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Pakistan's Habib Bank under US scanner in money laundering case, faces $630 million fine

Pakistan's Habib Bank came under the radar of New York's state Department of Financial Services over financial practices in December 2015. Photograph: (Reuters)

WION Web Team New York, NY, United States Aug 29, 2017, 04.09 AM (IST)

Pakistan's Karachi based Habib Bank on Monday shut down its US operations after the New York State Department of Financial Services (DFS) accused the bank of  “grave” compliance failures relating to anti-money laundering rules and sanctions.

Pakistan's largest Bank is facing upto $630 million fine by DFS but in a letter to Pakistan Stock Exchange on Monday, the bank said: "The DFS is still not appreciating or recognising the significant progress that HBL had made at its branch." 

The Bank felt the penalty was "unjustified, capricious and unreasonable".

Xinhua news agency reported the Bank has decided not only to contest the fine in court but close its operations in New York with the DFS allowing it to submit a withdrawal operation.

The fine and the latest controversy is a big blow to the Bank which aimed to expand its US operations after spreading its branches in over 25 countries around the world.

The Bank founded in 1941 is Pakistan's first commercial bank. The bank was nationalised in the 70s and privatised in 2003 after the Aga Khan Fund acquired a controlling stake. Habib Bank expanded its operations in the UK in the 60s and opened branches in Mauritius,  UAE and Zurich in the same period.

"State Bank of Pakistan reiterates its determination to protect the interests of depositors and to protect the health and safety of the country's banking system," Habib Bank said in a statement.

The DFS said in a filing that its investigation had found that HBL held a US clearing account with Saudi's largest private bank Al Rajhi, which has been linked in the media and by the US Senate to al Qaida, AFP reported.

The regulator also found instances of "wire-stripping", where a bank deliberately strips out information related to a payment, such as an originator or beneficiary, that may raise suspicions, AFP report added.

New York has imposed strict anti-money laundering regulations since 2015, and the DFS has pursued an aggressive enforcement strategy against foreign banks for anti-money laundering control lapses, these include Agricultural Bank of China, Mega International Commercial Bank of Taiwan and National Bank of Pakistan.

The Bank has made it to the Forbes Global 2000 list a number of times.

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