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Bloomberg
New York’s banking regulator ordered Habib Bank Ltd. to pay $225 million and surrender its license to operate in the state, effectively removing Pakistan’s largest lender from the US financial system.
Managers in Habib’s branch office in Manhattan failed for more than a decade to shore up weak anti-money-laundering controls and sanctions compliance, New York’s Department of Financial Services said in orders issued. The bank put through thousands of poorly screened transactions, the DFS said, including for people on a “good guy†list at the bank that included an identified terrorist, an international 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 DFS Superintendent Maria Vullo. “The bank has repeatedly been given more than sufficient opportunity to correct its glaring deficiencies, yet it has failed to do so.â€
Habib Bank repeatedly violated the terms of a 2006 agreement in which it promised to improve its internal controls, resulting in a 2015 order that called for the bank to hire an independent consultant to review its dollar-clearing activities, the regulator said. In a follow-up examination by DFS in 2016, Habib received the lowest rating. The agreement calls for Habib Bank’s outside monitor to review its dollar-clearing transactions back to 2013, as part of an orderly wind-down of Habib’s New York branch. The bank announced on Aug. 28 it was closing the branch.
Habib Bank “believes that the opportunity to resolve this matter consensually at this time is in the best interests of its investors, shareholders and customers,†Matthew Biben, a lawyer for the bank, said.
The bank agreed to pay the final penalty, which was lower than the maximum $630 million proposed by the New York regulator. Habib Bank, headquartered in Karachi, is the Pakistan’s largest bank, with $24 billion in total assets, according to DFS. The New York branch has been licensed by DFS since 1978.