Halkbank’s Supreme Court Appeal Will Delay Iran Sanctions-Evasion Case

A U.S. appeals court ruled on Friday that Halkbank, a public lender majority-owned by Turkey’s sovereign wealth fund, can appeal to the U.S. Supreme Court without having to defend itself in a Manhattan federal court for the bank’s alleged role in helping Iran evade U.S. sanctions. This decision is a win for Turkish President Recep Tayyip Erdogan in his ongoing attempts to delay a potentially embarrassing jury trial, which could expose further details of his complicity in Tehran’s sanctions-evasion schemes.

Since October 2019, Halkbank has taken numerous actions to scuttle the case that the U.S. attorney for the Southern District of New York has brought against the lender in a six-count indictment. The prosecutors charged Halkbank with fraud, money laundering, and sanctions offenses, accusing the bank of helping Tehran transfer $20 billion worth of restricted funds, with at least $1 billion laundered through the U.S. financial system.

In November 2019, Halkbank and its lawyers refused to acknowledge the indictment or to obey a legal summons to appear in court. After U.S. prosecutors in January 2020 asked U.S. District Judge Richard Berman to impose escalating fines that could total up to $1.8 billion after eight weeks if the bank failed to respond to criminal charges, Halkbank reversed course and pleaded not guilty two months later. In June 2020, the bank made a bid to press Berman to recuse himself, which he refused in August 2020.

That same month, Halkbank claimed that the Foreign Sovereign Immunities Act shields the public lender from prosecution in the United States. The U.S. Court of Appeals for the Second Circuit rejected that claim last October. Yet on December 21, the bank filed a motion with the appellate court for a stay of the trial pending a petition to the Supreme Court, arguing that the appellate court’s decision conflicted with Supreme Court precedents by greenlighting “the first criminal trial of a foreign sovereign in [U.S.] history.” Federal prosecutors opposed Halkbank’s motion on January 3, stating that it “does not identify a ‘substantial question’ likely to result in Supreme Court review, let alone reversal.” The prosecutors added that the bank “has not established good cause sufficient to outweigh the public interest in a speedy trial of this matter.” The appellate court sided with Halkbank, however, delaying the trial until the Supreme Court decides whether to take up the case.

If four of the nine Supreme Court justices find grounds to grant a review, it would be a win for Erdogan’s delaying tactics. Even if the Supreme Court eventually rules that Halkbank is subject to prosecution in U.S. courts, a lengthy court process would save the Turkish president and his inner circle from potentially embarrassing revelations by delaying the jury trial until after Turkey’s presidential and parliamentary elections scheduled for next year. In response to Friday’s ruling, Halkbank shares, which had lost over 96 percent of their value in U.S. dollars, falling from an all-time high of $10.63 per share in 2013 to just $0.34 by the end of 2021, climbed more than 8 percent on Monday.

The American justice system’s commitment to prosecuting Halkbank to the full extent of the law, along with the Turkish officials who facilitated the Islamic Republic’s sanctions-evasion schemes, would send an important signal. Washington’s commitment to denying impunity to Tehran’s accomplices would encourage other foreign banks to comply with U.S. sanctions and improve their anti-money laundering controls. Halkbank’s timely prosecution would also incentivize other defendant banks to settle cases by cooperating with U.S. prosecutors, implementing reforms, and paying fines as required by their deferred prosecution and/or non-prosecution agreements with U.S. authorities.

Aykan Erdemir is a former member of the Turkish parliament and senior director of the Turkey Program at the Foundation for Defense of Democracies (FDD), where he also contributes to FDD’s Center on Economic and Financial Power (CEFP). For more analysis from Aykan, the Turkey Program, and CEFP, please subscribe HERE. Follow Aykan on Twitter @aykan_erdemir. Follow FDD on Twitter @FDD and @FDD_CEFP. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.