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Turkey's Halkbank can be prosecuted over Iran sanctions violations, US court says

State-owned bank, which had argued for immunity, says it will assert all its legal rights to appeal the ruling
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 (AFP)

A US appeals court has ruled that state-owned Turkish lender Halkbank can be prosecuted over accusations it helped Iran to evade American sanctions.

The 2nd US Circuit Court of Appeals said on Friday that, even if the Foreign Sovereign Immunities Act (FSIA) shielded the bank, the charge against Halkbank falls under the commercial activity exception.

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

Robert Cary, a lawyer at Williams & Connolly, which represents Halkbank, declined to comment to Reuters. 

There was no immediate comment from the Turkish foreign ministry.

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 to secretly transfer $20bn of restricted funds, with at least $1bn laundered through the US 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 FSIA because it was "synonymous" with Turkey, which has immunity under that law.

Conflating its purpose

The appeals court said Halkbank was conflating its purpose, which is 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 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".

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Halkbank had been appealing a 1 October ruling by US 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 US-Turkish relations, with Turkish President Recep Tayyip Erdogan backing 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 wrote the opinion. 

The lower court had scheduled a trial to start for 3 May, but the proceedings were stayed during the appeal and a new trial has yet to be scheduled.