Turkey faces billions in fines if Halkbank refuses to testify before US court

United States (US) federal prosecutors have requested the Manhattan Federal Court to impose escalating fines on Turkey’s state-owned Halkbank which has continuously refused a  formal appearance in the court over a money-laundering scheme, Reuters reported on Tuesday.

According to the fine application, the penalty begins at $1 million and doubles each week as the Halkbank goes on refusing to defend itself in the court.

“Halkbank has consistently sought to avoid responsibility for its role in a massive sanctions-evasion and money-laundering scheme that gave the Government of Iran access to billions of dollars’ worth of restricted oil proceeds,” the US prosecutors said in their filing.

If the Halkbank keeps doing the same, the proposed fine could total $7 million at the end of the first week, $21 million and $1.8 billion at the end of the second and eighth weeks, respectively.

“It is an appropriate and necessary sanction to apply sufficient coercive pressure to cause the defendant to cease its contempt and appear in this matter,” Reuters reported the prosecutors as saying.

On October 15, the US prosecutors charged Turkey’s Halkbank with aiding a years’ long scheme to help Iran evade US economic sanctions by allowing revenue from oil and gas sales to be spent on gold and facilitating sham purchases of food and medicine.

To do so, the Halkbank executives used money servicers and front companies in Iran, Turkey and the United Arab Emirates, the US officials charge.

Overseeing the case, US District Judge Richard Berman last month rejected the bank’s request that it be allowed to make a “special appearance” to argue for the dismissal of charges without submitting itself to the court’s jurisdiction.

The Halkbank requested a federal appeals court in Manhattan to stay the case for which a hearing is scheduled for February 25.

Andrew Hruska, Halkbank’s US lawyer, didn’t immediately respond to requests for comment.

Nine people, including former Halkbank executive Mehmet Hakan Atilla and Turkish-Iranian gold trader Reza Zarrab, have been criminally charged in the case.

At the time, Turkish President Recep Tayyip Erdogan had likened the case to an “international coup attempt.”

Erdogan’s Justice and Development Party (AKP) government has appointed Atilla as the general manager of the Istanbul Stock Exchange, following his release from a US prison and return to Turkey last year.

In January 2018, the former Halkbank executive was convicted as Zarrab pleaded guilty and testified against him.

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