Halkbank granted relief in sanctions busting case as pressure mounts


Turkey’s state-owned Halkbank was handed a moment of relief by a U.S appellate court this week that granted a stay in the criminal proceedings against it. One of the country’s largest lenders, Halkbank stands accused by Manhattan federal prosecutors of aiding what they call the largest sanctions busting scheme to date – a plot to trade gold for Iranian oil and gas that helped Tehran evade U.S. measures imposed over its nuclear programme.

In a statement from Halkbank’s defence team at King & Spalding, the bank praised the ruling. Both the bank and its defence team have called for the case to be dropped on jurisdictional grounds and for the recusal of the lower court judge Richard Berman. The bank has pledged to not let up in its fight against the charges.

“Halkbank said it will aggressively defend itself against the indictment brought last year by the U.S. Attorney’s Office for the Southern District of New York … The Bank is committed to performing banking operations in an accountable, reliable and unwavering fashion and in full compliance with national and international regulations,” the statement said.

Halkbank is back in the news after the publication of a New York Times report on a new book by John Bolton, President Donald Trump’s former national security advisor. It is alleged that Bolton and Attorney General William Barr shared concerns that Trump was making policy concessions to Turkey as personal favours, including meddling in the Halkbank case.

A Department of Justice spokeswoman denied the report, saying it “grossly mischaracterises what Attorney General Barr and Mr. Bolton discussed”.

On the same day that Halkbank was granted its stay, Democrat Senator Ron Wyden, the ranking member of the Senate’s Finance Committee, wrote a letter to Barr asking whether he was subject to any pressure on the case and if he would recuse himself from the matter after Bolton’s allegations.

Wyden has consistently voiced his suspicions of the administration’s attitude towards Halkbank and accused Trump in a tweet of kowtowing to Turkey’s President Recep Tayyip Erdoğan on the case.

“Donald Trump has been carrying water for President Erdoğan and Turkey’s state-owned Halkbank. This is more evidence that Trump’s loyalties lie only with himself and his cronies.” Wyden tweeted on Jan 29 after the Times report was published.

In an Oct. 24 letter to Treasury Secretary Steve Mnuchin, Wyden asked about any interactions he had with Turkish officials that may have involved discussion of penalties against Halkbank. Wyden also sent letters to eight multinational banks, including UBS and Citibank, to request information related to any business they have with Halkbank.

A spokeswoman for Wyden said the banks had cooperated in the investigation, but no information could be shared due to the ongoing investigation.

Treasury officials responded to Wyden’s letter on Nov. 25 by pointing out the department’s support given to the investigation against Halkbank manager Mehmet Hakan Attila, who was convicted in Jan. 2018 for his involvement in the sanctions-busting scheme and released in July 2019.

Wyden insisted that the Treasury’s reply raises more questions than answers and repeated his view that Congress needed to examine any attempts by the Trump administration to undermine the case.

“Halkbank stands accused of the largest Iranian sanctions evasion scheme in U.S history. Congress needs to know to what extent Donald Trump and his cronies were carrying water for a state-owned Turkish bank and whether they ran the same Ukraine playbook by roping U.S. government officials into their personal scheme” said a statement by Wyden’s Finance Committee spokeswoman in November.

Congressional wariness of the Trump administration’s cosiness with Turkey remains high after several high-profile failures to punish Ankara for moves that went against U.S interests.

Since Turkey received Russian S-400 air defence missiles in July, the Trump administration has put off imposing sanctions on Ankara, as demanded by U.S law. Similarly, Trump placed sanctions on Turkish officials in October for its cross-border operation against the United States’ Syrian Kurdish allies. These sanctions only followed intense Congressional backlash, but were removed only a week later after a temporary ceasefire was secured.

Halkbank stands accused of violating U.S sanctions against Iran at a time when the Trump administration is waging a “maximum pressure” campaign against Tehran. Prosecutors in the case accuse Halkbank of moving approximately $20 billion in funds to Iranian entities and the U.S assistant attorney general for national security described it at the time of indictment as “one of the most serious Iran sanctions violations we have seen”.

Frustrated with its refusal to appear in court, prosecutors have demanded Halkbank be fined $1 million for every day it does not turn up to proceedings. An escalating fine on top of a large penalty if it is found guilty would be a devastating blow to Halkbank, the Turkish banking sector and the wider economy.

Prior to its indictment, Halkbank officials appeared confident that they would escape penalty and did not set funds aside. A Turkish banking analyst told S&P Global that managers believed the case was politically motivated and would be dismissed so avoided making any provisions. This came after appeals from Erdoğan, and from Trump and close Trump allies such as Rudy Giuliani, the president’s personal lawyer, to both Judge Berman and then-Secretary of State Rex Tillerson to consider the impact of the case on U.S-Turkey relations.

Berman previously waved off these concerns, reminding Halkbank that its economic problems predated its indictment and that any other risks would be mitigated through a “speedy response to the criminal charges”. Tillerson similarly refused because he thought any interference would be illegal.

Aykan Erdemir, senior director of the Turkey Program at the Foundation for the Defense of Democracies said that Turkish officials implicated in the case had benefitted from their involvement and enjoyed impunity at home with the legal protection of the Turkish government. He said any further leniency for Halkbank would completely undermine U.S sanctions worldwide, a pattern Trump already reinforces by shielding Turkish entities and individuals from sanctions related to the S-400 missile purchase.

“If Halkbank and Turkish officials complicit in Iran’s sanctions evasion schemes enjoy similar impunity from U.S courts, this would embolden not only Turkish sanctions-busters but also others around the world,” Erdemir said.



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