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Turkey’s Halkbank says US charges on evading Iran sanctions ‘political’

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Turkey’s Halkbank said on Wednesday that US charges against it amount to an escalation of Washington’s sanctions on Ankara over its military incursion in Syria, while President Recep Tayyip Erdoğan called them an “unlawful, ugly” step, according to Reuters.

US prosecutors on Tuesday charged the state-owned lender with taking part in a multibillion-dollar scheme to evade US sanctions on Iran. In response Halkbank’s shares plunged as much as 7 percent on Wednesday despite a new ban on short selling.

The indictment came a day after the United States imposed sanctions on Turkish officials, hiked tariffs and halted trade talks in an effort to persuade Turkey to stop attacks against the Kurdish militia in northeastern Syria.

The indictment in a US district court in New York, which further strains ties between the NATO allies, alleges Turkey’s second-largest state bank conducted fraud, money laundering and other sanctions offences.

While the US district attorney did not tie the charges to sanctions over Syria, Halkbank did.

“These were filed as part of the sanctions introduced against our country by the U.S. government in response to Operation Peace Spring, heroically launched by the Turkish army to secure our borders and establish peace in the region,” the bank said of the incursion now in its eighth day.

Halkbank said it did not engage in sanctions violations as alleged and falls outside of the US Justice Department’s jurisdiction since it has no branches or employees in the United States.

“Therefore the decision to indict is an unprecedented legal overreach,” it said.

The case against Halkbank follows from a previous criminal case that came to light in 2016 against Turkish-Iranian gold trader Reza Zarrab, who was accused of playing a central role in the sanctions evasion scheme.

Mehmet Hakan Atilla, a former Halkbank deputy general manager, was arrested in New York the following year and was later sentenced to 32 months in prison. He returned to Turkey in July after serving out his sentence.

Zarrab pleaded guilty and testified for US prosecutors. He said Iran, with the help of Halkbank and Turkish government officials including the president, used a web of shell companies and sham transactions in gold, food and medicine to sidestep US sanctions.

Turkey cast that case as a political plot against Erdoğan’s government and said it was an extension of a 2013 domestic corruption investigation, which Ankara says was launched by the network of Fethullah Gülen, a US-based Muslim cleric.

Erdoğan told reporters in Ankara the Halkbank issue was “supposedly closed. But now they have taken an unlawful, ugly step with the southern New York prosecutors opening it again.”

“We will see the decision they will take, and we will [respond] accordingly,” he added.

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