Jonathan Stempel, Tom Hals

(Reuters) – The U.S. appeals court ruled Friday that Halkbank, a Turkish state-owned lender, can be charged with helping Iran evade American sanctions.

The U.S. 2nd U.S. Circuit Court of Appeals ruled that even if Foreign Sovereign Immunities Act protected the bank, Halkbank’s charge falls within the Commercial Activity exception.

Robert Cary, an attorney at Williams & Connolly which represents Halkbank, declined to comment. The Turkish foreign ministry and Halkbank did not immediately respond.

Halkbank was accused by the prosecution of having converted oil revenues into gold, then to cash for Iranian interests. They also claimed that Halkbank documented fake food shipments in order to support oil proceeds transfers.

The Iranians also claimed that Halkbank assisted Iran in secretly transferring $20 billion worth of restricted funds to Iran, and at least $1 Billion was laundered through U.S. finance systems.

Halkbank has pled not guilty in bank fraud, money laundering, and conspiracy to bank fraud. It was accused of using money servicers to cover up sanctions.

The bank argued that it is exempt from prosecution under the Federal Foreign Sovereign Immunities Law because it was “synonymous” with Turkey. This law grants immunity to banks.

Halkbank, the court ruled that it was confusing its purpose (to act as a repository of Iranian oil and gas proceeds to Turkey) with its actual action which was to engage in money laundering.

The appeals court said that even if the law “confers sovereign immunity in criminal cases, the offense conduct with which Halkbank is charged falls within FSIA’s commercial activities exception to sovereign immunity.”

Halkbank appealed an Oct. 1, ruling by Richard Berman, U.S. District Judge. This allowed it to be pursued.

Berman is familiar with several similar cases. He oversaw the prosecution of Mehmet Atilla, an ex-executive at Halkbank, and the guilty plea by Reza Zarrab (a Turkish-Iranian Gold Trader).

The case of Halkbank has complicated U.S.-Turkish relationships, with Turkish President Tayyip Erdan backing Halkbank’s innocence in a memo sent to Donald Trump in 2018.

Jose Cabranes and Jose Bianco, Judges Amalya Kearse decided the case. Although the lower court originally scheduled May 3rd for a trial, the proceedings were stayed by Jose Cabranes during appeal. A new trial is still to be set.