Turkish Bank Charged with Money Laundering, Sanctions Evasion

By Colby Adams

Turkiye Halk Bankasi skirted U.S. sanctions against Iran through a “brazen scheme” that relied on front companies, gold and transactions disguised as humanitarian payments to move and hide billions of dollars from 2012 to 2017, New York federal prosecutors claimed Tuesday.

A 44-page indictment charges the Turkish state-owned lender, also known as Halkbank, with fraud, money laundering, conspiracy and sanctions violations for allegedly serving as the “sole repository” of roughly $20 billion in proceeds from oil and gas that Iran sold to Turkey, and helping route at least $1 billion of that sum through U.S. financial institutions.

U.S. sanctions and the anti-money laundering efforts of American banks impeded Iran’s ability to move those funds back to the Islamic Republic or transact with them abroad, according to the indictment.

“The bank’s audacious conduct was supported … by high-ranking Turkish government officials, some of whom received millions of dollars in bribes to promote and protect the scheme,” U.S. Attorney Geoffrey Berman said in a statement Tuesday.

The alleged perpetrators used the oil and gas proceeds, which at that point were denominated in lira and held at Halkbank on behalf of the Central Bank of Iran, National Iranian Oil Company and other Iranian entities, to buy gold from front companies controlled by Reza Zarrab, an Iranian-born Turkish trader who played a central role in the scheme.

Zarrab then arranged for the gold to be exported to Dubai, where it was converted to euros, U.S. dollars and other currencies for use by Iran.

In 2013, after U.S. officials intensified their prohibitions on gold transactions and bilateral trade with Iran, the alleged conspirators began using fraudulent documentation to cloak funds moving out of Halkbank as payments tied to food and medicine exports from Dubai to the Islamic Republic.

After U.S. officials met with Halkbank managers in February 2013, Adam Szubin, then serving as director of the Treasury Department’s Office of Foreign Assets Control, privately warned the lender’s deputy manager that the institution and its staff were in a “category unto themselves” in terms of helping Iran evade sanctions, according to the indictment.

Five years later, in January 2018, the same manager, Mehmet Hakkan Atilla, was convicted in New York of conspiracy, fraud and money laundering for his role in the scheme, which saw Iran-linked payments illegally routed through JPMorgan Chase, Bank of America and other U.S. financial institutions.

The government’s case against Atilla relied on the cooperation of Zarrab, who agreed to testify against his former boss after his arrest in Florida and indictment in New York for his prominent role in helping Iran access the global financial system.

Zarrab also testified against former Halkbank chief executive Suleyman Aslan and later accused Turkey’s President Recep Tayyip Erdogan of approving the circumvention scheme.

“Aslan and Atilla devised methods to mask the true purpose of the purported food trade so as to avoid detection, and to create a compliance record to protect Halkbank, the defendant, while excusing Zarrab from records he could not provide because the transactions were not genuine,” prosecutors claimed Tuesday.

The indictment references intercepted communications in July 2013 in which Zarrab explained to Aslan why he failed to notice errors in the fraudulent bills of lading and other documents when attempting to move too large a portion of Iran’s energy proceeds through fraudulent food transactions.

“Mr. minister told me to step on the gas and I think I over did it,” Zarrab told Aslan, referring to Turkey’s economic minister at the time, Mehmet Zafer Caglayan.

That December, Turkish investigators searching Aslan’s office and home after arresting him and Zarrab allegedly found a diagram of the food payments scheme and records of exceptions to requirements for documentation typically associated with such transactions.

Zarrab, according to the indictment, paid bribes to secure his and his co-defendants’ release from prison in February 2014 and ultimately succeeded in having the Turkish case against him dismissed later that year. He was arrested in March 2016 in Miami and ultimately pleaded guilty to several financial crimes.

In May 2018, Atilla, Halkbank’s former deputy manager, was sentenced to 32 months in prison.

Caglayan, Aslan and two other Halkbank employees, Levent Baklan and Abdullah Happani were indicted in the Southern District of New York in September 2017 for their alleged roles in the scheme and remain at large.

Contact Colby Adams at

Topics : Anti-money laundering , Sanctions , Counterterrorist Financing
Source: U.S.: Department of Justice , U.S.: OFAC
Document Date: October 15, 2019