U.S. court turns down latest Halkbank appeal paving way for prosecution

A U.S. court has denied Turkish state-owned lender Halkbank's petition to rehear an appeal against prosecution over a massive scheme to help Iran circumvent sanctions, local news site Inner City Press reported on Thursday.

Halkbank was indicted by the Southern District of New York in 2019 on charges of bank fraud, money laundering and conspiracy.

U.S. prosecutors accuse the Turkish bank of assisting Iran in illicitly transferring around $20 billion worth of restricted funds, with at least $1 billion laundered through the U.S. financial system.

The bank’s lawyers initially refused to acknowledge the charges, and later sought the removal of presiding Judge Richard Berman for alleged bias against the Turkish government and affiliation with Islamist preacher Fethullah Gülen.

Gülen, who lives in a secluded compound in the U.S. state of Pennsylvania, is accused by Turkish authorities of instigating the 2016 coup attempt through his followers in the Turkish military.  

The 2nd U.S. Circuit Court of Appeals ruled in October that the case against Halkbank could go ahead, rejecting arguments by the bank’s lawyers that its status as a state-owned lender gave it protection from prosecution under the Foreign Sovereign Immunities Act.

On Thursday, the same court rejected ‘en banc’ Halkbank’s petition for the appeal to be reheard, paving the way for the prosecution to proceed in full.

If found guilty, Halkbank faces being frozen out of the U.S. financial system, with significant implications for a banking sector already under strain from the rapid depreciation of the Turkish lira.    

In June, Halkbank’s chief executive officer Osman Arslan told local media that Turkish officials were in contact with their U.S. counterparts and the judiciary in a bid to find common ground for a dismissal of the charges against Halkbank.

Turkish-Iranian gold-smuggler Reza Zarrab, the alleged architect of the scheme, is expected to return to court as a witness against the Turkish bank. Zarrab was arrested in Miami in 2016 on charges of illegal gold trading with Iran.

He initially rejected the charges but a year later decided to 'flip' and became a state witness in the New York trial of Halkbank's former top executive Mehmet Hakan Atilla.

Atilla was eventually convicted of conspiring to evade U.S. sanctions on Iran in early 2018 and returned to Turkey after spending time at U.S. jails. He was released in July 2019.

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