUR 5,257.6 million (a 32.1% increase year-on-year).
Polish companies mainly export to Turkey products of the electromechanical industry (EUR 1,429 million, a 20.1% increase, with a 53.9% share of all exports from Turkey) and chemical industry (EUR 478 million, a 16.5% increase, with an 18.1% share). In the opposite direction, the main products are electromechanical industry (EUR 2,106 million, a 20.9% increase, with a 40.3% share of all imports) and light industry (EUR 1,372 million, a 34.1% increase, with a 26.3% share). The value of services provided by Polish companies to Turkey was EUR 142.3 million, an increase compared to 2020 (when the value was EUR 95.7 million), and Polish companies purchased services worth EUR 217.2 million from Turkish companies (in 2020 it was EUR 121.3 million).
Polish and EU Sanctions
The Russian military aggression against Ukraine in February 2022 has severely shaken the security of economic trade in Europe and globally. It is important to note that Russia is one of Turkey’s most important trading partners. In 2019, the trade balance between the two countries amounted to $26,309 billion. In August 2021, the Turkish Minister of Trade, Mehmet Muş, declared that both countries aim to increase the volume of trade to $100 billion and intensify cooperation in industry, energy, tourism, and agriculture. On the other hand, Turkey is one of the largest foreign investors in Ukraine. During the visit of the Turkish president to Kyiv on February 3, 2022, the two countries signed a free trade agreement.
All of this makes it difficult for Turkey to sever all economic ties with Ukraine and Russia, especially in the latter case, where cooperation between Turkish and Russian companies can have serious consequences for Polish contractors of Turkish companies. In response to the attack on Ukraine, the European Union imposed nine packages of sanctions on Russia until the end of last year. Poland also imposes its own restrictions, targeting the most important individuals and companies from Russia. Trade in goods and services with Russian companies is prohibited, and Polish entrepreneurs who violate this rule may face financial penalties of up to PLN 20 million and even up to 15 years in prison. However, Russian entrepreneurs have learned to circumvent international sanctions, using complex holding structures in which it is difficult to detect the actual ownership structure. How to check a company in Turkey to avoid sanctions?
National and EU registers
Detailed information about the type of economic transactions banned by the EU with Belarus and Russia can be found on the websites of the European Council: https://www.consilium.europa.eu/en/policies/sanctions/restrictive-measures-against-russia-over-ukraine/ and https://www.consilium.europa.eu/en/policies/eu-response-ukraine-invasion/. The list of persons and entities subject to sanctions can be found in the Official Journal of the EU at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A02014R0269-20220721. The Polish Ministry of Internal Affairs and Administration also maintains an up-to-date register of entities subject to sanctions, where you can check the contractor, its links, reasons for listing, and applied sanctions: https://www.gov.pl/web/mswia/lista-osob-i-podmiotow-objetych-sankcjami.
Therefore, the first step in checking a company in Turkey would be to look for it in one of the above-mentioned registers. The Regulation (EU) 2022/576 of the Council of April 8, 2022, amending Regulation (EU) No. 833/2014 concerning restrictive measures in response to Russia’s destabilizing actions in Ukraine, is also a source of useful information.
Economic interview, or how to verify a contractor from Turkey?
The verification of a contractor can be entrusted to a professional economic intelligence agency that specializes in carrying out such orders on a daily basis. A private detective in Warsaw, Poznan, Wroclaw or other cities will know how to obtain the necessary information to verify a current or future contractor.
The most important way to verify a contractor and their potential connections is to determine the entity that is their real beneficiary, and then check if they are listed on the sanctions list maintained by the Ministry of Interior and Administration. These determinations can be made in the Central Register of Real Beneficiaries maintained by the Minister of Finance at: https://crbr.podatki.gov.pl/adcrbr/#/wyszukaj
Direct inquiry to the contractor
In case of difficulties in determining the ownership structure of a business partner using available registers, another method of checking them as part of economic intelligence activities is to directly ask them to confirm who their real beneficiary is. Of course, to verify the response, you can ask the foreign entrepreneur to provide documents confirming their statements.
A publicly available way to obtain information about a contractor is to search the resources of the Internet. You can verify the company, check if they have a website, what opinions there are about them, and perhaps come across some publication about them. You can also ask for references from other companies that have dealt with this contractor.
If for security reasons we do not want to do this ourselves, we can entrust the research to a detective agency specializing in professional economic intelligence, because there are many more sources of information than just the Internet. For example, you can apply to the Embassy of the Republic of Poland in Ankara with a specific request for information on a particular entity, whether there have been complaints from other entrepreneurs or whether the Turkish contractor is known to have a bad reputation according to the knowledge of the diplomatic mission. Similar information can be provided by Polish-Turkish Chambers of Commerce.
In the Public Information Bulletin of the Ministry of Entrepreneurship and Technology, as the minister responsible for the economy, a register of foreign business representatives is maintained. If we find our contractor’s representation in this register, we can assume that they are still in existence and conducting business.
Another such register in which a contractor can be checked is the European Union VAT taxpayers’ register and the EORI register. Companies and individuals wishing to conduct commercial activities in the Union must use the EORI number as their identification number in all customs procedures.
Turkish business registers
Information about a Turkish contractor can, of course, be found in local registers. The Istanbul Chamber of Commerce is an official, deeply-rooted chamber and one of the largest in the world, with over 640,000 members. On its website https://bilgibankasi.ito.org.tr/en/data-bank/company-details it provides a company search engine that allows you to obtain basic information about the company, its directors, owners, previous owners, a list of announcements published in the official Turkish newspaper, and the entire profile available for download in PDF format. The search can be conducted by name, company name, NACE code (equivalent to our PKD), and type of business activity.
The Turkish Trade Registry Gazette is a state registry and official journal that provides basic information about the company at https://www.ticaretsicil.gov.tr, but to use it, you need to log in and create an account. It is available in English.
Information about contractors can also be found on the Borsa Istanbul website, https://www.borsaistanbul.com, the Istanbul Precious Metals and Diamond Market website, https://mersis.gtb.gov.tr in the national electronic communication system, and the Turkish Patent Institute, which provides an online database of business and patent registers at https://www.turkpatent.gov.tr.
It is better to thoroughly check a contractor before conducting any transactions or entering into cooperation with a Turkish contractor, especially to see if they are affiliated with Belarus or Russia. Violation of sanctions imposed on trade with these countries can result in a financial penalty of up to PLN 20 million, as well as 3 to 15 years of imprisonment.
Do you already know how to check a company in Turkey? If not, or if you need to find more detailed information, we can help you. Please contact us.