The New York Department of Financial Services (DFS) on Thursday announced a fine of USD 225 million on Pakistan’s Habib Bank Limited (HBL) and its New York branch for failure to comply with New York laws and regulations designed illicit financial transactions.
DFS Superintendent Maria T. Vullo emphasised that new consent order follows a 2016 DFS examination that found weaknesses in the bank’s risk management and compliance and the bank’s failure to undertake extensive remedial actions required by a 2015 consent order.
“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,” The Express Tribune quoted Vullo as saying.
“The bank has repeatedly been given more than sufficient opportunity to correct its glaring deficiencies, yet it has failed to do so. 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. 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 US soil and that DFS will still investigate the bank’s prior activities,” Vullo added.
Earlier, the bank facing a possible $630 million fine over compliance failures by its New York branch, admitted mistakes but denied any wrongdoing and said the penalty sought by US regulators was disproportionate.
Formerly Habib Bank Limited and now referred to as HBL Pakistan had said that it would fight all 53 points included in the charge sheet over suspicious transactions after the United States financial regulator imposed a penalty of nearly USD 630 million on its New York branch.
HBL Pakistan was penalised by the New York State Department of Financial Services (DFS) for deficiencies in risk management and for not adhering to the Bank Secrecy Act/Anti-Money laundering compliance programmes since 2015.
Speaking at a press conference, HBL Chief Executive Officer Nauman Dar had said the penalty has no logic. However, the bank will pay the penalty if it is in a “reasonable amount”. He did not elaborate what he meant by “reasonable amount,” The Dawn reported.
The negotiations were failed with the U.S. regulators regarding the issue as the bank doesn’t find any logic in penalising the branch 2006 onward, he added.
The bank had also announced that it would close its branch in New York after the United States financial regulator imposed a penalty of nearly USD 630 million.
The bank had said that it will contest the DFS notice in court. The civil monetary penalty is to the tune of USD 629,625,000 read a letter filed by HBL to the Pakistan Stock Exchange.
“Despite HBL’s sincere and extensive remediation measures, DFS is still not appreciating… the significant progress that HBL has made at its branch in New York,” read the letter filed by the bank.
“HBL shall vigorously contest this [order] in the scheduled administrative hearing and the courts of law in the United States,” it added.
In December 2015, the U.S. Federal Reserve had restricted HBL from conducting any dollar-clearing transactions or accepting any new accounts for US dollar.
The banking circle took the situation seriously and called it a bad omen for the country as well as the banking industry.
HBL Pakistan is headquartered in Karachi.