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

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October 22 (Reuters) – A US appeals court ruled on Friday that Turkish state-run lender Halkbank (HALKB.IS) could be prosecuted for allegations of helping Iran evade American sanctions.

The U.S. 2nd appeals court said even if the Foreign Sovereign Immunities Act shields the bank, the charges against Halkbank fall under the commercial activity exception.

Robert Cary, an attorney at Williams & Connolly who represents Halkbank, declined to comment. The Turkish Foreign Ministry initially did not issue a statement.

“We will use all of our statutory rights to appeal the Second Circuit’s rejection notice,” Halkbank said in a statement.

Prosecutors accused Halkbank of converting oil revenues into gold and then cash to further Iranian interests and documenting counterfeit food deliveries to justify transfers of oil revenues.

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

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

The bank had argued that it was immune to foreign states under the federal immunity law because it was “synonymous” with Turkey, which enjoys immunity under that law.

The court said that Halkbank balanced its purpose – to act as a custodian for the Iranian oil and gas revenues of the Turkish government – with its action, which was involvement in money laundering.

The appeals court said that even if the law grants “sovereign immunity in criminal matters, the criminal conduct charged with Halkbank falls under the commercial activities of the FSIA from sovereign immunity”.

Halkbank appealed an October 1 ruling by US District Judge Richard Berman that allowed prosecution.

Berman has overseen several related cases, including the conviction of former Halkbank manager Mehmet Hakan Atilla and an admission of guilt by Turkish-Iranian gold trader Reza Zarrab.

The Halkbank case made US-Turkish relations more difficult, with Turkish President Tayyip Erdogan supporting Halkbank’s innocence in a 2018 memo to then-US President Donald Trump.

The case was decided by Judges Amalya Kearse, Joseph Bianco and Jose Cabranes, who drafted the opinion. The lower court had set the trial to begin on May 3, but the trial was suspended on appeal and a new trial has yet to be rescheduled.

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