Implementing the Precious Metals Tracking System

The Precious Metals Tracking System (KMTS), that is, the recording system that tracks the source and movement of precious metals, covers precious metal refineries established in Türkiye. Refineries are obliged to register in this system all standard unprocessed precious metals they produce other than granulated silver, and all minted precious metals. The absence of registration has two consequences: the product cannot be sold domestically, and, depending on the seriousness of the breach, the refinery's activity is suspended or its licence is revoked.

The Ministry of Treasury and Finance regulates this system on the basis of Articles 1, 2, 7 and 20 of Decree No. 32 on the Protection of the Value of Turkish Currency (32 sayılı Karar), which entered into force under Law No. 1567 on the Protection of the Value of Turkish Currency (1567 sayılı Türk Parasının Kıymetini Koruma Hakkında Kanun). The technical, administrative and sanction details are set out in Articles 16, 17 and 18 of the Communiqué (tebliğ) on Precious Metal Standards and Refineries (Communiqué No. 2023/1), published in the Official Gazette of 23 February 2023.

Who Is Covered by the Obligation?

The KMTS obligation covers all precious metal refineries that have obtained an operating licence (faaliyet izni) from the Ministry. Producers that refine gold, silver, platinum and palladium into standard bars or bullion are the system's principal addressees.

The scope is not limited to new production. Standard unprocessed and minted precious metals produced before the system came into operation but not yet sold are also subject to registration. Granulated silver, however, is outside the scope; for it, the bag must be sealed and must bear the fineness, weight, the refinery's name or logo, the words "Granül Gümüş" or "Silver Granules", and the production date.

How Are Registration and Notification Carried Out?

Registration begins with the application to each product manufactured of a unique code provided by the General Directorate of Mint and Stamp Printing House (Darphane). Together with this code, the producer records in the KMTS the product's producer, date and place of production, weight, fineness and serial number.

To enable data entry by private assay offices (ayar evi), the Turkish State Mint establishes the Precious Metal and Precious Stone Fineness Report Monitoring System and grants access to it.

Refineries also record vault and stock entries and exits at the time of the transaction, with a dispatch note, that is, the official document listing the goods being transported. The data obtained under the KMTS are notified electronically to the Ministry by the Turkish State Mint and the refineries, in the manner determined by the Ministry.

Are Notification and Registration the Same Thing?

No, and this distinction is the point most often confused in practice. Registration is product-based; notification, by contrast, relates to permission to produce. Refineries must notify the Ministry of the technical characteristics and representative images of the precious metals they produce. Refineries on the Exchange Refinery List also send the same information and documents to the Exchange.

The sanction here arises not at the sales stage but at the production stage: precious metals that have not been notified, that do not conform to the notified technical characteristics or that have not been approved by the Ministry cannot be produced. In other words, a missing notification does not make the product unsaleable; it makes it impossible to produce.

What Is the Consequence of a Breach?

Precious metal not registered in the KMTS cannot be sold domestically (Communiqué No. 2023/1, Article 17(2)). Supervision is carried out by three authorities: the Ministry of Treasury and Finance, the Exchange, and the Turkish State Mint as regards the KMTS and sample tests.

If an inspection finds a breach of the legislation in the refinery's accounts, records or KMTS data, the Ministry, depending on the seriousness of the breach, temporarily suspends the activity or revokes the operating licence. Revocation also has consequences attaching to individuals, and these vary according to the ground for revocation. Persons who were shareholders or managers in the last one year of a refinery whose operating licence was revoked on the ground of the supply chain compliance report or the independent assurance report (Communiqué, Article 18(1)(ç)) may not take part in establishing a new refinery (Article 7(1)(e)(3)). Where revocation is for production contrary to the technical requirements and standards or for activity contrary to Article 9, the refinery and its shareholders may not apply for a new establishment permit or operating licence for five years; where it is for the absence of the technical requirements in an examination under Article 16(6), for one year (Article 18(3)).

On the administrative fine side, the basis is Article 3 of Law No. 1567. For operating without a certificate of authorisation (yetki belgesi), Article 3(5) applies; in addition to an administrative fine, this paragraph provides for the suspension of all activities at the business premises for one month and, if the premises were opened solely for the activity subject to permission, their permanent suspension.

Which Steps Should Refineries Take?

• Apply the unique code obtained from the Turkish State Mint without error to all standard unprocessed and minted precious metals other than granulated silver.
• Record in the system, at the time of production, each product's producer, date and place of production, weight, fineness and serial number.
• Record vault and stock entries and exits with a dispatch note at the moment the physical movement takes place.
• Track product registration and production notification as two separate obligations; do not start production before the notification of technical characteristics and images has been made.
• If you are on the Exchange Refinery List, send the same information and documents to the Exchange as well.
• Have the supply chain compliance report and the independent assurance report prepared on time; keep the appointment of the internal control and supply chain compliance officer complete.
• Check your list of founding shareholders and managers for any connection with a refinery whose operating licence was revoked in the last year.

Warning. The information in this article is for general information purposes and does not constitute a legal opinion. Foreign exchange and precious metals legislation is a frequently changing area; the amounts, rates, thresholds, time limits and dates in this article may change in line with the legislation in force. Verify the latest version of the legislation before every application and transaction. Current texts are available at mevzuat.gov.tr.

Source: Law No. 1567, Article 3 · Decree No. 32, Articles 1, 2, 7 and 20 · Communiqué No. 2023/1, Articles 16, 17 and 18 (Official Gazette of 23 February 2023, No. 32113)

Related page: Refineries