U.S. federal prosecutors prepared Tuesday an indictment against Turkish public lender Halkbank in a Manhattan federal court.
The move comes at a time of heightened U.S. pressure on Ankara over Turkey's Operation Peace Spring in northeastern Syria which aims to clear terror threats. The U.S. move has been construed as highly political and raised concerns due to its timing.
In a statement, the Southern District of New York claimed the bank participated in a scheme to evade U.S. sanctions on Iran.
President Recep Tayyip Erdoğan on Wednesday described the indictment against Turkey's state-run Halkbank as "unlawful" and "ugly."
"This is just another sign of how emotional these issues have become. One would think that this business was over. Now they have taken an unlawful, ugly step by reopening this case," Erdoğan told reporters at the parliament.
The six-count indictment includes conspiracy to defraud the U.S., conspiracy to violate the International Emergency Economic Powers Act, bank fraud, conspiracy to commit bank fraud, money laundering and conspiracy to commit money laundering.
The legal charges by the U.S. prosecutors indeed proved that any case that could be opened against the Turkish lender will lack legal merit since it only points out the increasing pressure on the Turkish government by the U.S. administration amid an ongoing military operation in Syria.
In a statement issued on Wednesday, the state lender said it did not in any way evade secondary sanctions on Iran and emphasized that the U.S. Department of Justice has no jurisdiction to try the bank, which has no branch in the country. "The preparation of indictment is an unprecedented legal excess of power," the statement read.
The bank claimed that the indictment only iterates the same allegations without any new findings compatible with the law. "In an independent investigation, our bank shared the results with the U.S. court during the case against Mehmet Hakan Atilla," it said.
"We will use all remedies and exercise our legal rights ensuing from international law," Halkbank stated.
Back in March 2016, Turkish-Iranian gold trader Reza Zarrab was arrested in the U.S. on the charge of violating U.S. sanctions against Iran. However, later he turned state's evidence against Turkey and entered the American witness protection program. He testified against the former deputy CEO of Turkey's state-run lender Halkbank, Atilla, who was arrested in March 2017 while on a business trip in the U.S.
When Atilla was convicted, Turkey blasted the verdict as "a scandalous decision in a scandalous case" and "a conspiracy aimed at complicating Turkey's internal politics and intervening in Turkey's internal affairs." Ankara has repeatedly criticized Atilla's conviction, calling it "politically motivated."
After 32 months of imprisonment, Atilla was released from U.S. prison in July and returned home in Turkey.
Ban on short-selling banking shares
Market regulators Wednesday suspended short-selling in seven banks, including Halkbank, ordering traders not to execute orders unless a client has the respective shares in his account.
Borsa Istanbul temporarily prohibited short selling on banking stocks while the Capital Markets Board (SPK) said the depository rule will be applied to the bank stocks and the sale will only be executed through brokers holding their clients' shares.
Borsa Istanbul's banking index, BIST30 trimmed as much as 4.1% at the opening session but was down 1.72% at 4 p.m. Halkbank shares were trading 5.1% lower at the same time, after tumbling as much as 7.4% earlier in the morning.
