U.S. warned Halkbank repeatedly about Iran sanctions busting

The United States issued multiple warnings to Turkey’s state-run Halkbank about Iran sanctions-busting, according to a key government witness at a trial in New York.

David Cohen, former Under Secretary of the Treasury for Terrorism and Financial Intelligence, said he met with Halkbank officials on many occasions between 2011 and 2014, warning them about the activities of Iranian-Turkish businessmen Reza Zarrab, and that Iran was employing fraudulent means to evade the U.S. sanctions regime.

Cohen asserted that Mehmet Hakan Atilla, a Halkbank official who is the sole defendant in the trial, and Suleyman Aslan, Halkbank’s then-CEO, took part in a meeting at the U.S. Treasury Department on March 14, 2012. Officials of the Turkish foreign ministry and treasury also attended, he told jurors.

Cohen, as Treasury undersecretary, said he also met with Halkbank officials in Ankara and Istanbul multiple times during 2014. Halkbank, he said, wasn’t the only Turkish bank doing trade with Iran.

“One way to combat sanctions evasion is to know who you are doing business with," Cohen said, referring to the International Emergency Economic Power Act and a previous $8.9 billion fine that BNP Paribas agreed to pay for breaking U.S sanctions regimes.

Cohen recalled that in a letter the Treasury wrote to Halkbank in September 2012, officials referred to Reza Zarrab directly by name and warned the bank about his activities. Cohen said that he was assured by Halkbank officials that the bank was conducting background checks on all customers.

He then visited Halkbank again on Feb. 23, 2013, warning them of a scheme to trade gold for oil. During the visit, he explained that the bank was "facilitating the gold trade to Iran”. He said that he was assured of Halkbank's due diligence once again.

Cohen also said that he told Aslan that the U.S. Treasury Department was “troubled” about an announcement by Ali Babacan, who was the most senior Turkish minister on matters of economy at the time. Babacan had stated publicly that Turkey intended to violate U.S. sanctions via the gold trade, and Cohen said he warned Aslan about those comments in a letter:

“Recent press reports quote Turkey’s Deputy Prime Minister Ali Babacan as stating that Turkey is exporting billions of dollars’ worth of gold to the government of Iran in order to pay for Turkey’s imports of oil from Iran,” the letter stated. “In particular, Deputy Prime Minister Babacan is reported to have said ‘When Turkey buys Iranian oil, we pay for it in Turkish Lira. However, it is not possible for Iran to take that money as dollars into its own country due to international sanctions. Therefore, when Iran cannot take this money back as currency, they withdraw Turkish Lira and buy gold from our market.’”

Cohen also scheduled a meeting with Aslan on Dec. 17, 2013, the day Turkish police and prosecutors began an operation to detain him, Zarrab and other suspects as part of a crackdown on the illicit trading. He told the court that the purpose of the visit was to warn Aslan, once again, about Iran's efforts to evade sanctions.

He said he then met with defendant Atilla and other Halkbank officials in the U.S in 2014 to convey the government's "concerns" about Zarrab. Cohen said that Atilla had asked if Zarrab had been sanctioned by the U.S. Treasury. Cohen told Atilla that the Treasury had not yet done so.

Cohen will continue his testimony on Monday, when the defence will cross-examine him.