Habib Bank, Pakistan's largest private lender, has been ordered by the US banking regulators to shut down its New York office .
Habib Bank, Pakistan’s largest private lender, has been ordered by the US banking regulators to shut down its New York office after nearly 40 years of operation. The order came after Habib Bank repeatedly failed to pay heed to concerns over possible terrorist financing and money laundering, officials were quoted as saying in an AFP report.
Habib Bank has been operating in the US since 1978. In 2006, the US authorities had ordered the bank to tighten its oversight of potentially illegal transactions but it failed to comply. According to the report, Habib Bank had allowed 13,000 transactions that were not sufficiently screened to ensure they did not involve sanctioned countries, the agency said. Not only this, the bank improperly used a “good guy” list to rubber stamp transactions worth at least USD 250 million in transactions, including those by an identified terrorist and an international arms dealer, AFP reported regulators as saying.
According to report, Habib Bank neglected compliance concerns and red flags by authorities on transactions that allegedly promoted terrorism, money laundering or other illicit ends, New York banking officials said.
$225 million fine
The New York State Department of Financial Services (DFS), which regulates foreign banks, also slapped a $225 million fine on the bank. The fine is however much smaller than the $629.6 million penalty initially proposed.
Earlier in a letter to Pakistan Stock Exchange in August, Habib Bank’s company secretary Nausheen Ahmad had termed the USD 629.6 million proposed fine as “outrageous” and “capricious”. He said that the bank had decided to close its New York operations “in an orderly manner.”
No escape route
The United States would not allow Habib Bank to sneak out of US. DFS said the banks will have to surrender its license. “The bank has repeatedly been given more than sufficient opportunity to correct its glaring deficiencies, yet it has failed to do so,” Reuters reported Financial Services Superintendent Maria Vullo as saying in an official statement. “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,” Vullo added.
Reuters reported the DFS as saying that Habib Bank had agreed to pay $225 million to settle an enforcement action, which was brought against it for infringing laws designed to combat illicit money transfers.