Turkish bank charged with evading U.S. sanctions on Iran

Daniel Fowler
October 17, 2019

USA prosecutors on Tuesday filed criminal charges against Turkey's state-run Halkbank for allegedly taking part in a multibillion-dollar scheme to evade sanctions on Iran.

A bank majority-owned by the Turkish government was charged Tuesday in a six count indictment filed in NY federal court related to its participation in a multi-billion dollar scheme to evade US sanctions on Iran, prosecutors said. In response, Halkbank's shares plunged as much as seven percent on Wednesday despite government measures created to limit the fallout by banning trades that wager on a decline in Halkbank's share price - so-called "short selling".

A USA lawyer for Halkbank did not immediately respond to a request for comment.

Republican President Donald Trump has announced sanctions on Turkey, ratcheted up tariffs on the country's steel imports and suspended a major trade deal, but many lawmakers say the United States response must go even further.

The alleged scheme, which ran between 2012 and 2016, allowed Iran to spend proceeds from sales of its oil and gas on global markets - in violation of USA sanctions - using a complex web of front companies.

The US indictment published Tuesday alleges Halkbank conducted fraud, money laundering, and other sanctions offenses. He returned to Turkey in July after serving out his sentence.

Reza Zarrab, an Iranian-Turkish businessman, pleaded guilty in October 2017, before he was set to go on trial.

USA prosecutors said some officials took bribes as part of the scheme.

Erdogan has repeatedly rejected the allegations, saying Turkey did not violate the USA embargo on Iran and that political rivals were behind the case.

Erdogan told reporters in Ankara the Halkbank issue was "supposedly closed, but now they have taken an unlawful, ugly step with the southern NY prosecutors opening it again".

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"We will see what decisions they make".

But Halkbank stock fell as much as 7.2% at the open and was down 5.5% at 0705 GMT.

Turkey's main banking index, which has fallen more than 16 percent this month on fears of USA repercussions, was down 2.4 percent while Turkey's broader stock index was off 1.3 percent.

Tougher sanctions have been threatened if Turkey refuses to halt the violence in northeastern Syria.

The U.S. withdrew its forces from the immediate area; the Kurds, which have been U.S.

But the currency has firmed this week since USA sanctions were announced, with many investors deeming the punitive measures lighter than expected.

The U.S. sanctions and increased tariffs risk slowing Turkey's recovery from recession after last year's crisis chopped almost 30% off the value of the lira.

Halkbank said it will take legal action against what it called "an unwarranted case under worldwide law".

Prosecutors said it mostly involved masking money transfers and revenues caused by selling oil and gas in the global markets, so that this move is considered as violation of sanctions imposed by United States against Iran.

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