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NY regulator imposes $225 mn fine on HBL Pak

09 September 2017

NY banking regulators said Habib Bank neglected to watch for compliance problems and red flags on transactions that potentially could have promoted terrorism, money laundering or other illicit ends.

DFS Superintendent Maria T Vullo emphasised that new consent order follows a 2016 DFS examination that found weaknesses in the bank's risk management and compliance and the bank's failure to undertake extensive remedial actions required by a 2015 consent order.

"The bank has repeatedly been given more than sufficient opportunity to correct its glaring deficiencies, yet it has failed to do so", Vullo added, saying the agency will not allow Habib Bank to easily sneak out of the US.

Earlier in a letter to Pakistan Stock Exchange in August, Habib Bank's company secretary Nausheen Ahmad had termed the United States dollars 629.6 million proposed fine as "outrageous" and "capricious".

Pakistan's largest private bank - Habib Bank Limited (HBL) - was ordered to shut down its NY office over possible terror funding and money laundering allegations.

According to reports, despite repeated warnings, Habib was not able to fund the financing of terrorists and money laundering in his favor.

The negotiations were failed with the United States regulators regarding the issue as the bank doesn't find any logic in penalising the branch 2006 onward, he added.

"HBL has received a notice in terms of which DFS seeks to impose and outrageous civil monetary penalty of up to $629.62 million", the statement added.

The Department of Financial Services, which regulates foreign banks, levied a fine of almost $225 million on the bank.

The bank allowed at least 13,000 transactions to flow through its NY branch without the information needed to properly screen for prohibited transactions or transactions with sanctioned countries, state officials revealed.

Habib Bank, Pakistan's biggest lender, will also allow DFS to investigate transactions processed by its NY branch from October 2013 to September 2014, and from April 2015 to July 2017.

The action against HBL comes at a time when Pakistan is facing growing pressure from the Paris-based Financial Action Task Force (FATF) to crack down on the financing of terror groups, especially the Lashkar-e-Taiba and its various front organisations.

It also showed that the bank used a "good guy" list - a list of customers regarded low risk - to rubber stamp at least US$250 million in transactions.

"Our liquidity, profitability and strength is enough to take the bank forward", he said.

NY regulator imposes $225 mn fine on HBL Pak