The 2nd U.S. Circuit Court of Appeals in Manhattan put the U.S. government’s prosecution of the Turkish state-owned lender Halkbank on hold as the bank appeals to the U.S. Supreme Court, Reuters reported on Friday.
The appeal court’s order will enable Halkbank to appeal without simultaneously having to defend itself against the criminal case it faces.
The U.S. Department of Justice opposed the delay, arguing that Halkbank’s claims are “meritless” and didn’t raise “substantial” questions.
Halkbank stands charged with bank fraud, conspiracy, money laundering and helping Iran evade sanctions. It allegedly helped Iran secretly transfer $20 billion in restricted funds, including $1 billion laundered through the U.S. financial system. It also allegedly converted Iranian oil revenue into gold and then cash to help Iran circumvent U.S. sanctions.
The alleged architect of this scheme, Turkish-Iranian gold-smuggler Reza Zarrab, was arrested in Miami in 2016 for illegal gold trading with Iran. While Zarrab initial denied the charges against him, within a year, he decided to ‘flip’ and become a state witness in the New York trial of Mehmet Hakan Atilla, Halkbank’s former top executive. Atilla was convicted for conspiracy to evade U.S. sanctions against Iran in early 2018.
In October, the 2nd Circuit ruled that Halkbank could face prosecution if these charges were proven since they involve commercial activity not protected by sovereign immunity. The bank’s lawyer’s have tried to make the case that the state-owned lender is protected from prosecution under the Foreign Sovereign Immunities Act.
Halkbank claimed that the decision went against Supreme Court precedents and that it “greenlights the first criminal trial of a foreign sovereign in the nation’s history.”
It added that it would face irreparable harm if forced to defend itself against “a case from which it is immune.”
In December, the 2nd Circuit rejected ‘en banc’ Halbank’s petition for its appeal to be reheard. This paved the way for the prosecution of the state-owned lender to proceed in full.
Reuters noted that the Supreme Court denies most appeals. For example, it received 5,307 filings in its last term but only heard arguments in 72 cases.
If Halbank is ultimately found guilty of these charges, it will be frozen out of the U.S. financial system. This could have significant ramifications for the Turkish banking sector which is already struggling with the rapid depreciation of the Turkish lira, which has hit record lows in recent months.
Ahval