U.S. Supreme Court agrees to hear Halkbank appeal in Iran sanctions-busting case

The U.S. Supreme Court on Monday agreed to hear Turkish state-owned lender Halkbank’s appeal in a case in which the bank is charged with laundering billions of dollars to violate sanctions against Iran, Reuters reported.

U.S. federal prosecutors in 2019 brought charges against Halkbank, accusing it of moving $20 billion in Iranian oil and gas revenues in violation of U.S. sanctions against Iran.  The bank has pleaded not guilty to the charges in the case which has received widespread attention because of former U.S. President Donald Trump’s reported efforts to drop the charges as a favour to his Turkish counterpart Recep Tayyip Erdoğan.

The justices took up Halkbank's appeal of a lower court's decision rejecting the bank's contention that it was immune from U.S. prosecution under the 1976 Foreign Sovereign Immunities Act pertaining to the limitation of the jurisdiction of American courts over lawsuits against foreign countries, citing the bank’s majority Turkish government ownership, Reuters said.

The bank’s alleged misconduct includes helping Iran secretly transfer of restricted funds, including $1 billion laundered through the U.S. financial system, and converting oil revenue into gold and then cash to benefit Iranian interests.

The alleged architect of this scheme, Turkish-Iranian gold-smuggler Reza Zarrab, was arrested in Miami in 2016 for illegal gold trading with Iran. While Zarrab initial denied the charges against him, within a year, he decided to 'flip' and become a state witness in the New York trial of Mehmet Hakan Atilla, Halkbank's former top executive. Atilla was convicted for conspiracy to evade U.S. sanctions against Iran in early 2018. 

In its appeal to the U.S. Supreme Court, Halkbank called the prosecution "unprecedented" and saying the ruling "green lights future indictments of any sovereign state." The trial was delayed awaiting action by the country’s top court.

The Supreme Court denies most appeals. In its last term it received 5,307 filings and heard arguments in 72 cases, according to Reuters.

If Halkbank is ultimately found guilty of these charges, it will be frozen out of the U.S. financial system. This could have significant ramifications for the Turkish banking sector which is already struggling with the rapid depreciation of the Turkish lira, which has hit record lows in recent months. 

Halkbank’s shares skyrocketed by 10 percent after its appeal to the U.S. Supreme Court was accepted on Monday, Turkish media reported.

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