ALBANY, N.Y.—The New York State Department of Financial Services (DFS) said it is seeking to fine Habib Bank Ltd, Pakistan’s biggest lender, up to $630 million for “grave” compliance failures relating to anti-money laundering rules and sanctions at its only U.S. branch.
If imposed, the penalty on Habib Bank (HBL) would be the largest-ever faced by a Pakistani financial institution, Reuters reported.
Karachi-listed HBL plans to surrender the foreign bank license for its New York branch, according to the DFS, which intends to expand its review of the bank’s transactions. The DFS said in a filing that HBL’s compliance was “dangerously weak” and that “serious and persistent” failings found at its New York branch appeared to affect the entire Habib banking enterprise, posing “grave risks” to the banking system, Reuters reported.
Nausheen Ahmad, the bank’s company secretary, said in a statement on Monday that DFS did not recognize “the significant progress that HBL has made at its branch in New York” and that the bank would vigorously contest the proposed fine in U.S. courts, Reuters said.
The DFS said in a filing that its investigation had found that HBL held a U.S. clearing account with Saudi’s largest private bank Al Rajhi, which has been linked in the media and by the U.S. Senate to Al Qaeda and the financing of extremism. The regulator also found instances of so-called “wire-stripping,” where a bank deliberately strips out information related to a payment, such as the originator or beneficiary, that may raise suspicions, Reuters said.