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Turkey's Halkbank can be prosecuted over Iran sanction violations, U.S. appeals court rules

10/22/2021 | 01:42pm EST
FILE PHOTO: People walk by a branch of Halkbank in Istanbul

(Reuters) -A U.S. appeals court ruled on Friday that state-owned Turkish lender Halkbank can be prosecuted over accusations it helped Iran evade American sanctions.

The 2nd U.S. Circuit Court of Appeals said even if the Foreign Sovereign Immunities Act shielded the bank, the charge against Halkbank falls under the commercial activity exception.

Robert Cary, an attorney at Williams & Connolly which represents Halkbank, declined to comment. There was no immediate comment from the Turkish foreign ministry.

"We will be asserting all our legal rights for appealing the Second Circuit's denial order," Halkbank said in a statement.

Prosecutors accused Halkbank of converting oil revenue into gold and then cash to benefit Iranian interests and documenting fake food shipments to justify transfers of oil proceeds.

They also said Halkbank helped Iran secretly transfer $20 billion of restricted funds, with at least $1 billion laundered through the U.S. financial system.

Halkbank has pleaded not guilty to bank fraud, money laundering and conspiracy charges over its alleged use of money servicers and front companies in Iran, Turkey and the United Arab Emirates to evade sanctions.

The bank had argued it is immune from prosecution under the federal Foreign Sovereign Immunities Act because it was "synonymous" with Turkey, which has immunity under that law.

The court said Halkbank was conflating its purpose - to act as a repository for the Turkish government's Iranian oil and gas proceeds - with its action, which was a scheme to participate in money laundering.

The appeals court said that even if the law "confers sovereign immunity in criminal cases, the offense conduct with which Halkbank is charged falls within FSIA's commercial activities exception to sovereign immunity."

Halkbank had been appealing an Oct. 1 ruling by U.S. District Judge Richard Berman allowing it to be prosecuted.

Berman has overseen several related cases, including the conviction of former Halkbank executive Mehmet Hakan Atilla and a guilty plea by Turkish-Iranian gold trader Reza Zarrab.

Halkbank's case has complicated U.S.-Turkish relations, with Turkish President Tayyip Erdogan backing Halkbank's innocence in a 2018 memo to then-U.S. President Donald Trump.

The case was decided by Judges Amalya Kearse, Joseph Bianco and Jose Cabranes, who wrote the opinion. The lower court had scheduled a trial to start for May 3, but the proceeding was stayed during the appeal and a new trial has yet to be scheduled.

(Reporting by Tom Hals in Wilmington, Delaware, additional reporting by Tuvan Gumrukcu and Ezgi Erkoyun Editing by Howard Goller and Mark Potter)

By Jonathan Stempel and Tom Hals

© Reuters 2021
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