May 18, 2018 | Policy Brief

Turkish Banker Sentenced for Iran Sanctions-Busting Scheme

May 18, 2018 | Policy Brief

Turkish Banker Sentenced for Iran Sanctions-Busting Scheme

A Manhattan court Wednesday sentenced Mehmet Hakan Atilla, deputy general manager of Turkey’s second-largest public lender, Halkbank, to 32 months in prison for his role in a multi-billion dollar scheme to evade U.S. sanctions on Iran. Turkish-Iranian gold trader Reza Zarrab, the ringleader of the conspiracy who later turned state’s witness, still awaits sentencing. Seven others charged in the same indictment, including Turkey’s former economy minister and the general manager of Halkbank, remain in Turkey, beyond the reach of U.S. law. Atilla’s conviction is likely to trigger major Treasury Department fines on Turkish financial institutions, including Halkbank, which could further escalate tensions between Washington and its NATO ally.

Seeking a harsher sentence for Attila, Assistant U.S. Attorney Michael Lockard described the defendant’s crimes as part of “the biggest sanctions evasion case prosecuted in the United States that we are aware of,” and added that the case was not about drugs or conventional weapons, but about the “nuclear capability [of] the world’s biggest state sponsor of terrorism.” Although the prosecution originally sought at least a 15-year sentence and a fine between $50,000 to $500,000, the judge, calling Atilla “a cog in the wheel,” treated the Turkish banker leniently, imposing neither any fine nor restitution beyond the prison term.

Even so, the case continued to elicit harsh criticism from the Turkish government. President Recep Tayyip Erdogan, in an interview with Bloomberg two days before the sentencing, demanded Atilla’s acquittal, warning, “If Atilla is going to be declared a criminal, that would be almost equivalent to declaring the Republic of Turkey a criminal.”

Following Atilla’s sentencing, the Turkish Foreign Ministry issued a statement questioning the legitimacy of the trial, arguing, “By convicting a foreign government official, this court made an unprecedented decision regarding the implementation of the U.S. sanctions legislation.” Deputy Prime Minister Bekir Bozdag claimed that the trial is “concrete proof” of cooperation between the U.S. and the Fethullahist Terrorist Organization (FETO), the designation Turkish authorities apply to the shadowy network of Muslim cleric Fethullah Gulen. The Turkish public widely believes that the U.S.-based Gulen is behind the abortive coup of July 2016.

Although the sentencing of Atilla, pending appeals, has brought the United States of America v. Mehmet Hakan Atilla case to a close for now, it is almost certain that there are additional sealed indictments of other Turkish officials who took part in the sanctions-busting scheme. It is also possible for the U.S. government to sanction Turkish culprits through the Global Magnitsky Act.

For Turkey, a more immediate consequence of Atilla’s conviction could be substantial fines on Turkish banks imposed by the Treasury. An economist warned last month that a “crippling penalty that extends beyond Halkbank would have a more substantial impact” on the Turkish economy, triggering a “financial system crisis.” When asked whether Turkey would be prepared to pay any fines against Halkbank, Erdogan replied, “of course, our bank will do what the laws require them to do,” yet also warned that the process could “completely destroy Turkish-U.S. relations.” One thing is certain at this point: The biggest sanctions-evasion case in U.S. history will continue to erode relations between Washington and its NATO ally, which only last week vowed to help Tehran again resist U.S. sanctions.

Aykan Erdemir is a senior fellow at the Foundation for Defense of Democracies and a former member of the Turkish parliament. Follow him on Twitter @aykan_erdemir.

Follow FDD on Twitter @FDD. FDD is a Washington-based, nonpartisan research institute focusing on national security and foreign policy.