Former Treasury Official Slams Ex-Erdogan Deputy on Sanctions

Ali Babacan, a member of Turkey’s parliament, is pictured here at the World Economic Forum in 2012. That year, according to new testimony in a federal money-laundering trial, the U.S. Treasury Department was “troubled” by reports suggesting that Babacan had been skirting sanctions against Iran as deputy prime minister. (Photo credit: World Economic Forum)

MANHATTAN (CN) – A member of Turkey’s parliament joined the ever-growing list Friday of Turkish officials accused in a New York money-laundering trial of enabling sanctions violations.

Though there are no charges against him, Ali Babacan was implicated in testimony about his stint as deputy prime minister of Turkey from 2009 to 2015. For all but the last year of that term, Turkey’s now president, Recep Tayyip Erdogan, was prime minister.

David Cohen, a former official with the U.S. Treasury Department, told jurors Friday that Babacan was outspoken in that role about his intent to violate U.S. sanctions against Iran.

Testifying for the U.S. government, Cohen read a letter he sent in 2012 to Suleyman Aslan, the general manager of  Turkey’s state-run bank Halkbank.

“Recent press reports quote Turkey’s Deputy Prime Minister Ali Babacan as stating that Turkey is exporting billions of dollars’ worth of gold to the government of Iran in order to pay for Turkey’s imports of oil from Iran,” Cohen wrote in the letter. “In particular, Deputy Prime Minister Babacan is reported to have said ‘When Turkey buys Iranian oil, we pay for it in Turkish Lira. However, it is not possible for Iran to take that money as dollars into its own country due to international sanctions. Therefore, when Iran cannot take this money back as currency, they withdraw Turkish Lira and buy gold from our market.’”

Cohen told Aslan that the U.S. Treasury Department had been “troubled” by Babacan’s announcements, and “concerned” that Halkbank may be facilitating these sales.

 

Multiple Halkbank officials, including Aslan, were later indicted for sanctions violations.

Former Halkbank manager Mehmet Hakan Atilla was the only one arrested, however, and he has been the lone defendant in a high-stakes trial that has embarrassed several Turkish leaders.

The star witness in the case — gold trader Reza Zarrab — recently testified that Erdogan ordered billions in transactions to Iran through two Turkish banks, one of which had a branch in New York.

Zarrab also testified that he bribed ex-Turkish economy minister Zafer Caglayan between “45 and 50 million” euros and paid $100,000 to the son of Turkey’s former Minister of the Interior Muammer Guler.

Cohen, who previously served as deputy director of the CIA, has been testifying for two days about his work as the Treasury Department’s then-under secretary for terrorism and financial intelligence.

In that capacity, Cohen met with Halkbank officials about their compliance with U.S. sanctions against Iran on multiple occasions in Turkey and Washington, D.C.

One of those meetings had been slated to occur in December 2013, only to be interrupted by turmoil in Turkey.

“So it turned out that my travel to Turkey occurred essentially on the same day that there was a major law enforcement action in Turkey, where a number of people were arrested, including Mr. Aslan,” Cohen testified.

Turkey’s 2013 corruption scandal quickly disappeared, and those detained were quickly released.

At the time, Erdogan slammed the probe as a “judicial coup,” but Zarrab’s testimony here this week corroborated many of those bribery claims.

To get out of a Turkish prison at the time, Zarrab said that he paid off officials.

“I made payments and partially, they were bribes,” Zarrab said on Thursday, toward the end of a week on the witness stand.

Trial will resume on Monday.

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