U.S. Federal prosecutors on Tuesday charged Turkey’s Halkbank, the largest state-owned bank, with taking part in a multibillion-dollar scheme to evade U.S. sanctions against Iran.
This came after the US announced a new set of sanctions against Turkey over its Syria offensive, further complicating the already tense relationship between the two NATO allies.
The charges the bank faces are conspiracy to defraud the US, conspiracy to violate the International Emergency Economic Powers Act, bank fraud, conspiracy to commit bank fraud, money laundering, and conspiracy to commit money laundering.
Halkbank shares fell more than 7% at the opening of trade on Wednesday after the federal prosecutors unsealed the charges.
The charges are similar to those against one of Halkbank’s former executives, Mehmet Hakan Atilla, who was found guilty and sentenced to prison after a trial in the same court last year.
Germany’s Deutsche Presse-Agentur news agency quoted US Attorney Geoffrey Berman as saying that the bank’s activity “was supported and protected by high-ranking Turkish government officials, some of whom received millions of dollars in bribes to promote and protect the scheme.”
The U.S. vs Atilla
Atilla, 48, was arrested in March 2017 while on a business trip in the US after a witness said he helped organize a multi-billion-dollar scheme to bypass the US oil sanctions against Iran.
Prosecutors wanted a 20-year sentence for the banker. The court, however, handed down a lower sentence since Atilla’s argument of “taking the orders from Halkbank’s Director-General Suleyman Aslan” was accepted. The executive was found guilty in May 2018 for an Iran sanctions-busting scheme and was sentenced to 32 months in prison.
The judge took into account the time he had already served while awaiting trial to be credited in the sentence.
Attila was released this year in July from prison after serving the 32 months.
His conviction hinged on the testimony of Reza Zarrab, a controversial Iranian gold-trader famous in Turkey for avoiding justice in a 2013 graft probe, who was arrested in the US in 2016 on charges of violating the sanctions against Iran.
The US Federal case against Halkbank is at the heart of a meddlesome probe that goes back to 2012 when Turkish prosecutors launched an investigation against Zarrab’s actions. The Iranian was subsequently arrested in December 2013.
Graft Probe of December 2013 and Aftermath
On the 17th of December 2013, Turkish police carried out dawn raids in Istanbul, detaining around 52 people including sons of three ministers and business figures close to then prime minister Recep Tayyip Erdogan, (including Reza Zarrab) and searched the headquarters of state-run Halkbank in the capital Ankara.
The investigation sought then which figures close to the government were bribed in exchange for helping Iran avoid the US sanctions.
Erdogan accused the police and judiciary officials involved in the investigation, of attempting to overthrow the elected government. All of the police officers involved were reassigned to other departments in distant regions of Turkey.
One week later an arrest warrant against Erdogan’s son Bilal Erdogan was issued by a public prosecutor, however, it was not enforced by the newly assigned police chiefs due to intervention from the governor of Istanbul.
Zarrab was released from prison by the newly assigned judges two months after his arrest and appeared on Turkish TV, claiming his actions helped close the current deficit of the Turkish State.
The U.S. vs Zarrab
Despite the cover-up, the case reappeared in a U.S. federal court three years later, with Zarrab detained by the Federal Bureau of Investigation as part of a probe lead by US Attorney for the Southern District New York.
Zarrab was detained right after he landed on the U.S. soil for holiday, in March 2016.
Consequently, he pleaded guilty of all charges and his testimony against a senior Halkbank official, Hakan Atilla, which dealt a serious blow to President Erdogan who defined his vision of Zarrab as “a charitable man,” after the graft probe of December 2013.
Shortly after Zarrab started to testify against Attila, former’s assets in Turkey were seized by court order and an arrest warrant was issued for him over an illegal villa restoration.
Attila was sentenced to 32 months in prison by a Federal Judge in New York.
Zarrab was reportedly set free by the U.S. District Court in October 2017, on account of his cooperation with the investigators.
He reportedly implicated several high ranking officials of the Turkish government as he fulfilled his part of the guilty plea deal.
FBI agent Jennifer McReynolds who arrested Atilla and Zarrab, gave a public statement in August 2018 saying: “The implications of this investigation are far from over. Many other co-conspirators are indicted, and have not yet been brought to justice yet.”