Turkey Anticipates Manageable Fine to Settle Halkbank-US Dispute

(Bloomberg) -- Turkey anticipates settling a long-running dispute with the US administration over sanctions busting allegations against state lender Turkiye Halk Bankasi AS with a manageable fine, according to a person familiar with the matter.

Turkey’s President Recep Tayyip Erdogan discussed the issue with US President Donald Trump at the White House last month, the person said, asking not to be identified due to the sensitivity of the matter.

Halkbank didn’t immediately respond to a request for comment. The White House and the US Treasury didn’t reply to requests for comment. Turkey’s Treasury and Finance Ministry couldn’t be immediately reached for comment.

A resolution to Halkbank’s nearly decade-long saga would mark a significant boost to US-Turkey relations. The lender was indicted in 2019 for allegedly participating in a multibillion-dollar scheme to evade sanctions on Iran. It faces charges of fraud, money laundering and sanctions violations, making the case one of the biggest thorns in the bilateral relationship.

Erdogan sought to make his White House meeting with Trump a turning point to reset the strained ties. A settlement for Halkbank would serve that goal, allowing the bank to avoid a drawn-out legal battle that could result in heavy fines and loss of access to the US financial system. 

The bank has largely stayed out of the Eurobond market since the wake of the sanctions allegations. Its shares rose more than 11% since the Erdogan-Trump meeting amid rising expectations for a resolution to the long-running saga.

Halkbank has argued that it was immune from prosecution because it is majority-owned by the Turkish state, that the conduct occurred outside the US and that it is beyond the jurisdiction of US courts. A federal appeals court rejected the immunity defense last year, and the bank is now waiting to find out if the US Supreme Court will review the lower-court ruling.

Halkbank can withdraw its Supreme Court appeal, effectively bringing the matter to a close if the US Justice Department decides to drop the case. 

Mehmet Hakan Atilla, a former executive of the lender, served about three years in a US prison after being convicted of evading sanctions on Iran. The man at the center of the allegations, Turkish-Iranian gold trader Reza Zarrab, pleaded guilty and became a witness in the case against Atilla.

--With assistance from Josh Wingrove, Daniel Flatley and Bob Van Voris.

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