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Monday, July 22, 2024 | Back issues
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Turkish state-run bank lacks immunity in US criminal laundering case

The Second Circuit’s ruling found Halkbank engaged in commercial activity when it allegedly laundered $1 billion of Iranian money through the U.S. financial system.

(CN) — Federal prosecutors can continue to prosecute a Turkish bank in a Manhattan courthouse for allegedly evading U.S. sanctions against Iran by laundering $20 billion of that nation’s oil and gas proceeds.

The bank — whose majority owner is the Government of Turkey — had claimed sovereign immunity and claimed it could not face prosecution in a U.S. Court because of the Foreign Sovereign Immunities Act. But the Second Circuit rejected that argument Friday and said because the bank was engaged in a commercial activity, the federal courts had jurisdiction to sit in judgment.

In his opinion, Circuit Judge Jose Cabranes said Halkbank officials had allegedly sought to skirt U.S. sanctions against Iran when they met with and held conference calls with U.S. Department of the Treasury officials.

“Although Halkbank is majority-owned by the Government of Turkey, such communications are plainly the type of activity in which banks, including privately owned correspondent banks, routinely engage,” Cabranes wrote in his 29-page opinion.

The case against Halkbank, also known as Turkiye Halk Bankasi, is one of the largest money-laundering cases to be prosecuted in the states and the six-count indictment unveiled two years ago rattled relations between the United States and Turkey.

Former President Donald Trump reportedly had tried to interfere in the case against the Turkish bank.

The case against the bank grew from testimony of a gold trader named Reza Zarrab, who had pleaded guilty to his involvement in the scheme years before, but not before giving testimony saying Turkish President Recep Tayyip Erdogan himself directed some of the trades designed to skirt sanctions.

The U.S. indictment claims high-ranking officials in both Turkey and Iran participated in the sanctions-evading laundering.  

The bank has pleaded not guilty, but not before it resisted appearing for an arraignment for three months, instead asking to lodge a special appearance, its lawyers communicating with the court in a way so as not to signal the bank recognized its jurisdiction.

Federal prosecutors described the bank in October 2019 as a fugitive.

When Halkbank turned the Second Circuit in an effort to attack the case, the appellate court declined to delay the proceedings in February 2020.

A three-judge panel consisting of Judges Cabranes, Amalya Kearse and Joseph Bianco heard the bank’s second trip to the Second Circuit where its attorney argued a domestic courtroom is no place for two sovereigns to resolve their disputes.

Kearse was nominated to the Second Circuit by President Jimmy Carter; Bianco is a Trump appointee.

In his opinion, the Clinton-nominated Cabranes said it was clear the Foreign Sovereign Immunities Act largely applied in civil cases. But in a criminal courtroom? The law was less clear.

“We think that the district court plainly has subject-matter jurisdiction over the federal criminal prosecution of Halkbank … However, we need not — and do not — decide whether … FSIA confers immunity on foreign sovereigns in the criminal context,” Cabranes wrote.

Halkbank’s alleged actions, the judge said, was commercial activity and that was an exception to the FSIA.

Halkbank further argued that the money moves with Iran was sovereign in nature, holding funds for the sanctioned nation.

But that wasn’t the focus of the indictment, the Second Circuit noted. Instead, the bank is on trial in the states for allegedly skirting sanctions and engaging in money laundering which caused “victim-U.S. financial institutions to take part in laundering over $1 billion through the U.S. financial system in violation of U.S. law,” Cabranes wrote.

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Categories / Appeals, Business, Economy, Financial, International, Politics

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