Turkey’s Halkbank Must Face U.S. Prosecution Over Iran Sanctions Charges.

An appeals court ruled that the state-owned lender, accused of helping Iran evade sanctions, isn’t entitled to sovereign immunity

Halkbank offices in Ankara. The ruling against the bank comes amid renewed action from the Biden administration aimed at Iran’s oil sales, and follows years of legal wrangling.

Turkish state-owned lender Halkbank can be criminally prosecuted in New York for allegedly helping Iran to evade U.S. sanctions by laundering oil revenue, a federal appeals court said, rejecting objections from Turkey’s government.

Sovereign immunity doesn’t shield Halkbank, also known as Turkiye Halk Bankasi, from a criminal prosecution initiated under the Trump administration, the Second Circuit said in a decision released Tuesday. A U.S.-based lawyer for Halkbank and a representative for the Turkish Embassy in Washington didn’t respond to requests for comment.

The ruling comes amid renewed action from the Biden administration aimed at Iran’s oil sales, and follows years of legal wrangling, including before the U.S. Supreme Court, over whether Manhattan federal prosecutors can put the bank on trial for alleged sanctions-related crimes.

Halkbank had argued that a criminal prosecution like this one was unprecedented. In a legal filing, Turkey said denying the bank immunity would be like prosecuting the country itself, pointing to its North Atlantic Treaty Organization alliance with the U.S. that dates back to World War II.

The governments of Pakistan, Qatar and Azerbaijan also urged the Second Circuit to throw out the case, but the court said it wasn’t its place to overrule the administration.

“The decision to initiate a federal criminal prosecution against a foreign state-owned corporation … is not one for the judiciary to second-guess,” the court said. “A federal grand jury found probable cause to believe that Halkbank violated numerous criminal laws of the United States, and the Executive decided to prosecute those alleged crimes.”

Halkbank is accused of participating in a multiyear scheme to violate U.S. sanctions on Iran and give the country access to billions of dollars in funds held in Halkbank accounts, including by lying to U.S. Treasury Department officials.

The bank argued that it should get the immunity foreign governments normally receive in U.S. courts because Turkey officially designated it as a repository for Iranian oil-sale proceeds and Turkish officials participated in the alleged scheme. Turkey in its legal filing said the bank was indistinguishable from its government.

But the Second Circuit said that the bank’s activities were essentially commercial in nature, and so the bank isn’t entitled to the same immunity normally given to government actions. The U.S. routinely prosecutes foreign commercial banks for crimes, including at times for sanctions violations.