US decision on Halkbank to strengthen deterrence against Iran – Aykan Erdemir



A US appeals court ruled on Friday that Turkish state-owned Halkbank could be prosecuted for violating US sanctions.

The court rejected Halkbank’s offer to dismiss an indictment accusing the lender of helping Iran evade the measures.

Aykan Erdemir, senior program director for Turkey at the Foundation for the Defense of Democracies (FDD) and a former opposition member in the Turkish parliament, analyzed the developments regarding the decision of the US court of appeals, saying that it would strengthen deterrence against sanctions violations by Iran and others.

“The commitment of the US judiciary to prosecute sanction violators and money launderers to the fullest extent of the law would prompt banks to improve their anti-money laundering controls, while deterring them from colluding with them. Iran or other states that sponsor terrorism, ”he said. on the FDD website on Tuesday.

A reproduction of the full article follows below:

A US appeals court ruled on October 22 that Halkbank, a public lender majority owned by the Turkish sovereign wealth fund, could not claim sovereign immunity under US law to derail a federal criminal case for the alleged role of the bank in helping Iran escape US sanctions. This landmark decision, which sets an important legal precedent, will strengthen US deterrence against foreign financial institutions that facilitate Tehran’s escape from US sanctions.

In a six-count indictment in October 2019, U.S. attorneys in the Southern District of New York indicted Halkbank with fraud, money laundering, and penalty offenses related to the alleged involvement of the bank “to a multibillion-dollar ploy to evade US sanctions against Iran.” “Prosecutors accused the Turkish public lender of helping Tehran transfer $ 20 billion in restricted funds, including at least $ 1 billion laundered by the US financial system.

The previous year, Halkbank deputy managing director Mehmet Hakan Atilla was sentenced to 32 months in prison when a federal jury found him guilty of five charges related to the scheme, including evasion of sanctions, bank fraud and obstructing the actions of the US Treasury. Department. In the run-up to Atilla’s conviction, Reza Zarrab, the leader of Tehran’s sanctions circumvention programs in Turkey, pleaded guilty and became a state witness, confessing to bribing senior Turkish ministers and senior officials. executives of Halkbank. Zarrab even implicated Turkish President Recep Tayyip ErdoÄŸan, claiming that the then prime minister endorsed the efforts to violate sanctions.

Since October 2019, Halkbank has taken numerous steps to derail the case and delay a jury trial. At first, Halkbank and his lawyers refused to acknowledge the indictment or a subpoena to appear in court. After U.S. prosecutors in January 2020 asked U.S. District Judge Richard Berman to impose escalating fines of up to $ 1.8 billion after eight weeks if the bank did not respond to criminal charges, Halkbank stepped in. back and pleaded not guilty two months later. The bank’s blocking tactics also included a June 2020 offer urging Berman to recuse himself, which he declined in August 2020.

Halkbank then claimed that the Foreign Sovereign Immunities Act (FSIA) protects the public lender from lawsuits in the United States. In response, federal prosecutors warned that granting immunity to Halkbank under the FSIA would constitute an extension of sovereign immunity from civil cases to criminal cases. In a 16-page opinion published in October 2020, Berman said: “The court clearly has personal jurisdiction over Halkbank. He ruled that the FSIA “does not appear to grant immunity in criminal proceedings.” Halkbank immediately appealed the decision.

Last week, a three-judge panel of the United States Court of Appeals for the Second Circuit said in its ruling that even though the court assumed that the FSIA grants immunity in the criminal context, the offense of which Halkbank is accused “would revert to the exception of commercial activity to the FSIA.” The court also rejected Halkbank’s “claim that it was entitled to common law immunity from prosecution.”

Following the ruling, Halkbank issued a statement to the Istanbul Stock Exchange, claiming that the bank would use all of its legal rights to appeal the court ruling. It’s a sign that the Turkish public lender will continue its delaying tactics to delay a potentially embarrassing jury trial, which could further expose the complicity of ErdoÄŸan and his close associates in Iran’s sanctions circumvention programs.

Since Zarrab and Atilla were arrested in 2016 and 2017 respectively, ErdoÄŸan has used underhanded tactics to derail U.S. lawsuits against Turkey-linked sanctions circumvention programs. The Turkish leader has held US pastor Andrew Brunson hostage for two years, hoping to trade him for Zarrab and Atilla. In 2017, ErdoÄŸan also called on former New York Mayor Rudolph Giuliani, who was one of President Donald Trump’s surrogates during the 2016 presidential campaign, to pressure Trump’s White House for a Brunson exchange. -Zarrab. Ankara’s interference in the Halkbank lawsuits has been the subject of an investigation launched by Senator Ron Wyden (D-OR). Giuliani, as Bloomberg reported in June, has since become “the subject of a Justice Department investigation into possible foreign lobbying for Turkish interests.”

ErdoÄŸan not only tried to cover up the Halkbank scandal, but also rewarded those who facilitated Tehran’s sanctions circumvention plans, offering them cushy dates. In 2019, three months after Atilla returned to Turkey after serving his prison term in the United States, and just days after US federal prosecutors indicted Halkbank, then Turkish Finance and Treasury Minister Berat Albayrak, who is also the son-in-law of ErdoÄŸan, appointed Atilla as CEO of the Istanbul Stock Exchange. Nine days later, the European Bank for Reconstruction and Development, which had opposed Atilla’s appointment, announced that it would sell its 10% stake in the Istanbul Stock Exchange, a transaction the bank international finalized later in the year.

Erdoğan also appointed former Minister of European Union Affairs Egemen Bağış Ambassador of Turkey to Prague. Bağış had resigned from the ministry after a corruption scandal in 2013 implicated him in accepting bribes linked to the scheme managed by Halkbank.

The ErdoÄŸan government’s attempts to evade justice have been disastrous for Halkbank and, by extension, for the Turkish economy. Since the December 2013 corruption investigation which revealed the role of the public lender in Iran’s sanctions circumvention programs, the bank’s shares have lost more than 95% of their value in US dollars, dropping from a level record of $ 10.63 per share in 2013 to $ 0.45 as of October 25, 2021.

Halkbank is also facing a civil lawsuit in the Southern District of New York. Eight hundred and seventy-six victims of Iranian-sponsored terrorism, to whom Iran collectively owes $ 10 billion, sued the bank, claiming the Turkish public lender helped Tehran avoid the financial consequences of its support terrorist attacks. The court ruled in February 2021 that plaintiffs, who are U.S. citizens or foreign U.S. government employees targeted while serving in the U.S., should instead take their cases to a Turkish court. In doing so, the court ignored substantial evidence that plaintiffs cannot get a fair trial in a Turkish court, as Ankara conceals the bank’s complicity in Iranian sanctions circumvention programs. The plaintiffs appealed against the dismissal of the tribunal.

US appeals court ruling that the FSIA does not grant public lenders or other foreign sovereign instruments any immunity from US lawsuits will strengthen Washington’s deterrence against Iran’s escape from sanctions and other rogue regimes. It will also discourage banks from resorting to costly delaying tactics and prompt deferred prosecutions and / or no-prosecution agreements with US authorities. Last year, for example, the Industrial Bank of Korea, a state-owned bank, settled criminal and civil lawsuits against the United States and New York State for authorizing an illegal transfer of more than $ 1 billion to Iran in violation of US sanctions. The denial of impunity by American courts to accomplices in Tehran would also serve as a wake-up call for international financial institutions. The US judiciary’s commitment to prosecute sanction breakers and money launderers to the fullest extent of the law would prompt banks to improve their anti-money laundering controls, while deterring them from colluding with Iran or other sponsoring states of terrorism.



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