New York regulator fines Habib Bank $225 mln for compliance failure

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NEW YORK, Sept 8 (APP): New York’s banking regulator ordered
Habib Bank Ltd. to pay $225 million and surrender its license to
operate in the state, with Bloomberg News saying that the
move had effectively removed Pakistan’s largest bank from the
U.S. 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 on Thursday. The bank put through
thousands of poorly screened transactions, the DFS said.
The DFS would not tolerate inadequate risk and compliance
functions that may open the door to the financing of terrorist
activities, posing a grave threat to the people of the 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.”
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 in a written statement.
Habib’s shares snapped seven-days of losses and rose by the
5 percent limit, the most in more than two months.
Habib Bank, headquartered in Karachi, has $24 billion in
total assets, according to DFS. The New York branch has been licensed
by DFS since 1978.
The statement said DFS had initially proposed a civil penalty
of $630 million, which Habib described as “outrageous.”
The statement noted that Habib had voluntarily decided to close
its business in New York and that there would be “no material
impact” on its business outside the U.S.