May 20, 2018

US Shuts Down Pakistan's Habib Bank on Charges of Terror-Funding

09 September 2017, 02:51 | Kenneth Drake

Pakistan's Habib Bank to pay $225m New York fine

New York branch of Pak bank allowed transactions by persons on US terror watch lists

The New York Department of Financial Services (DFS) on Thursday announced a fine of Dollars 225 million on Pakistan's Habib Bank Limited (HBL) and its New York branch for failure to comply with New York laws and regulations designed illicit financial transactions.

Financial Services Superintendent Maria T. Vullo announced the fine on September 7 after finding weaknesses in the bank's risk management and compliance and the bank's failure to undertake extensive remedial actions.

"The bank has repeatedly been given more than sufficient opportunity to correct its glaring deficiencies, yet it has failed to do so".

Habib Bank claimed on Thursday that the fine and the closure of its NY operations would have no impact on its businesses in other countries.

The New York Department of Financial Services ordered Habib to surrender its license to operate in the state after discovering it failed to comply with a number of laws.

State financial regulators have fined Pakistan-based Habib Bank $225 million and forced it to shutter its New York City branch for failing to comply with New York's anti-terrorism and money laundering laws.

According to NY regulators, Habib Bank facilitated billions of dollars of transactions with a Saudi private bank - Al Rajhi Bank - which reportedly has associations with Al-Qaeda. In 2006, the United States authorities had ordered the bank to tighten its oversight of potentially illegal transactions but it failed to comply.

The review showed HBL had failed to properly screen thousands of transactions and had processed payments for known criminals and sanctioned entities, among other failings.

In addition the bank improperly used a "good guy" list to rubber stamp at least $250m in transactions, including those by an identified terrorist and an global arms dealer, regulators said.

The probe revealed that a "substantial number of parties were improperly included" on the list and that "at least $250 million in transactions have flowed through the New York Branch without any screening due to the apparent improper inclusion on the so-called "good guy" list".

The fine, which is the largest ever imposed upon a Pakistani bank by regulatory authorities, has to be paid within 14 days.

Until April 2015, Pakistan's government held a 42.5 per cent stake in HBL, the country's oldest bank.

"All charges have been dropped following this consent order", said a senior bank officer who did not wish to speak for attribution.

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