WASHINGTON/ANKARA (Reuters) - Turkey and the United States have discussed returning a jailed executive from state-owned lender Halkbank to Turkey where he can serve the rest of his sentence from an Iran sanctions-busting case, Foreign Minister Mevlut Cavusoglu said on Tuesday.

FILE PHOTO: A street vendor sells roasted chestnuts in front of a branch of Halkbank in central Istanbul, Turkey, January 10, 2018. REUTERS/Murad Sezer

In May, a U.S. court sentenced Hakan Atilla, an executive from Halkbank, to 32 months in prison for helping Tehran get around U.S. sanctions, in a case that has strained already tense ties between the NATO allies.

Halkbank has since faced potential U.S. fines in relation to the case.

Speaking to reporters following talks with U.S. Secretary of State Mike Pompeo in Washington, Cavusoglu said Halkbank had not violated any U.S. sanctions, adding that he had discussed what steps could be taken in the case during his talks.

“There is also the situation of Hakan Atilla being sent to Turkey. As part of bilateral agreements, he can serve the rest of his sentence in Turkey. We also evaluated what could be done on this issue,” Cavusoglu said.

Halkbank denies any wrongdoing and President Tayyip Erdogan has condemned the case as a political attack against his government, while his son-in-law, Finance Minister Berat Albayrak, said he did not expect the bank to face a fine.

Cavusoglu said there were two ongoing processes in the United States over Halkbank with one being run by U.S. District Court for the Southern District of New York and the other by the U.S. Treasury.

“The Halkbank case continues, as you know, at the court in New York and the Treasury. We also met with lawyers on this issue and exchanged ideas on what needs to be done and the steps to be taken,” Cavusoglu said.

Turkish daily Hurriyet reported that the federal court in New York had launched a second investigation against Halkbank and it could soon submit an indictment.

“On the Halkbank issue, there is a process under way here at the Treasury and the judicial process in the southern New York area. There is also a Justice Ministry aspect. ... The court is carrying out a process here, the Justice Ministry has a role in this as well,” Cavusoglu said.

“We discussed what we could do. On the other hand, in the process in the Treasury, it is about administrative decisions.” he added.

Erdogan earlier this month said he has discussed Halkbank’s case with U.S. President Donald Trump, saying the talks were on a “positive path.” He said Trump had told him that “he would instruct the relevant ministers immediately” regarding the Halkbank case, without elaborating.

However, Cavusoglu warned on Tuesday that the legal proceedings against Halkbank must be stopped.

“Since there was no evidence - and the jury couldn’t prove it either - these proceedings need to be stopped. Otherwise they will be politically motivated,” he said.

Strained ties between Ankara and Washington began to improve after U.S. pastor Andrew Brunson, who was on trial over terror-related charges in Turkey, was released last month.

The NATO allies remain divided on a host of other issues, including U.S. policy in Syria and Turkey’s request for the United States to extradite Fethullah Gulen, a cleric Ankara blames for organizing the 2016 abortive putsch. Gulen denies involvement.