HBL fined $225m as US confused identity of Pakistanis with suspected persons, claims official

ISLAMABAD - A senior official of Habib Bank Limited (HBL) claimed on Wednesday that the US regulators misconstrued the identities of two Pakistanis with prohibited persons of Iraq and Iran, consequently slapping a hefty penalty of $225 million.

Speaking before members of the Senate Standing Committee on Finance, Nausheen Ahmad, head of the HBL legal department said that the two transactions that the US regulators said were conducted by Iraq’s former deputy prime minister under Saddam Hussein, Tariq Aziz, and an Iranian oil tanker company, Al-Ameen, were actually carried out by Pakistani individuals.

“Tariq Aziz is a very common name in Pakistan and Al-Ameen is a Pakistani trader based in Gujranwala. In our view these transactions were not ‘prohibited transactions’,” Ahmad told the committee which had summoned the State Bank of Pakistan (SBP) and the HBL officials to get a briefing on civil monetary penalty on New York branch of the bank.

The US had put the names of Iraq deputy PM and the Iranian oil tanker company on ‘Specially Designated Nationals and Blocked Persons List’, known as ‘SDN List’ and declared their transactions as suspicious and, as per the claims of bank official, the penalty was imposed in a mix up although Pakistani nationals were not prohibited.

https://en.dailypakistan.com.pk/pakistan/hbl-agrees-paying-225m-fine-after-settlement-with-us-regulator/

When members were apprised of the mixup, they posed another question as to why HBL management did not challenge the decision, knowing they could simply convince the US authorities and get away unscathed.

"Initially this option was considered but the bank later decided not to take any risk," Ahmed responded.

She continued that out of $150 billion worth of transactions, the US regulators highlighted about five transactions which, they said, should also have been reported.

"Some transactions were related to an account of Axact, which the bank subsequently suspended," she added.

On the occasion, the SBP’s Executive Director Banking Irfan Ali said the US decision was largely a “principled decision rather than a transaction-based decision”.

He maintained that the branch was operating under a written agreement since 2006 owing to adverse observations in the areas of risk management and Bank Secrecy Act.

“Under the agreement, the bank was required to strengthen controls in the areas of AML compliance, suspicious activity reporting, customer due diligence, training of staff and transactions monitoring system,” said Irfan Ali.

To a question by PTI’s senator Mohsin Aziz whether the HBL reported all suspicious transactions, the HBL’s Chief Risk Officer Rizwan Haider replied that the US regulators wanted that some other transactions should have also been reported.

“We made all possible efforts to improve the systems but unfortunately the US authorities said the bank management had not done much,” Haider claimed.

He observed that the US authorities’ decision to downgrade the bank in 2015 after escalating their enforcement action was a real surprise adding that the bank had initiated negotiations with the US authorities to end written agreement due to improvement in its systems.

He said HBL decided to engage with the Al Rajhi Bank of Saudi Arabia to ensure smooth flows of foreign remittances.

To this, SBP’s Executive Director Banking Irfan Ali added that the US regulators had termed the Al Rajhi as a high-risk client.

"Out of total $287 billion business of HBL’s New York branch, about $65 billion was with Al Rajhi bank" he noted.

It bears mentioning that in August this year, the New York Department of Financial Services had initiated a process to impose civil monetary penalty of up to $629.63 million but the HBL management had reached an out of court settlement and paid $225 million.

The US regulator in its order further claimed that the department’s investigation had identified nearly 200 additional instances of suspicious activity that were never identified or reported by the branch.

These transactions included a variety of suspicious characteristics, such as payments lacking economic purpose; instances of structuring; shell company activity and politically exposed person activity.