Supreme Court Allows Iran Sanctions-Evasion Case Against Turkish Bank to Proceed

Latest Developments

The Supreme Court ruled on April 19 that the Turkish state-owned Halkbank remains subject to criminal prosecution in U.S. courts for conspiring to evade U.S. sanctions against Iran. The court majority rejected Halkbank’s argument that the Foreign Sovereign Immunities Act (FSIA) of 1976 renders the bank immune from criminal prosecution. Instead, the justices maintained that a plain reading of the law “indicates that the statute exclusively addresses civil suits,” according to the case syllabus. In a six-count indictment in October 2019, U.S. attorneys for the Southern District of New York charged Halkbank with fraud, money laundering, and sanctions offenses related to the bank’s alleged participation “in a multibillion-dollar scheme to evade U.S. sanctions on Iran.”

Expert Analysis

“Turkish President Recep Tayyip Erdogan and his inner circle thought they could get away with the largest sanctions evasion scheme in modern history. They moved $20 billion in cash and gold to Iran, in direct contravention of U.S. sanctions, at the height of the effort to thwart Iran’s nuclear ambitions. This Supreme Court decision confirms that Halkbank, the key financial institution in this scheme, must face the charges leveled against it. Should the bank be found guilty, it could have a profound effect on the Turkish economy. The decision is also a body blow to Erdogan, who is fighting for re-election, with the vote scheduled to be held in less than one month. This Supreme Court decision will not make things any easier for him, as it has direct implications for the Turkish economy and also affirms his role in an illegal scheme.” — Jonathan Schanzer, FDD Senior Vice President for Research

“Beyond impacting whether Turkey could rely on the court to get it out of legal jeopardy, at stake was whether Chinese, Russian, Iranian, Venezuelan, and other foreign state-owned entities that engage in sanctions evasion would be immune from all criminal proceedings in the U.S. The court rightly determined that the intent of FSIA was not to permit any entity affiliated with a foreign government that was engaging in criminal activity to be protected against U.S. prosecution. This will hopefully send a strong signal to those illicit actors hoping for a get out of jail free card that our justice system cannot shield them.” — Toby Dershowitz, FDD Senior Vice President for Government Relations and Strategy

The Halkbank Case

In the 2019 indictment, prosecutors accused the Turkish public lender of helping Tehran transfer $20 billion worth of restricted funds, with at least $1 billion laundered through the U.S. financial system. The previous year, Halkbank’s deputy general manager, Mehmet Hakan Atilla, received a 32-month prison sentence when a federal jury found him guilty on five counts related to that scheme, including sanctions evasion, bank fraud, and obstructing the actions of the U.S. Treasury Department.

In the run-up to Atilla’s conviction, Reza Zarrab, the ringleader of Tehran’s Turkey-based sanctions-evasion schemes, pleaded guilty and turned state’s witness, confessing to having bribed senior Turkish ministers and top Halkbank executives. Zarrab even implicated Recep Tayyip Erdogan, saying that the then prime minister had approved the sanctions-busting efforts.