Turkey’s State-Owned Bank Probed By the New York Fed

The United States Federal Reserve launched a probe last week into the New York branch of Turkey's largest state-run bank, Ziraat Bankasi. Although the bank said this was a routine inspection, the timing may suggest otherwise. 

The probe comes on the heels of a June 25 agreement between the Fed and the New York branch of Ziraat, which called on the Turkish bank’s New York branch to provide the Fed with a written audit within 60 days to address suspicious money transactions. According to the agreement, the suspicious activity referred to certain dollar clearing transactions between July 1 and December 31, 2012. A Ziraat official said the plan was submitted on time and was being reviewed by the Fed. 

A probe into Ziraat bank is, in effect, a probe into Turkey. Ziraat is the largest of Turkey’s three state-owned banks. Halkbank, another state-owned bank, was also subject to scrutiny in December 2013 as a part of a massive corruption scandal. According to a leaked prosecutor’s report, the bank allegedly facilitated suspicious transactions between Iran and an illicit financial network in Turkey. A great many of the transactions helped Iran circumvent international sanctions. Some of the transactions in question were also dated 2012.  

Interestingly, after being detained as part of the probe, Halkbank CEO Suleyman Aslan resigned and joined Ziraat in February 2014. Aslan resigned from Ziraat on May 9 for unknown reasons. 

Vakifbank, another state-owned bank, has not yet been the subject of any government scrutiny. However, questions have been publicly raised about a $99,999,990 foreign donation made via Vakifbank to the Turkish charity TÜRGEV, a charity also investigated as part of the December corruption scandal. 

It is still unclear whether the Fed’s probe of Ziraat is routine or whether it is connected to the illicit financial transactions that were alleged in the corruption scandal. If there is a connection, with the Fed involved, it could be a sign that illicit financial transactions took place on U.S. soil. 

Merve Tahiroglu is a research associate at Foundation for Defense of Democracies, focusing on Turkey. Find her on Twitter @MerveTahiroglu