Turkish President Recep Tayyip Erdogan has for the first time been implicated in the billion-dollar money laundering plot run by Turkish-Iranian gold trader Reza Zarrab to help Iran evade US sanctions.
In the ongoing trial in New York, Zarrab on November 30 told the jury that Turkey’s then-economy minister, Mehmet Zafer Caglayan, had informed him that then-prime minister Erdogan had personally signed off on a plan to involve two Turkish banks in the scheme, news agencies reported.
He quoted Caglayan as saying "the prime minister has given his approval for the work with Ziraat," in a reference to money laundering through Turkish bank Ziraat Bankasi, Bloomberg reported. During his testimony on November 29, Zarrab, 34, claimed Caglayan had taken more than $50mn of bribes in return for helping to facilitate the scheme.
In a speech to MPs of his ruling Justice and Development (AKP) party in Ankara, Erdogan, according to NTV, said: ““We did not violate the embargo. Whatever comes out of this trial, let it come out, we did the right thing.” Erdogan, Turkey's prime minister from 2003 to 2014 before he became the country's first directly elected president, insists the trial is the result of conspiratorial efforts of Gulenists whom he blames for the attempted coup that took place in Turkey in July last year.
Erdogan and the Turkish government say the plotters have infiltrated the American prosecution system with a fabricated case, although those claims have been described as absurd by prosecutors who have brought the sanctions evasion scheme to trial and neither the Obama nor Trump administrations met any of several requests from Ankara for the investigation into Zarrab's scheme to be halted. Zarrab has pleaded guilty to his role in the affair—specifically to charges including bank fraud and money laundering—but has turned prosecution witness in exchange for leniency.
On November 30, pro-government newspaper Daily Sabah published a rebuttal of the trial under the headline: “Fabricated evidence, a pro-[Gulenist] judge, a clear plot against Turkey: all about the Zarrab case.” The piece accused the judge overseeing the case and the prosecutor who indicted Zarrab of having links to the Gulenist movement.
Observers of Turkey's markets and economy are keeping a close eye on the already pressured Turkish lira while for the country's banking system there is destabilising conjecture that dollar-dependent banks could face heavy American fines after the trial is over.
The case actually began as a corruption investigation in Turkey in 2013, but Erdogan quashed it and purged investigators and prosecutors. At that point too, he claimed the allegations were the work of Gulenist subversives.
They "gave the order"
In what was his second day of testimony, Zarrab told the court he was informed by Caglayan on a separate occasion that Erdogan and the Turkish treasury minister, Ali Babacan, had approved a transaction of the scheme. They "gave instructions, gave the order, to begin doing this trade", he said.
Zarrab was arrested in March 2016 after flying to Florida with his wife, Turkish pop star Ebru Gundes, and his daughter, for a trip to Disney World. He is testifying against his former co-defendant, Mehmet Hakan Atilla, a 47-year-old former deputy chief executive officer at Turkey's state-owned Halkbank, who has pleaded not guilty. Atilla and Halkbank were, according to Zarrab, involved in a plot that saw gold purchased with the proceeds from Iranian oil and gas sales to Turkey. Falsified customs documents were used, he said, to make it appear that the final destination for the gold was Iran, rather than his office in Dubai. Once in Dubai, the gold was sold and the proceeds were transferred to an exchange office with an account at banks in the US. Payments were then made in Iran’s direction, Zarrab explained.
Zarrab also claimed to the court that Suleyman Aslan, then the Halkbank CEO, had sought a meeting, making it clear he was becoming nervous about the money laundering. He said he interpreted the conversation as a request for a bribe.
Atilla's lawyer, Victor Rocco, told jurors in an opening statement that Zarrab was “a liar, a cheat … a one-man crime wave”, the Guardian reported. His client was not corrupt and took no bribes, he said.
Halkbank issued a November 30 statement saying it “strictly adheres to national and international regulations” in all businesses and transactions. “Foreign trade transactions and money transfers are conducted in an open, transparent manner and can be monitored by the relevant authorities,” it added.
As well as charging Zarrab and Atilla, US prosecutors have charged in absentia Caglayan and six other high-ranking officials. All are still at large. Caglayan has issued statements denying the allegations made against him.