Turkey’s Halkbank settles US criminal case over Iran sanctions violations

The U.S. government agreed to resolve its long-running criminal prosecution of Turkish state-run lender Halkbank HALKB.IS, saying the accord furthers Washington’s interest in curbing support for Iran.

Monday’s deferred prosecution agreement, if approved by a judge, would relieve one of the main irritants between the United States and Turkey, as the NATO allies experience their best ties in decades following Donald Trump’s return to the U.S. presidency last year.

It would also end a years-long saga centered on allegations that Halkbank helped Iran evade American economic sanctions. Turkish President Tayyip Erdogan once called the case unlawful and “ugly.” 

The agreement filed in Manhattan federal court forbids Halkbank from entering transactions that benefit Iran, and requires it to hire a monitor to review its sanctions and anti-money-laundering compliance.

No money will change hands, and the charges will likely be dismissed after the monitor reviews Halkbank’s compliance, according to the agreement.

“This agreement by Halkbank furthers the United States’ compelling interests in combatting terrorist financing and financial support for the Government of Iran,” U.S. Attorney Jay Clayton in Manhattan said in a letter to U.S. District Judge Richard Berman, who oversees the case.

Clayton also said the agreement strongly serves the public interest, by advancing the U.S. government’s national security interests in combatting money laundering and terror finance.

Berman’s approval is required for the Halkbank agreement. Clayton asked the judge to adjourn a scheduled March 11 status conference.

The U.S. Supreme Court in October let stand a federal appeals court decision that had allowed the prosecution to proceed.

Halkbank’s agreement was disclosed during the ongoing U.S.-Israeli war with Iran. 

TURKEY HAD PROPOSED PAYMENT

Turkish officials had proposed resolving the case for some $100 million during a September meeting between Erdogan and Trump at the White House, two sources told Reuters in October.

In a statement, Halkbank said it is not admitting to any criminal wrongdoing, and that the agreement would completely end the case.

Hakan Akbas, managing director at Strategic Advisory Services, a consultancy firm, said the agreement “closes a long and costly legal chapter while strengthening compliance standards. Trump and Erdogan appear to be steadily clearing major disputes from the U.S.–Turkey agenda.”

Halkbank’s Istanbul-traded shares on Monday closed up 10%, that exchange’s maximum permitted increase, after Berman filed an order mentioning a deferred prosecution agreement.

U.S. prosecutors charged Halkbank in 2019, during Trump’s first term as president, with fraud, money laundering and conspiracy for allegedly helping Iran use money servicers and front companies in Iran, Turkey and the United Arab Emirates.

Prosecutors said the bank secretly transferred $20 billion of restricted funds, converted oil revenue into gold and cash to benefit Iranian interests and documented fake food shipments to justify transfers of oil proceeds.

Halkbank pleaded not guilty. 

CIRCUITOUS PATH THROUGH COURTS

Deferred prosecution agreements let defendants avoid criminal charges if they meet various conditions, typically over several months or a few years. The government dismisses cases after the defendants comply. U.S. judges generally lack discretion to review such agreements. 

“Courts cannot substantively review and reject deferred prosecution agreements,” said Kaleb Byars, a professor at Mercer University School of Law. “The court really has no discretion but to accept it unless it does something that is not supported by precedent.”

After meeting with Trump in September, Erdogan expressed hope that the meeting would resolve various issues between the countries. 

The Turkish president said Trump told him at the White House and in a subsequent phone call that “the Halkbank problem is finished for us.”

Halkbank’s case was an outgrowth of several related criminal cases, including those against Turkish-Iranian gold trader Reza Zarrab and former Halkbank executive Mehmet Hakan Atilla.

Zarrab pleaded guilty to bank fraud, money laundering and conspiracy charges in 2017, but has not been sentenced. He testified against Atilla, who was convicted in 2018 of bank fraud and conspiracy charges.

Atilla returned to Turkey in 2019 after serving most of a 32-month prison term. He has denied wrongdoing.

Halkbank’s case has taken a circuitous path through the U.S. courts.

It first reached the Supreme Court in 2023, when the top U.S. judicial body temporarily voided the prosecution despite agreeing that the desire of Congress to shield foreign countries and their instrumentalities from civil liability did not cover criminal cases.

A federal appeals court later found that immunity under centuries-old common law did not shield Halkbank, prompting the most recent Supreme Court appeal.