By Syed Raza Hassan
ISLAMABAD (Reuters) – The New York State Department of Financial
Services (DFS) is seeking to fine Habib Bank Ltd nearly $630
million for deficiencies relating to compliance with state and
federal laws at its only U.S. branch, an official of the Pakistan
bank said on Monday.
If imposed, the penalty would be the largest ever faced by a
Pakistani financial institution.
The DFS could not immediately be reached for comment.
The compliance issues date to 2015 when the DFS told
Karachi-listed Habib Bank (HBL) to institute a series of reforms
pertaining to the bank’s policies for preventing illicit money
A December 2015 DFS statement said it had “identified significant
breakdowns” in the bank’s anti-money laundering compliance.
Nausheen Ahmad, the bank’s company secretary, said in a statement
on Monday that despite HBL’s “sincere and extensive remediation
measures, DFS is still not appreciating or recognizing the
significant progress that HBL has made at its branch in New
She said HBL has received a notice from DFS , which “seeks to
impose an outrageous civil monetary penalty of up to $629.625
HBL said that it will “vigorously contest” the fine in U.S.
courts, adding that there will be no “material impact on HBL’s
business outside of the United States”.
The statement added that HBL has submitted an application to DFS
to shut its New York operations.
STRICT RULES ON LAUNDERING
US federal and state laws require financial institutions to have
policies and procedures in place to detect and prevent illicit
money transfers. The measures include everything from screening
customers and reporting suspicious transactions to regulators.
New York State imposed strict anti-money laundering regulations
in 2015, which include requiring a bank’s chief compliance
officer to certify whether it maintains the types of systems
outlined in the rule to detect and prevent illicit money
Examinations of HBL’s New York branch at the time “identified
significant breakdowns” in the bank’s anti-money laundering
compliance efforts but the nature of the breakdowns was unclear.
In 2016, DFS “identified significant breakdowns” in risk
management protocols at the New York branch of another bank, the
National Bank of Pakistan, which was given 60 days to draw up an
improved monitoring and oversight proposal. That bank continues
to have a New York branch.
On Sunday, Pakistan postponed a visit by a U.S. acting assistant
secretary of state, officials said, as small protests broke out
against President Donald Trump’s accusations that Islamabad was
prolonging the war in Afghanistan.
(Writing by Saad Sayeed; Editing by Richard Borsuk)