KARACHI – One of the country’s biggest banks, Habib Bank Ltd (HBL) has agreed to pay a staggering $225m fine after out of court settlement with the Department of Financial Services (DFS) of New York State.
The fine, which is the largest ever imposed upon a Pakistani bank is liable to be paid within 14 days. The fine is still far smaller than the $630 million that the regulator had earlier assessed.
The New York State Department of Financial Services said in a statement that the fine was being imposed for failures to comply with laws and regulations designed to combat illicit money transactions.
The bank was also ordered to surrender its license to operate in the state, effectively removing it from the US financial system.
“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 in the 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.”
HBL permitted at least 13,000 transactions that were not sufficiently screened to ensure they did not involve sanctioned countries, the agency said.
In addition the bank improperly used a “good guy” list to rubber stamp at least $250m in transactions, including those by an identified terrorist and an international arms dealer, regulators said.
“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 Maria Vullo.
“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 U.S. soil and that DFS will still investigate the bank’s prior activities”, said the Superintendent of DFS.
On the other hand, Nausheen Ahmad, the bank’s company secretary, confirmed in a letter that HBL has settled the earlier penalty after which the charges are being dismissed.
‘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.
It bears mentioning that the said branch has been operational since 1978 and the settlement follows a notice by US financial department, Department of Financial Services, seeking to impose a penalty worth US$629,625,000”, last month.
At that time, HBL vowed to vigorously contest fine in the scheduled administrative hearing and the courts of law in the United States as ‘being unjustified capricious, unreasonable not supported by facts or law and as being time barred’.
The letter, written on August 28, was copied to the director of Surveillance, Supervision & Enforcement Department of Securities & Exchange Commission of Pakistan.
It further stated the penalty notice will not impose an impact on bank’s business outsides of the US.
Earlier in 2015, the only US branch of Pakistan’s largest bank Habib Bank Limited (HBL) had been slapped a strict enforcement order by United States Federal Reserve after significant breakdowns were identified in the branch’s anti-money-laundering program which was found to be not in compliance with US federal laws.
HBL had become the target of an enforcement action by DFS for 53 separate violations allegedly committed between 2007 and 2017.
HBL that enjoyed good repute internationally before the emergence of allegations declared a profit after tax of $327 million last year.
A hearing scheduled for Sept 27 has now been canceled since the matter has been resolved.