Pakistan's Largest Bank Ordered to Close its US Branch for Compliance Failures

Dianna Christensen
September 10, 2017

United States banking regulators on Thursday ordered Pakistan's Habib Bank to shut shop in NY after nearly 40 years of operation.

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

The DFS said in a legal filing last month it was seeking to fine the bank, Pakistan's biggest lender, up to $630 million for "grave" compliance failures over anti-money laundering and sanctions rules at its only USA branch.

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

Habib, Pakistan's largest private bank, neglected to respond to compliance problems and red flags on transactions that potentially could have promoted terrorism, money laundering or other illicit ends, NY banking officials said.

"It bears mentioning that the said branch has been operational since 1978 and the settlement follows a notice by USA financial department, Department of Financial Services, seeking to impose a penalty worth US$629,625,000", last month.

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The decision is likely to deliver a significant blow to the bank's ambition to aggressively grow its operations outside Pakistan. In 2006, the bank was ordered to stay alert on potentially illegal transactions. "The bank has repeatedly been given more than sufficient opportunity to correct its glaring deficiencies, yet it has failed to do so", Financial Services Superintendent Maria Vullo said.

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

Habib has approved at least 13 thousand such transactions which encourage terrorist activities.

The findings of the department's investigation into HBL's operations, posted on its website, state the bank had apparently misused its "good guy" list - a list of customers who purportedly were screened and identified as "very low risk".

The United States would not allow Habib Bank to sneak out of US. Habib has operated in the United States since 1978.

"The terms of this Consent Order and the Surrender Order now agreed to by the bank will ensure that Habib's misconduct will no longer occur on USA soil and that DFS will still investigate the bank's prior activities", said the Superintendent of DFS.

Other reports by GlobalViralNews

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