NEW YORK (Reuters) - U.S. prosecutors on Tuesday charged an executive at a Turkish state-owned bank with participating in a multi-year scheme to violate U.S. sanctions against Iran, escalating a case that has added to tensions between the United States and Turkey.

Mehmet Hakan Atilla, a deputy general manager of Halkbank, is shown in this court room sketch as he appears in Manhattan federal court in New York, New York, U.S., March 28, 2017. REUTERS/Jane Rosenberg

Mehmet Hakan Atilla, a deputy general manager of Halkbank, is accused of conspiring with wealthy Turkish gold trader Reza Zarrab to conduct hundreds of millions of dollars of illegal transactions through U.S. banks on behalf of Iran’s government and other entities in that country.

Atilla, a 47-year-old Turkish citizen, looked somber as he appeared at a brief hearing before U.S. Magistrate Judge James Francis in Manhattan, a day after being arrested at John F. Kennedy International Airport.

It was unclear whether Atilla has hired a lawyer or made any bail application. He will remain in federal custody for now.

The charges expand a case that has drawn criticism from Turkish President Tayyip Erdogan, who has said he believed U.S. authorities had “ulterior motives” in prosecuting Zarrab.

Atilla was arrested on the same day it was revealed that Zarrab, the gold trader, had added former New York City Mayor Rudolph Giuliani, a confidante of President Donald Trump, to his legal team.

Turkey’s relations with the United States deteriorated under former President Barack Obama, and officials in Ankara had been hoping for improvement under Trump.

Turkish officials contacted by Reuters on Tuesday said they had no information on the arrest.

FAKE INVOICES ALLEGED

According to a criminal complaint, Atilla worked with Zarrab and others from 2010 to 2015 to conceal Zarrab’s ability to supply currency and gold to Iran through a Turkish bank, without subjecting the bank to U.S. sanctions.

As part of that scheme, Atilla and Zarrab used front companies and fake invoices to trick U.S. banks into processing transactions disguised to appear as though they involved food, and thus were exempt from U.S. sanctions, prosecutors said.

“United States sanctions are not mere requests or suggestions; they are the law,” Acting U.S. Attorney Joon Kim in Manhattan said in a statement.

Atilla was charged with conspiring to commit bank fraud, which carries a maximum 30-year prison term, and violating U.S. sanctions, which carries a maximum 20-year term.

Atilla had been in New York for the latest in a series of investor meetings ahead of a planned Halkbank dollar-denominated subordinated bond issue, Turkish bankers said.

Zarrab, a dual national of Iran and Turkey, had been arrested in 2013 in a corruption probe of people with close ties to Erdogan, who was then Turkey’s prime minister.

In questioning that case, Erdogan said in September that prosecutors were trying to implicate him by referring in the indictment to Zarrab’s donations to an educational charity with which Erdogan and his wife were affiliated.

Zarrab has denied the charges in his case, and faces an Aug. 21 trial. He was arrested on March 21, 2016 in Miami while en route to Disney World with his wife and daughter.

TILLERSON VISIT TO ANKARA

Ties between the United States and Turkey have been strained by U.S. support for Kurdish militia fighters in Syria, and the presence in the United States of Turkish cleric Fethullah Gulen, whom Ankara blames for last July’s failed military coup.

U.S. Secretary of State Rex Tillerson is scheduled this week to make a one-day visit to Ankara, where talks with Erdogan will focus on Syria, senior U.S. officials said on Monday.

In a court filing on Monday, Kim questioned whether Zarrab’s legal team could include Giuliani and former U.S. Attorney General Michael Mukasey, who work for law firms that also represent some of the alleged U.S. bank victims.

Another lawyer for Zarrab said Giuliani’s and Mukasey’s roles would not require them to appear in court.

Kim later said his understanding was that both will remain “involved in efforts to explore a potential disposition of the criminal charges in this matter.”

The case is U.S. v. Atilla, U.S. District Court, Southern District of New York, No. 17-mag-02197.