By Aykan Erdemir
October 08, 2020
A Manhattan federal judge on October 1 refused to dismiss an indictment accusing Halkbank, a public lender majority-owned by the Turkish government, of helping Iran evade U.S. sanctions. In the event of a conviction, the potential fines the Treasury Department may issue to the bank would signal to financial institutions around the globe Washington’s commitment to full accountability for sanctions busters.
Halkbank’s alleged role in Iran’s sanctions-evasion schemes once again made headlines last month after the Organized Crime and Corruption Reporting Network published a series of exposés proving Iran’s machinations involving Turkey “started earlier, lasted longer, extended further, and involved more people and countries” than previously known. In 2018, a federal jury found Halkbank’s then-deputy general manager Mehmet Hakan Atilla guilty on five counts, including sanctions evasion, bank fraud, and obstructing the actions of the Treasury Department, for which he received a 32-month sentence.
In their indictment of Halkbank, U.S. attorneys for the Southern District of New York charged the Turkish lender with “fraud, money laundering and sanctions offenses,” claiming the bank and its executives aided Turkish-Iranian gold trader Reza Zarrab in a “multi-billion dollar scheme to circumvent U.S. sanctions on Iran.” According to the prosecutors, Halkbank and its executives also “illicitly transferred approximately $20 billion worth of otherwise restricted Iranian funds.”
For Turkish President Recep Tayyip Erdogan, the Halkbank case is personal. A 2013 Turkish graft probe into the Turkish public lender’s sanctions-evasion network revealed that key Erdogan aides, including his ministers of the interior and economy, were on Zarrab’s payroll. Consequently, Erdogan has worked tirelessly to scuttle the case. According to a Bloomberg News source, Ankara refused to accept a deferred prosecution agreement and a fine for Halkbank’s sanctions evasion, because it “believed doing so would constitute an admission of guilt.”
According to The Room Where It Happened, the memoir by President Donald Trump’s former National Security Advisor John Bolton, the Halkbank case is Erdogan’s obsession, a “favorite subject, frequently discussed with Trump.” According to Bolton, Erdogan even brought Trump a “memo by the law firm representing Halkbank which Trump did nothing more than flip through before declaring he believed Halkbank was totally innocent of violating U.S. Iran sanctions.”
The Turkish government also made numerous attempts to reach out to senior members of the Trump administration, beseeching it to block the Halkbank indictment. This approach succeeded in stalling the prosecution for almost two years but ultimately failed when U.S. authorities went forward with the charges last October.
Initially, Halkbank and its lawyers refused to acknowledge the indictment or a legal summons to appear in court. When prosecutors asked U.S. District Judge Richard Berman in January to impose escalating fines that could total up to $1.8 billion after eight weeks if the bank failed to respond to criminal charges, Halkbank reversed course and pleaded not guilty in March.
The bank’s stalling tactics also involved a June bid pressing Judge Berman to recuse himself, which Berman denied in August. Halkbank also claimed the Foreign Sovereign Immunities Act shielded the financial institution from prosecution in the United States. In his 16-page opinion, Berman stated, “The court clearly has personal jurisdiction over Halkbank,” and noted that the Foreign Sovereign Immunities Act “does not appear to grant immunity in criminal proceedings.”
Financial institutions around the world will continue to watch the Halkbank case closely, seeing the insistence of U.S. authorities on prosecuting the Turkish public lender – as well as any potential fines the Treasury Department may issue – as a measure of Washington’s commitment to enforcing Iran sanctions. Any impunity granted to Erdogan and Halkbank short of the opportunity to persuade a jury that the charges are unfounded would only embolden sanctions-evasion networks as well as their corrupt accomplices willing to bankroll Iran’s nefarious activities.
Foundation for Defense of Democracies