$117.2M uncovered in illegal watch trade, says Turkish finance ministry – Türkiye Today

The Turkish Ministry of Treasury and Finance has uncovered a vast ₺4 billion ($117.2M) illegal watch trade spanning 2023 and 2024.

The ministry’s Tax Inspection Board (VDK) identified over 6,500 taxpayers involved in the unregistered trade of luxury and imitation watches, marking a significant crackdown on tax evasion and illegal economic activity.

Extensive investigation into the underground watch trade

The VDK, through its Risk Analysis Center, conducted extensive research that led to the identification of numerous unregistered businesses engaged in the sale of high-end and imitation watches without proper documentation.

This investigation brought to light transactions involving luxury watches such as Rolex, Omega, and Patek Philippe, often sold without tax payment or records.

In many cases, the same buyers were repeatedly obtaining luxury watches, further drawing the scrutiny of authorities. Transactions were conducted through various methods, including bank payments and cash-on-delivery, enabling millions of untaxed exchanges to take place.

$117.2M in illegal trade revealed

The investigation uncovered an unregulated economy worth approximately ₺4 billion ($117.2M) in 2023 and 2024, based on a wide range of transactions involving real and imitation watches.

This trade included both the sale of legally obtained watches without proper documentation and the sale of unregistered watches.

The tax evasion occurring through these sales is now being closely monitored by authorities.

During the investigation, it was discovered that illegal watch traders were making extensive use of e-commerce platforms, social media, and online websites. Many of these sales took place through virtual POS systems and cash-on-delivery services.

Following these transactions, buyers were often not issued receipts, leaving them vulnerable to future disputes over the authenticity and value of the products they purchased.

Luxury watches and money laundering under scrutiny

As part of the ongoing investigation, the VDK analyzed 944 different brands and models of watches sold without proper registration. A significant portion of these were high-end imitation watches from brands such as Rolex and Omega.

The VDK is not only focusing on the illegal sale of imitation watches but is also investigating the consumer profiles of buyers acquiring luxury watches worth millions of lira. In many cases, individuals with no visible income sources were purchasing expensive watches, raising suspicions about the origins of their wealth. The board is investigating potential links to money laundering, income concealment and other financial crimes.

Tax justice a key priority

Speaking on the issue, Finance Minister Mehmet Simsek emphasized the ministry’s dedication to fighting tax evasion and ensuring fairness in taxation. “We have promised tax justice and efficiency, and we are continuing our relentless fight against the unregistered economy. We are tracking those who profit unfairly through tax evasion and cause unfair competition,” he said.

Simsek also highlighted that combating unregistered activity is a central component of the ministry’s broader strategy for economic reform. “One of the most important elements of our program is fighting the unregistered economy,” he added.

The VDK is working to close gaps in the system that allow for widespread tax evasion through luxury goods like watches. By leveraging advanced data analysis and close monitoring of banking and transaction records, the board aims to reduce the impact of unregistered economic activity.

Minister Simsek reiterated his commitment to ensuring tax fairness across all sectors. “Our program focuses on ensuring justice in taxation, and combating the unregistered economy is a critical part of that effort,” he said, reinforcing the ministry’s dedication to holding businesses accountable for proper tax reporting and ensuring a level playing field in the economy.

Focus on e-commerce, digital sales

The investigation found that digital platforms facilitated many illegal transactions, with online marketplaces, social media, and e-commerce websites playing a significant role in the trade of unregistered watches. Payments through virtual POS and cash-on-delivery services further contributed to the difficulty in tracking these sales.

Authorities are now placing a heightened focus on monitoring these digital platforms and ensuring that appropriate documentation is provided for all transactions.

The VDK’s investigation revealed the unregistered sale of 944 distinct brands and models of watches. While many of these were imitation products, the investigation also uncovered significant transactions involving genuine luxury watches.

The spending habits of consumers purchasing these watches are being closely examined, with authorities looking for any discrepancies between declared income and high-value purchases.

Dark side of luxury: A tool for money laundering 

Transnational criminal networks have discovered that these watches are not just status symbols but also effective tools for laundering money. A recent case in Türkiye has revealed how a criminal gang used luxury watches to launder illicit funds by exploiting airport security and the fragmented gray market. 

Case of call center scam 

• Background: A criminal gang based in Germany, operating a call center in Izmir, Türkiye, was recently put on trial. The gang, posing as police officers, defrauded elderly individuals in Munich, collecting money and valuables. 
• Money laundering method: The gang transported the stolen money to Türkiye by smuggling luxury watches through airports. They wore these high-value products, each worth millions, on their wrists, easily passing through airport customs without raising suspicion. 
• Final destination: Once in Türkiye, these watches were sold at local jewelers, converting the illicit funds into legitimate money – a classic case of money laundering. 

Global reach of watch laundering 

This method of laundering money through luxury watches is not unique to Türkiye. It’s part of a global network where criminals, corrupt officials, and even some organizations have used high-end timepieces to move funds across borders. 

• Hezbollah: In 2015, the DEA uncovered a Hezbollah operation where the group purchased €14 million worth of luxury watches in Europe. These were smuggled into Lebanon and sold for cash, effectively bypassing international financial monitoring. 
• Bolsonaro’s controversy: Former Brazilian President Jair Bolsonaro was implicated in a similar scandal, where he allegedly sold a Rolex and a Patek Philippe gifted by Saudi Arabia. The watches were transported to the U.S. and sold for $68,000, which was then likely repatriated to Brazil. 

How is money laundered through watches? 

Luxury watches are ideal for laundering money because of their high value-to-weight ratio and the ease with which they can be transported across borders. Here’s how it works: 

• Step 1: Purchase luxury watches in one country using illicit funds. 
• Step 2: Smuggle the watches to another country by wearing them or carrying them in luggage. 
• Step 3: Sell the watches at local jewelers or on the gray market, converting them back into cash or integrating the money into the financial system. 

These steps are relatively easy to execute, making watches a preferred method for laundering colossal sums of money.

The lack of oversight in the watch market, especially in the gray market, further facilitates this illicit activity.