Nov 30 2017

Turkish government, banks close ranks against Zarrab allegations

Turkey’s government and banks accused by businessman Reza Zarrab of complicity in Iran sanctions-busting closed ranks on Thursday, denying any wrongdoing.

A spokesman for the ruling Justice and Development Party (AKP) and the country’s deputy prime minister both depicted the New York trial of a Halkbank executive, in which Zarrab appeared as state’s witness, as “theatre” and a conspiracy against the country.

Halkbank, controlled by Turkey via its sovereign wealth fund, and Denizbank, owned by Russia’s Sberbank, both denied any wrongdoing.

Zarrab, taking the witness box in the court in the Southern District of New York on Wednesday, outlined a complex web of alleged money transfers and transactions he claimed were used to funnel billions of dollars in cash to Iran in defiance of the sanctions. He said former Economy Minister Zafer Cağlayan and ex-Minister for Europe Egemen Bağis were complicit in the scheme, as well as three Turkish banks: Halkbank, Denizbank and Aktifbank.

Zarrab has been “taken hostage” by U.S. authorities, AKP spokesman Mahir Ünal told reporters in Ankara. “We will not give our permission to those who want to sit Turkey in the defendant's chair.”

The allegations made by Zarrab raise the spectre of fines and other sanctions against Turkish banks, which could run into billions of dollars. French bank BNP Paribas was fined $8.9 billion in 2015 on similar charges, after accepting full responsibility.

But Halkbank, with which Zarrab claimed to have the most dealings, has so far denied complicity in any scheme.

"Our bank has not been a party to any transaction that is uncertain and illegal, relating to any country, and has not executed any transfer transaction that is uncertain and unlawful," it said in a statement to the Istanbul Stock Exchange.