THE JOURNAL OF EXPORT CONTROLS AND SANCTIONS

NEWS

Habib Bank ousted from New York after US regulator probe

September, 2017

Systemic failures allowed transactions by a known terrorist, an international arms dealer, and other possible sanctioned persons.

Habib Bank ousted from New York after US regulator probe

Pakistan’s Habib Bank Limited (‘HBL’) has been fined $225m by the New York Department of Financial Services (‘DFS’) and ordered to close its New York office. This is the first time the DFS has forced a bank to leave the city. The DFS first flagged up significant weaknesses in adherence to rules over anti-money laundering and terrorist financing in the New York office over a decade ago. A comprehensive review of Habib Bank’s operations was then triggered after non-compliance with a 2015 consent order. The review revealed that the bank’s compliance function was ‘dangerously weak’, and implicated risk-management strategies across the enterprise, including in the head office of HBL in Karachi.

‘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 Financial Services 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. 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 DFS’s recent investigation uncovered systemic failures, which included facilitating billion-dollar transactions with a Saudi private bank, the Al Rajhi Bank, which has reported links to al Qaeda. Other failings included allowing at least 13,000 transactions to flow through New York without the information required to screen for prohibited transactions or transactions with sanctioned countries, and the use of a ‘good guy’ list of supposedly low-risk customers, to permit at least £250m in transactions without any screening. This conduct allowed transactions by a known terrorist, an international arms dealer, an Iranian oil tanker and other possible sanctioned persons or entities.

 

More information can be found here:
http://www.dfs.ny.gov/about/press/pr1709071.htm

WorldECR’s sister publication, Trade Security Journal, reports on anti-money laundering and other terrorist financing issues and regulatory developments. For more information, visit www.tradesecurityjournal.com

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