U.S. federal court charges Turkish bank with sanctions evasion

This story has been updated

A Manhattan federal court indicted state-owned Turkish Halkbank with fraud, money laundering, and sanctions offences related to the bank’s participation in a multibillion-dollar scheme to evade U.S. sanctions on Iran, the U.S. Department of Justice said in a statement on Tuesday.

The trial of former Halkbank executive Mehmet Hakan Atilla in January 2018 illustrated the bank’s senior management’s participation in “the brazen scheme to circumvent our nation’s Iran sanctions regime,” the department said.

"This indictment constitutes an additional step that does not contribute positively to the current situation of U.S. Turkey relations," an unnamed Turkish official told Reuters.

Turkish government officials supported and protected the bank’s actions, while receiving millions of dollars in bribes, the indictment continued.

The indictment induced a flurry of reactions in social media

“The FBI will aggressively pursue those who intentionally violate U.S. sanctions laws and attempt to undercut our national security,” the statement quoted FBI Assistant Director-in-Charge William F. Sweeney Jr. as saying.

Freedom House's special projects director and Turkey expert Nate Schenkkan said Halkbank may face billions of dollars in fines.

Halkbank knowingly facilitated the scheme, and transferred 20 billion dollars of Iranian funds by fraudulent methods, the U.S. Treasury statement continued.

Assistant Attorney General for National Security John C. Demers said:  “Halkbank, a Turkish state-owned bank, allegedly conspired to undermine the United States Iran sanctions regime by illegally giving Iran access to billions of dollars’ worth of funds all while deceiving U.S. regulators about the scheme. This is one of the most serious Iran sanctions violations we have seen, and no business should profit from evading our laws or risking our national security.”

Page 33 of the indictment, it is seen that the prosecutors made references to current President, then-Prime Minister Recep Tayyip Erdogan and current Economy Minister and Erdogan's son-in-law Berat Albayrak, without mentioning their names:

Halkbank Indictment

The charges are connected to a 2017 case against Iranian-Turkish businessman Reza Zarrab, who pleaded guilty, and the 2018 conviction of Atilla, who was released from prison after serving his 32-month sentence in July this year.

The Treasury press release summed up all six charges:

Halkbank is charged with (1) conspiracy to defraud the United States, (2) conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”), (3) bank fraud, (4) conspiracy to commit bank fraud, (5) money laundering, and (6) conspiracy to commit money laundering.

During the trial which was held in 2017, Erdogan and half a dozen senior Turkish officials condemned the proceedings and accused the U.S. of trying to overthrow their government. Erdogan berated the case on many occasions, accusing American prosecutors of attempting an “international coup attempt.”

In a statement to reporters, Jonathan Schanzer, Senior Vice President for Research at the Foundation for Defense of Democracies (FDD), a Washington-based think tank, said it was Halkbank’s refusal to negotiate its penalty with the U.S. authorities that caused the indictment.

"Every other bank has moved quickly to settle their fines in an effort to mitigate the public relations and business reputation fallout. Yet, Turkey’s second-largest lender, at the behest of strongman Recep Tayyip Erdogan, refused to compromise. The bank’s executives, and Erdogan, believed that they could outlast the Department of Justice through prolonged obstinacy." he said.

According to Schanzer, Trump is now scrambling to deter Turkey from its newly waged war, and that is why he is imposing a wide range of penalties to do so. "The Halkbank indictment is just one of those measures."

Aykan Erdemir, FDD senior fellow and former member of the Turkish parliament said "the indictment exposes not only the complicity of Turkey's senior government figures in Iran's sanctions evasion schemes, but also how some of them were on an Iranian ringleader's payroll.

"This is a grim reminder for those members of the U.S. government who are hoping to outsource the Syria portfolio to the Erdogan government, a mission that involves containing the Islamic Republic's hegemonic ambitions in the Middle East."

The full indictment can be found here.

The opinions expressed in this column are those of the author and do not necessarily reflect those of Ahval.