PAKISTAN FIRM’S NEW YORK OFFICE CLOSED AFTER FINANCE CONCERNS
BANKING regulators in the US ordered Pakistan’s Habib Bank to shut its New York office after nearly 40 years, for repeatedly failing to heed concerns over possible terrorist financing and money laundering, officials said last Thursday (7).
Habib, Pakistan’s largest private bank, neglected to watch for compliance problems and red flags on transactions that potentially could have promoted terrorism, money laundering or other illicit ends, New York banking officials said.
The state’s Department of FFinancialServices, which regulates foreign banks, also slapped a $225 million fine on the bank, although that is much smaller than the $629.6 million penalty initially proposed.
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.
New York regulators said Ha-bib facilitated billions of dollars of transactions with Saudi pri-vate bank, Al Rajhi Bank, which reportedly has links to al Qaeda, and failed to do enough to ensure that the funds were not laundered or used for terrorism.
“DFS will not tolerate inade-quate risk and compliance func-tions 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,” DFS Superintendent Maria Vullo said.
“The bank has repeatedly been given more than sufficient opportunity to correct its glaring deficiencies, yet it has failed to do so.”
Habib permitted at least 13,000 transactions that were not sufficiently screened to ensure they did not involve sanctioned countries, the agency said.
And the bank improperly used a “good guy” list to rubber stamp at least $250 million in transactions, including those by an identified terrorist and an international arms dealer, regulators said.
In an August letter to the Paki-stan Stock Exchange, Habib company secretary Nausheen Ahmad called the proposed fine of $629.6 million “outrageous” and “capricious” and said the bank had decided to close its New York operations “in an or-derly manner.”
But DFS said Habib will have to surrender its license after it meets the agency’s require-ments. “DFS will not stand by and let Habib Bank sneak out of the United States,” Vullo said.
HBL said last month that it will “vigorously contest” the fine in US courts, adding that there will be no “material impact on HBL’s business outside of the United States”.
HBL was founded back in 1947 and now has over 40 per cent of market share in Pakistan’s bank-ing sector.
It was part-privatised in 2004, with the Agha Khan Foundation buying the bulk of the shares.
In April 2015 the Pakistan gov-ernment approved divesting all of its state-owned shares in HBL for $1.02 billion, in the country’s largest-ever equity offering.
It had received a licence to open a branch in China last year, making it the first south Asian lender to operate in the world’s number two economy.
It currently has more than 1,700 branches in Pakistan and an international network spread over 25 countries. (AFP, Reuters)