October 23, 2019 / 3:42 PM / 25 days ago

Turkey's Halkbank may face sanctions if it fails to appear in U.S. court

WASHINGTON (Reuters) - A U.S. district judge on Wednesday ordered Turkey’s majority state-owned Halkbank to appear in court on Nov. 5 and warned that he may sanction the bank if it fails to show up.

FILE PHOTO: People walk past by a branch of Halkbank in central Istanbul, Turkey, October 16, 2019. REUTERS/Huseyin Aldemir/File Photo

Federal prosecutors in Manhattan on Oct. 16 charged the state-owned lender with taking party in a multibillion-dollar scheme to evade U.S. sanctions on Iran.

Halkbank declined to comment on the order. It previously said it did not engage in sanctions violations as alleged and falls outside of the U.S. Justice Department’s jurisdiction since it has no branches or employees in the United States.

Prosecutors had served a summons requiring the bank’s U.S. lawyer to appear in court on Oct. 22. A U.S. prosecutor on Tuesday called the bank a “fugitive” after it failed to show up.

Andrew Hruska, Halkbank’s U.S. lawyer, said in a court filing Monday that he was not authorized to accept a summons or appear in court on behalf of the bank.

“Should Halkbank fail for a second time to appear pursuant to the Second Summons, the Court will consider any appropriate sanctions for knowing and willful noncompliance,” U.S. District Judge Richard Berman said in a court filing.

Such sanctions would be a penalty only for failing to appear in court and would not reflect a finding that the bank was guilty of the charges against it.

The case comes as the United States and Turkey are at odds over Turkey’s military offensive into northeastern Syria against Kurdish-led militia. U.S. President Donald Trump announced a set of sanctions on Oct. 14 to punish Ankara for the invasion, although froze them since last week after a ceasefire agreement.

The bank has said the charges amount to an escalation of Washington’s sanctions on Ankara and President Tayyip Erdogan called them an “unlawful, ugly” step.

The indictment against Halkbank alleges Turkey’s second-largest state bank engaged in fraud and money laundering, among other sanctions-related offenses.

The charges were the latest development in a case that became public in 2016 with the arrest in Miami of Reza Zarrab, a Turkish-Iranian gold trader accused of playing a central role in a scheme to help Iran evade U.S. sanctions using sham transactions in gold, food and medicine.

Mehmet Hakan Atilla, a Halkbank deputy general manager, was arrested in New York the following year. Zarrab pleaded guilty and testified for U.S. prosecutors at Atilla’s trial, accusing officials, including Erdogan, of taking part in the sanctions evasion scheme.

Reporting by Humeyra Pamuk; Additional reporting by Brendan Pierson in New York and Ebru Tuncay in Istanbul; Editing by Noeleen Walder and Lisa Shumaker

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