HBL’s New York branch fined $225 million

US financial services dept says bank fails to comply with laws and regulations

KARACHI: The Department of Financial Services (DFS) has fined Habib Bank and its New York branch $225 million for failure to comply with New York laws and regulations designed to combat illicit financial transactions, announced Financial Services Superintendent Maria T Vullo on Thursday.
The new order follows a 2016 DFS examination that found weaknesses in the bank’s risk management and compliance and the bank’s failure to undertake extensive remedial actions.
As a result of DFS’s most-recent findings, Superintendent Vullo has exercised her authority to expand the scope of an independent review of the bank’s operations.
In addition, Habib Bank has agreed to surrender its licence to operate the New York branch upon fulfilment of conditions outlined in a separate surrender order to ensure the orderly wind down of the New York branch.
A 2015 DFS examination found that Habib Bank’s compliance function had deteriorated even further, resulting in a December 2015 consent order that required the branch to undertake extensive remedial actions and engage an independent consultant to conduct a “look back” of the branch’s US dollar clearing transaction activity from October 1, 2014 through March 31, 2015.
The new consent order requires an expanded “look back” that requires Habib Bank to expand the scope of the original look back to cover the additional periods of October 1, 2013 through September 30, 2014 and April 1, 2015 through July 31, 2017.
The expanded lookback further requires Habib Bank to continue to engage the independent consultant, previously approved by the Department, to conduct this broadened review, until completion even after the licence surrender process is completed.



HBL’s view
Earlier, HBL said in a statement that it had been operating a small branch in New York since 1978, which mainly offered US dollar clearing services.
The bank said despite its sincere and extensive remedial measures over the last two years, DFS was still not appreciating or recognising the significant progress that HBL had made at its New York branch.
HBL said it would vigorously contest the proposed penalty in the scheduled administrative hearing and the courts of law in the United States, as being unjustified, capricious, unreasonable, not supported by facts or law and as being time barred.
HBL has also voluntarily decided to close its business in New York in an orderly manner and DFS has allowed the bank to submit a voluntary application for orderly winding down its New York business. “Steps to formalise this will commence shortly,” HBL said.
“There will be no material impact on HBL’s business outside of the United States and HBL will continue to service the requirements of its domestic and international customers including for their US dollar business.”