Many officials and individuals across the globe may be indicted by the Zarrab case – financial crimes expert

Washington D.C. - Kenneth Rijock is a financial crime consultant based in Miami, Florida. A former banking lawyer, he has been covering the Reza Zarrab oil-for-gold case since the corruption scandal broke in Turkey in late 2013.

Zarrab is an Iranian-Turkish gold trader accused of shipping bullion to Iran in return for sanctions-busting oil. It is possible Zarrab may opt to cooperate with U.S. prosecutors and give them information in return for a reduced sentence.

This is the second part of an Ahval interview with Rijock on Zarrab's trial, which begins on Nov. 27. The first part can be found here.

Some of the people Reza Zarrab might testify against will not be living in the U.S. – they may be living in Turkey or in other countries. How are U.S. authorities going to bring those people to court?

First of all, the story is oil-for-gold. There are bankers in Turkey. There are co-conspirators. We have his co-defendant Babak Zanjani in Iran who received a death sentence. One real curious guy, named Ali Reza Monfared, was probably an Iranian intel agent. He was a partner with the other two (Zarrab and Zanjani) in the oil-for-gold business. They used a tax haven on a small Malaysian island called Labuan and they sent the oil money, billions in oil money there using lax tax rules with the help of Monfared who was living in Malaysia and had a Dominican passport. Monfared actually bought his passport. He was of course not a diplomat. He was trying to evade capture through diplomatic immunity. When Malaysian police came with the Iranian warrant, he got away by saying he was a diplomat from Dominica. He hid for several months in Dominica. The Dominican government told Iran they didn’t have him. Then they moved him to the Dominican Republic and he was arrested by Iranian agents there. They used Havana to Moscow, then Tehran because they were afraid if they got into U.S. airspace, he would be arrested by the U.S. government in connection with Zarrab case. Since he is back to Iran, he has never appeared at any hearing. This has led many observers to believe he was an Iranian intel officer. He may also have been a criminal stealing big money with Zanjani and Zarrab but it sounds like he was a government agent one time, or he may still be. There is a strong suspicion that some officials in Dominica gave him a passport. Prime Minister of Dominica Roosevelt Skerrit may end up being a defendant in the New York Zarrab case. A wide range of individuals may be named involving this case down the road from Germany to Malaysia, so not only in Turkey or Iran.

If Zarrab names President Recep Tayyip Erdoğan or other Turkish officials, will they have diplomatic immunity?

No, they are not diplomats. Diplomatic immunity only works in the U.S. for a specific mission. So, therefore, if they are arrested and extradited to the U.S., they will go to prison. Look, the U.S. convicted the prime minister of the Turks and Caicos, Mr. Norman Saunders and the president of Panama, Noriega. So, just because you are a foreign national or official, it doesn't mean you have diplomatic immunity. To be a diplomat, you have to have a diplomatic mission and diplomatic passport, and be qualified by the country; anything less than that is not diplomatic immunity. And of course, the Turkish impact on the Zarrab cases is that: what if he names certain ministers in the Turkish government, or what if he names their sons? Remember the scandal in Turkey (December, 2013). They believe that millions of dollars, bribes, and kick-backs were paid and the case was dismissed during December 17-25. Therefore, there are very senior people in Turkey, not just Halkbank, who are probably very nervous at this point, worried about avoiding huge, life sentences if Zarrab implicates them.

Erdogan is talking about Zarrab almost every day…

Yes, I'm sure. Well, he is thinking that this case is a political case and it's not. It's a case involving the United Nations, the U.S. and global sanctions against Iran … Turkish institutions were facilitated to make money. Remember all of these transactions in oil, gold, and the acquiring of dollars to pay for these things. This of course made a huge profit for banks in Turkey. And with all of these bribes and kick-backs paid, it seems like everybody had their pockets filled up with bribes. You know, there are all of these statements saying that Zarrab is a Turkish citizen. He was born in Iran, he acquired Turkish nationality and there are the couple of other countries where he has got nationalities as well. He is an Iranian ... But the point is that this guy is not a Turk. He may have Turkish nationality. But he is an Iranian and ran an Iranian programme to evade sanctions. And unfortunately, you know, Turkey being a part of NATO and an ally of the United States; it's extremely embarrassing for them.

Will testimony come out of a trial, if they go to a trial?

Grand jury testimonies are secret. Testimony at trials is public.

How is the public going to know what he testified, if he gets a deal?

The public will only know what he testifies at court when the trial starts. Of course, it will be publicly available and the press will be in the room there. All trials in the U.S. are open to the public.

How long will the trial last?

It could go several months, because there will be, I'm sure, a huge number of witnesses from the law enforcement community and other individuals who may have gotten what is called immunity, where they wouldn’t be charged when they testify, so this could be a very lengthy trial. And now we have an additional defendant, remember. As the case goes on they keep adding new defendants. So therefore, it could be a very complicated case. However, you know once the case goes to trial, you are not going to see any people indicted in the case, but after the case is over, a number of people will be convicted, and you’d better believe that they will then co-operate and you will see people added subsequently to the trial based on evidence that was recovered from defendants who later don’t want to go to jail for 20 or 30 years and spoke out.

