US orders Pakistan’s Habib Bank to shut shop in New York over terror funding allegations

New York, Sep 08 : Pakistan’s largest private bank – Habib Bank Limited (HBL) – was ordered to shut down its New York office over possible terror funding and money laundering allegations.

The New York Department of Financial Services (DFS) passed the order on Thursday.

The banking regulator further announced a fine of USD 225 million on the bank and its New York branch for failure to comply with New York laws and regulations designed illicit financial transactions. Initially, the DFS proposed a penalty of $629.6 million.

Habib has operated in the United States since 1978, and in 2006 was ordered to tighten its oversight of potentially illegal transactions but failed to comply.

DFS investigation found that the bank facilitated billions of dollars in transactions with a Saudi private bank, the Al Rajhi Bank, with reported links to al Qaeda, without adequate anti-money laundering and counter-terrorist financing controls.

It further said that Habib Banl allowed for “at least 13,000 transactions to flow through the New York branch that potentially omitted information adequate to properly screen for prohibited transactions or transactions with sanctioned countries

The bank also used an improper “good guy” list – a list of customers who supposedly presented a low risk of illicit transactions – to permit at least $250 million in transactions without any screening, including transactions by an identified terrorist, an international arms dealer, an Iranian oil tanker, and other potentially sanctioned persons and entities

Financial Services Superintendent Maria T. Vullo announced the fine on September 7 after finding weaknesses in the bank’s risk management and compliance and the bank’s failure to undertake extensive remedial actions.

“In addition, Habib Bank has agreed to surrender its license to operate the New York branch upon fulfillment of conditions outlined in a separate Surrender Order to ensure the orderly wind down of the New York branch,” said a DFS release.

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