WASHINGTON -  The New York State Department of Financial Services said on Thursday it had fined Pakistan’s Habib Bank and its New York branch $225 million for failures to comply with laws and regulations designed to combat illicit money transactions. The bank was also ordered to surrender its licence to operate in the state, effectively removing it from the US financial system.

The DFS statement followed an announcement by the regulator last month that it was seeking to fine Pakistan’s biggest lender, known as HBL, up to $630 million for “grave” compliance failures relating to anti-money laundering and sanctions rules at its only US branch.

The enforcement action was brought following a 2016 review during which the department said it found “weaknesses in the bank’s risk management and compliance” which bank management had failed to address.

“The bank has repeatedly been given more than sufficient opportunity to correct its glaring deficiencies, yet it has failed to do so,” Financial Services Superintendent Maria Vullo said in the statement.

“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 bank put through thousands of poorly screened transactions, the DFS said, including for people on a “good guy” list at the bank that included an identified terrorist, an international arms dealer and an Iranian oil shipper.

“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 Maria Vullo.

Officials at Habib Bank, which is listed in Karachi, were not immediately available for comment outside normal working hours.

The bank disclosed last month that it was in negotiations with the DFS regarding the potential fine and would also shutter its New York branch.

Nausheen Ahmad, the bank’s company secretary, said in a statement at the time that the DFS did not recognise “the significant progress that HBL has made at its branch in New York” and that the bank would vigorously contest the proposed fine in US courts.

The bank also said the closure of its New York operation would have no material impact on its business outside the United States.

As per authorities, Habib Bank repeatedly violated the terms of a 2006 agreement in which it promised to improve its internal controls, resulting in a 2015 order that called for the bank to hire an independent consultant to review its dollar-clearing activities, the regulator said. In a follow-up examination by DFS in 2016, Habib received the lowest rating.

The agreement calls for Habib Bank’s outside monitor to review its dollar-clearing transactions back to 2013, as part of an orderly wind-down of Habib’s New York branch. The bank announced on Aug 28 it was closing the branch.

DFS’s most recent investigation found that the bank handled billions of dollars in transactions with a Saudi private bank, the Al Rajhi Bank, which has reportedly been linked to the Al-Qaeda, without adequate anti-money laundering controls. It failed to adequately identify some of the Saudi bank’s customers, the department said.

The bank’s “good guy” list consisted of customers who the bank claimed presented a low risk of illicit transactions. It permitted at least $250 million in transfers to people on the list without screening, the New York regulator said.

This news was published in The Nation newspaper. Read complete newspaper of 08-Sep-2017 here.