Will we see all the documents and evidence?

A lot of that doesn't appear in the court file, but they will be exchanged with the lawyers, it doesn't show up publicly. Also remember: there are serious issues here, classified information. And the information dealing with ongoing criminal investigations of other individuals. So as long as they are looking at other targets, they are not going to allow evidence or documents to be made public. So that they will not flee or disappear.

Are there other banks?

I'm sure there are several other Turkish banks involved and some of them will come out in the trial. They could be subject to criminal charges but that’s rare in the U.S. Usually what happens is that there are civil fines and penalties levied on them. In other words, an American government agency which is involved with financial crime or banking regulations may fine some amount one or more Turkish banks in the future. The extreme case is where they cut the bank out of the American banking system, which basically drives it out of business. But this is extremely rare. If they not going to charge other banks with crime, they may just (impose) a substantial multi-million-dollar fine on them.

Do you know the other banks' names?

I don’t have the names of other banks. A lot of information is being held very closely by the U.S. attorney, and not a lot of it comes out in the court documents because they do not want to alert other people who may be probable defendants down the road. This case can go on for some time. Zarrab and most of the others being convicted, and then of course they have appeals. But then there will be charges for other individuals and there will be another trial.

The importance of the trial basically is that, it demonstrates the ability of the United States to reach out and touch people who have violated its sanctions even if they don’t have direct connections with the U.S., because if they are trading in U.S. dollars and money flows through the New York banking system, there are therefore banks that are victims in the U.S.  

If they traded in euros, they would not be in trouble?

You know candidly if Zarrab and Zanjani had done all of the trading for euros instead of dollars they probably never would been indicted, because the euros don’t go through U.S. and there wouldn’t be any contact. But they chose to use the world’s global currency and that is U.S. dollars because of the strength and stability.

The other thing about the case is a textbook problem about his arrest and the rest of Halkbank executives. If you engaged in risky behaviour which might subject you to criminal charges in the United States, your lawyer should advise you not to enter the U.S. for any purpose.

What happens when a person outside of the U.S. is charged with a felony in federal courts?

The file is sealed, the indictment is sealed and it's not public. Therefore, they will only be unsealed when the person comes and then gets arrested. So here's Zarrab, his wife and his child; they came into Miami to go to Disneyworld totally oblivious to the fact that where he may be headed the case might be sealed so the public don’t know about it. But he just shows up and surprise, surprise he’s looking at spending the rest of his life in prison. And the banker is even worse. Halkbank's Atilla who comes in on other business after the Zarrab case is already going on. He made an even grosser mistake. Because he is a professional, he knew, he should have known, or his lawyer should have known that he could be charged in the future because of his relationship with Zarrab. But he comes to U.S. to do business and he gets arrested.

His lawyers say Atilla came to the United States several times, four or five times, and he got arrested on the fifth time.

Yes, yes. It shows you that they were developing a case against him, maybe because of his arrogance, he thought they didn't bother me before, they will not bother me now. The evidence might have changed. These people made a serious error of judgment and I blame their lawyers for not advising them that there is always a risk. The U.S. has a very powerful court system with a very high percentage of convictions, and if you are arrested on a federal charge the odds are you are going to get convicted.

News is that Zarrab was told through his connections in the Turkish government that there was no problem for him in the U.S.

Even the consul may even not have known. Because remember that he is in the diplomatic service and law enforcement are the ones who have information on criminal charges. He may have honestly thought there was nothing. But unfortunately, we have 30 different federal law enforcement agencies, any one of which has right to charge him with the crime. But it is favourite tactic in the United States to seal the indictment and just wait for the person come on over, to make that mistake. (Saves) the process of extradition as you know that Erdogan will never extradite Zarrab from Turkey.

How does the U.S. Treasury mechanism work? Is it different from the court case?

They develop their own evidence at a parallel level where they have seen illegal transactions avoiding international sanctions on the civil side. Although banks could be charged with criminal activity they will mostly likely fine the banks millions or billions. We know some UK banks got fined billions as the most egregious example. So, it's not outside the realm of possibility if we see billions of dollars of fines. They do their own investigation. I am sure they can get some evidence from the criminal case, that means the Zarrab case as well, but they will fine them for breaching international and American sanctions.

Is there a chance New York and the U.S. Treasury could separately charge Turkish banks?

Yes, they can charge Halkbank or other Turkish banks with money laundering or with some other criminal activity and they can also fine them on the civil side. They can do deferred prosecution. They can put a bank on probation, the bank can pay huge fines. They might close U.S. branches and then the charges are dismissed and they are upgraded again. There are plenty of ways for the U.S. to charge foreign banks; the biggest one is to deny a bank the ability to use the U.S. banking structure so they cannot process within the U.S.