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


The New York state government on Thursday said Pakistan's Habib Bank had agreed to pay $225 million (Rs 1,436 crore) in settlement for infringing laws created to combat illicit transfers of money, Reuters reported.

The review found that Habib had facilitated billions of dollars of transactions with a Saudi private bank, Al Rajhi Bank, which is believed to be linked to al Qaeda.

HBL disclosed it was in negotiations with the DFS last month and said the potential fine and closure of its NY branch would have no material impact on its business outside the United States.

Habib Bank, which has operated in the U.S. since 1978, was ordered to tighten its oversight of potentially illegal transactions in 2006 but failed to comply.

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 United States branch. Give Pak due credit, says China Meanwhile, China said on Friday that Pakistan has done its "best" to combat terrorism and "some countries" must give it full credit for that, days after Beijing backed the BRICS's declaration which named Pakistan-based terror groups like LeT and JeM for the first time. The amount, however, is much smaller than the penalty initially imposed on the bank- $629.6 million. In 2006, the bank was ordered to stay alert on potentially illegal transactions.

The bank was also ordered to surrender its license to operate in the state, effectively removing it from the USA financial system.

"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", Bloomberg quoted DFS Superintendent Maria Vullo as saying. The list featured Pakistan-based terrorist groups, an global arms dealer, and the former Deputy Prime Minister of Iraq under Saddam Hussein regime.

HBL has also made a decision to shut down its NY branch's operations which was established there since 1978. The New York branch of the bank will also be shut down as part of the settlement. DFS said the banks will have to surrender its license.

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".