People walk past by a branch of Halkbank in central Istanbul, Turkey, January 22, 2020. [Murad Sezer/Reuters]
A federal judge dismissed on Wednesday the US Justice Department’s criminal indictment of Halkbank after President Donald Trump’s administration reached a deal with the Turkish state-run lender, ending a prosecution brought in 2019.
The bank’s shares on the Istanbul stock exchange rose as much as 8.4% after US District Judge Richard Berman said he had signed off on federal prosecutors’ request to end the case. The deal was announced in March but required the judge’s approval.
The dismissal promised to relieve a lingering irritant between NATO allies Turkey and the United States.
Halkbank was charged during Trump’s first term with helping Iran evade American economic sanctions. Turkish President Tayyip Erdogan once called the case unlawful and “ugly.” But the countries are experiencing their best ties in decades since Trump’s return to the presidency last year.
“The criminal case against our bank ongoing in the United States for years has been definitively and conclusively closed,” Halkbank said in a statement.
Halkbank Chief Executive Recep Süleyman Özdil said the bank expected its opportunities to access foreign funding would improve.
Prosecutor cites diplomatic negotiations with Turkey
US judges have little discretion to reject the terms of deferred prosecution agreements such as the one reached between the Justice Department and Halkbank.
At the hearing, prosecutor Michael Lockard of the Manhattan US Attorney’s office said the agreement to end the case arose out of diplomatic efforts to secure a ceasefire last year between Israel and Hamas.
“Those multilateral efforts included an instrumental role from the government of Turkey,” Lockard said.
After Erdogan and Trump met last year, the Turkish president expressed hope for a resolution of the Halkbank matter. Erdogan said in October that Trump told him during a September meeting at the White House and in a subsequent phone call that “the Halkbank problem is finished for us.”
The Justice Department has also said dropping the prosecution would further the US interest in curbing support for Iran. The agreement bars Halkbank from entering transactions that benefit Iran and requires a monitor to review Halkbank’s sanctions and anti-money laundering compliance.
No money changes hands in the agreement, and the bank did not admit criminal wrongdoing. Halkbank had pleaded not guilty in the case.
At a court hearing in March, Berman referenced a letter he received from an advocacy group urging him to press for an explanation as to why there was no financial penalty. The judge did not address the issue at Wednesday’s hearing.
Monitor finds no instances of Halkbank noncompliance
US prosecutors had accused Halkbank of secretly transferring $20 billion of restricted funds, converting oil revenue into gold and cash to benefit Iranian interests and documenting fake food shipments to justify transfers of oil proceeds.
The settlement was announced after the Iran war began in February.
Cemal Demirtas, the general manager for research at Istanbul-based Ata Invest, said the dismissal was positive for the bank but largely expected.
After the deal was announced in March, the judge paused the case for 90 days to allow Halkbank to demonstrate compliance with its terms. Halkbank hired Ernst & Young to review its compliance policies.
When that period lapsed on June 10, prosecutors with the Manhattan US Attorney’s office asked Berman to formally dismiss the case, writing that the monitor, Ernst & Young, had not found any instances of noncompliance by Halkbank.
The case has taken a circuitous path through the US courts. The US Supreme Court last October let stand a lower court’s decision that allowed the prosecution to proceed. Halkbank had argued that as a Turkish state-owned entity, it should be immune from legal actions in another country’s courts. [Reuters]
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GR