NY regulator fines Habib Bank $225mn for compliance failures

Randall Padilla
September 10, 2017

In a legal filing, DFS has alleged that the bank has failed to work according to the rules in anti money laundering cases.

It singled out HBL's connections with Saudi Arabia's largest private bank Al Rahji, which has been linked by the US Senate and in the media to al Qaeda and the financing of extremism.

The DFS penalty is being imposed in relation to "significant breakdowns" in the bank's New York Branch's risk management and compliance with the applicable federal laws, including anti-money laundering regulations in the US.

HBL, which has its headquarters in Karachi, is Pakistan's largest bank with total revenues of $1 billion in 2016 and $24 billion in total assets.

The bank was also ordered to surrender its license to operate in the state, effectively removing it from the USA financial system.

Habib has operated in the United States since 1978, and in 2006 was ordered to tighten its oversight of potentially illegal transactions but failed to comply.

The DFS, which has pursued several aggressive enforcement actions against foreign banks, had said HBL's compliance systems were "dangerously weak" and "serious and persistent failings" at its NY unit appeared to affect the entire enterprise.

New York branch of Pak bank allowed transactions by persons on US terror watch lists
Pakistan's Habib Bank to pay $225m New York fine

The regulator said it had also imposed a surrender order imposing conditions for the orderly wind down of Habib Bank's NY branch.

"DFS will not tolerate inadequate risk and compliance functions that open the door to the financing of terrorist activities that pose a grave threat to the people of this State and the financial system as a whole", said Superintendent Vullo. The expanded lookback further requires Habib Bank to continue to engage the independent consultant, previously approved by the Department, to conduct this broadened review, until completion even after the license surrender process is completed.

Habib has approved at least 13 thousand such transactions which encourage terrorist activities.

"DFS will not stand by and let Habib Bank sneak out of the United States without holding it accountable for putting the integrity of the financial services industry and the safety of our nation at risk", said Financial Services Superintendent Maria T. Vullo.

The regulators also said the bank used a "good guy" list to stamp almost $250 million in transactions including the one from an identified terrorist and an worldwide arms dealer, AFP reported.

According to a report, in terms of size, the penalty is nearly 30 per cent of bank's assets in the U.S. and the Middle East. DFS says that Habib Bank has to surrender its license and it cannot go from the stealthy America.

Other reports by AllAboutTopnews

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