HBL to face cases before NYDFS

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  • CEO says ‘ready to pay penalty’ if HBL has committed wrong

KARACHI: Habib Bank Limited (HBL) can easily pay the fine imposed by the New York Department of Financial Services (NYDFS), without hurting financial operations in Pakistan or other countries, said HBL Chief Executive Officer (CEO) and President Nauman Karamat Dar on Tuesday.

“We are in negotiations with NYDFS and it may impose a maximum penalty of up to $630 million on HBL or may reduce this amount,” the CEO said. The financial services department informed the bank about the details of the penalty on Friday evening, and the bank informed about it on Monday morning to the stock market, added the CEO.

The NYDFS said it is seeking to fine HBL, Pakistan’s biggest lender, by up to $630 million for “grave” compliance failures relating to anti-money laundering rules and sanctions, at its only New York branch.

“The case has been put on September 27 in which we will define the bank’s point of view before NYDFS, and will try to minimise the penalty imposed by them,” said Dar.

If the penalty imposed, it would be the largest-ever penalty faced by a Pakistan financial institution.

“Our bank did not commit such a big crime for which such a huge penalty is being imposed. It is just a minor regulatory mistake,” the CEO claimed. Therefore, he added, the bank has decided to face the case in NYDFS or any other court of law in the US.

Given the position of HBL, the CEO said, “We are a profitable, and the largest, bank of the country, therefore, the penalty will not impact us or the share holders,” and added, “We are already making our banking -transactions and remittances to Pakistan and others countries through other foreign banking channels.”

According to reports, HBL decided to surrender the New York branch license and DFS has given them 30-days to finalise and review the documentations process.

The CEO also said that the DFS was the sole regulator of the financial institutions in the state of New York and it found that “HBL’s compliance” was “dangerously weak” and posed ‘grave risks’ to them. He informed that the financial services department of the state was calculating transactions from 2007 to 2015, and found that there were only a few suspicious transactions.

He further claimed that HBL’s branch in NY was very small and that the banks had no depositor accounts there. “HBL NY branch was just a clearing branch and making transactions of remittances and other related payments to Pakistan and other parts of the world, and from the last two years, we have already handed over such payments to other foreign banks to avoid further legal matters,” added the bank’s executive.

The CEO further stated that after the announcement of penalties, we have informed the State Bank of Pakistan (SBP) first, which said that the potential fine posed no imminent threat to HBL or the country’s banking system.” The closure of HBL’s New York operation would have no material impact on the bank’s business outside the US, SBP claimed.

Dar, while replying a question, accepted that the branch was making transactions of Saudi’s largest private Al Rajhi Bank and SBP, and the Board of Directors knew about it. He added that the bank was making legal transactions of remittances of Pakistanis in US, and rest of the world, but when DFS informed HBL about irregularities in transactions, the bank discontinued such transactions of Bank Al Rajhi on July 10 this year.

HBL has struggled to comply with the agreement signed with NYDFS in May 2016, the CEO said, but NYDFS claimed that inspections in 2015 identified ‘serious deficiencies’ in the bank’s anti-money laundering controls.

HBL, majority-owned by the Pakistan government, subsequently agreed to introduce a range of measures to guard against money laundering and sanctions violations, including improving management oversight, tightening customer due diligence and suspicious transaction monitoring.