Turkish-Iranian Gold Dealer Must Face Laundering, Sanctions Case

  • Zarrab argued U.S. prosecutors overreached in bringing charges
  • Gold trader is accused of violating U.S. sanctions on Iran

A Turkish-Iranian gold trader must stand trial for laundering hundreds of millions of dollars and violating U.S. sanctions on Iran, a New York judge said in rejecting a bid to dismiss the case as “unprecedented.”

Reza Zarrab, who allegedly owns a multi-billion dollar network of companies in Turkey and the United Arab Emirates, argued that U.S. prosecutors had "manufactured" the case as part of a "dangerous extension" of American law. He said he’s the first foreign national accused of violating U.S. banking sanctions against Iran in transactions that were otherwise lawful for him as a Turkish citizen, a claim prosecutors didn’t deny.

“Without Zarrab and his network of exchange houses and front companies to secretly conduct sanctions-evading international financial transfers, Zarrab’s Iranian co-conspirators would have been excluded from access to the U.S. financial system," U.S. District Judge Richard Berman in Manhattan said Monday, summarizing the U.S. allegations. "Zarrab’s charged conduct goes to the very heart of what U.S. sanctions laws are intended to prohibit."

Zarrab, who denies wrongdoing, is accused of money laundering and using a web of companies to induce American banks to launder money in transactions that violated the sanctions. He has been in custody in New York since he was arrested in Florida in March en route to a family trip to Disney World.

Bribery Scandal

The case has been closely watched in Turkey as Zarrab was at the center of a bribery scandal that engulfed that country’s leadership. He was previously charged in a graft probe there in 2013, accused of bribing cabinet ministers with millions of dollars in cash and gifts to help facilitate trade in gold with Iran, according to police and court documents in Turkey reviewed by Bloomberg News. 

Berman said sanctions laws can be used against people and not just banks and that the U.S. has authority to bring such cases because it needs to defend itself against Iran’s sponsorship of international terrorism. The U.S. has levied billions of dollars in fines against banks including HSBC Holdings Plc and BNP Paribas SA for violating sanctions against Iran and other countries.

The U.S. anti-money-laundering law "applies to foreign nationals or persons acting outside the United States if they are engaging in a transaction that involves property that is subject to the jurisdiction of the United States," Berman wrote.

Berman also said there was evidence to suggest Zarrab and his accomplices used "layered transactions" and shell companies "to deceive U.S. banks into processing transfers on behalf of sanctioned entities." Zarrab has said his business was legitimate.

Zarrab’s lawyer, Benjamin Brafman, didn’t immediately respond to a voice-mail message seeking comment on the decision.

The case is U.S. v. Reza Zarrab, 15-cr-867, U.S. District Court, Southern District of New York (Manhattan).

— With assistance by Benjamin Harvey

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