February 21, 2018

HBL agrees to pay $225m fine after settlement with USA regulator

10 September 2017, 02:28 | Frank Carlson

Akhtar Soomro Reuters

New York government fines Pakistan’s Habib Bank Rs 1,436 crore to shut down its US branch

The enforcement action followed a 2016 review in which the regulator said it found "weaknesses in the bank's risk management and compliance" that management had failed to tackle.

According to AFP reports which quoted NY banking officials, Pakistan's largest private bank HBL neglected to watch for compliance problems and red flags on transactions that potentially could have promoted terrorism, money laundering or other illicit ends. Subsequently, the DFS said in a regulatory filing in August this year that it wanted to fine the bank up to $630 million (Rs 4,022 crore) for "grave failures" in complying with anti-money laundering rules at its NY branch.

A sigh of relief swept through financial circles in the country on Friday as the difficulties of HBL, the country's largest commercial bank, ended with a fine and nothing more.

Habib Bank is learnt to have repeatedly violated the terms of a 2006 agreement to improve its internal controls. The state's Department of Financial Services (DFS), which regulates foreign banks, slapped a $225 million fine on the bank.

"Formal steps for the voluntary closure of HBL New York branch are underway" she mentioned in the letter addressed to General manager Pakistan Stock Exchange.

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DFS had said last month that he is considering imposing a fine of about Rs 40,000 crore on Habib Bank.

The regulators' agency said Habib allowed almost 13,000 transactions which were not screened properly. DFS did not have to take this tough step due to the lack of instructions from the Pakistani bank. 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. The bank, DFS said, put through thousands of poorly screened transactions, including for people on a "good guy" list at the bank that included an identified terrorist, an global arms dealer and an Iranian oil shipper.

"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.

In another instance, the DFS reported that the Habib handled payments involving individuals wanted by U.S. authorities, including an individual suspected of cybercrime and a Chinese weapons manufacturer subject to USA sanctions. Habib officials did not immediately respond to request for comment on DFS' actions.

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