Maria Vullo, Superintendent of the New York State Department of Financial Services (NYLJ/Rick Kopstein)
Pakistan-based Habib Bank Ltd. and its New York branch were fined $225 million for failing to comply with state anti-money laundering and anti-terrorism statutes, the Department of Financial Services announced Thursday.
DFS Superintendent Maria Vullo said in a statement that the bank has “repeatedly” been given “more than sufficient opportunity to correct its glaring deficiencies,” yet has failed to do so.
Headquartered in Karachi, Habib Bank is Pakistan’s largest bank, with $1 billion in total revenues in 2016 and $24 billion in total assets. The New York branch has been licensed by DFS since 1978, according to the department.
“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 Vullo.
The bank entered into a new consent order with DFS, after a review last year revealed continued risk management and compliance weaknesses despite the presence of prior agreements with the state dating back to 2006.
In an undated notice that appeared before today’s announcement by the DFS, Habib stated that, despite its “sincere and extensive remediation measures” taken since the latest consent decree was issued in 2015, “DFS is still not appreciating or recognizing the significant progress that HBL has made at its New York branch.” Faced with a departmental hearing with an “outrageous” maximum penalty from the DFS of almost $629.6 million, the bank said it has “voluntarily” decided to close its New York banking operations.
In her statement, Vullo appeared to reference the bank’s attempts when stating that the 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.”
According to the DFS, Habib, among other allegations, has continued to facilitate billions in transactions with a Saudi bank alleged to have ties to al-Qaida, while allowing at least 13,000 transactions to flow through its New York branch that may have not been properly screened for being prohibited.
The bank did, ultimately, consent to the terms of the agreement announced Thursday. On top of the fine, the bank has agreed to an orderly wind down of its banking operations, the surrender of its bank license that will end its U.S. operations, and the installation of a monitor.
In a statement, Habib’s counsel, Debevoise & Plimpton partner Matthew Biben, said the bank is “pleased” to have the matter dealt with ahead of its wind down.
“HBL believes that the opportunity to resolve this matter consensually at this time is in the best interests of its investors, shareholders and customers,” Biben said.