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The Second Circuit Court of Appeals, in a twenty-seven page opinion, has recently held that Halkbank, owned by the Government of Turkey, can be charged with criminal conduct in the United States. The bank had asserted that it was immune, due to the Foreign Sovereign Immunities Doctrine, which prohibits actions against foreign governments in criminal prosecutions. An adverse ruling on this issue was entered in US District Court in New York, after which the Bank took an interlocutory appeal.
The Court held that, while the FSIA confers immunity on sovereign governments, the bank's case fell under the Commercial Activity exception, which holds that, if an entity is engaged in substantial commercial activity within the United States, the FSIA is not a bar to criminal prosecution.
Why is this American appellate decision relevant to our Malta readers, you ask The Bank of Valletta, should be considered the most prominent bank in the Republic of Malta, Which owns 25% of the bank's shares, retained ever since the Dom Mintoff government nationalised* the bank. While bank management may consider themselves immune from American criminal indictment by virtue of the FSIA, it appears that the Bank has had sufficient commercial contacts with US financial institutions to bring it under the Commercial Activity exception.
This is not just a theoretical exercise; the Bank's close relationship with the now shuttered Pilatus Bank, which has been accused of being primarily a money laundering operation, and which is now under indictment in Malta, has exposed the bank to possible criminal charges abroad, including in the United States. While Pilatus' former owner and CEO, Ali Sadr Hashemi Nejad, had his American Federal criminal case dismissed, it was for alleged prosecutorial conduct, Brady violations, not because he was innocent. In truth and in fact, he was first convicted by a jury before the misconduct surfaced.
Therefore, it would be prudent for the Bank's management to study the Halkbank opinion, inasmuch as the world's financial institutions now are required to operated risk-based compliance programmes. Clearly, the Pilatus Bank scandal is far from over, and it could result in collateral damage not presently contemplated by third parties.
* Malta's corrupt court system has still failed to bring justice to the original owners of the bank, then known as the National Bank of Malta, who lost their shares, in a case that has operated as a permanent stain upon Malta amongst judiciary of the Members of the European Union.