Halkbank and OFAC: a sanctions evasion case study
| Date | 07 October 2019 |
| Pages | 734-743 |
| DOI | https://doi.org/10.1108/JMLC-12-2018-0074 |
| Published date | 07 October 2019 |
| Author | Benjamin Fraser Scott |
Halkbank and OFAC: a sanctions
evasion case study
Benjamin Fraser Scott
Independent Scholar, Sydney, Australia
Abstract
Purpose –The purpose of this paper is to use two recent US prosecutions of Turkish nationals for
sanctions evasion, the Zarrab and Atilla cases, as case studies of recent developments in US sanctions law
and law enforcement.
Design/methodology/approach –This paper uses primary sources (pleadings and other court
documents) to articulate the key facts and arguments in the Zarrab and Atilla cases and to explain the
sanctions evasionmethodologies used by the group. This paper then draws out the lessons of these cases for
the practiceof financialcrime compliance in banking institutions.
Findings –This paper highlightsthe expanding scope of US sanctions laws and the challengesfor banks in
complying with them. In particular, it shows thesimilarities between sanctions evasion and other financial
crime methodologies,arguing that banks need to become more interdisciplinaryin their operational approach
to financialcrime.
Originality/value –The Zarrab and Atilla cases are of international significance in sanction law. This
paper is the first in-depthcase study of these cases from a legal and compliance perspective.
Keywords Iran, Turkey, United States, Money laundering, OFAC, Sanctions law, Financial crime
Paper type Case study
Background
Relations between Turkey and Iran, and their imperial predecessors, have been shaped by
the geopolitics of the region and the strategic needs of each party. Long before the
foundation of the modern Turkish and Iranian states, the Ottoman and Safavid empires
competed for strategic influence, with occasional wars between them. However, they also
developed mutually beneficial economic relationships. Though no longer empires, Turkey
and Iran are important regional powers and strategic competitors, divided by religion and
their very different political systems. At the same time, Iran’s energy resources and
Turkey’s expanding industrial economy have created a mutual interest in better economic
relations, and Turkey under Prime Minister(now President) Erdogan has been prepared to
develop these ties in spite of sanctionsrisks (Ozcan and Ozdamar, 2010).
Reza Zarrab, a Turkish–Iraniangold and currency trader, moved effectively betweenthe
two cultures, using his extensive political networks to build wealth and influence. A well-
known media figure in Turkey with links to the Erdogan Government, Zarrab owned a
network of foreign exchangebusinesses in Turkey, Dubai and Iran. He was at the centre of a
2013 bribery case, which involved senior members of the Turkish Government, and was
imprisoned for corruption and bribery offences. However, the Turkish Government
intervened to quash Zarrab’s sentence, with Erdogan himself claiming that Zarrab was
innocent, and that the charges had been fabricated by prosecutors in league with the exiled
Turkish cleric FethullahGulen, who opposes Erdogan (Sloat, 2017).
In 2012, Iran’s main government petroleum agency, the National Iranian Oil Company
(NIOC), maintained accounts with Halkbank, a large Turkish state-owned bank. US
JMLC
22,4
734
Journalof Money Laundering
Control
Vol.22 No. 4, 2019
pp. 734-743
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-12-2018-0074
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