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The Habib Bank Limited has on Monday announced its decision to wind up operations in New York following intimation from the state's financial regulator that it seeks to impose a hefty penalty of nearly $630 million on the bank, it has been learnt.
The bank has decided to contest in US courts the notice sent by New York State Department of Financial Services (DFS) about the imposition of a civil monetary penalty amounting to $629,625,000, read a letter filed by HBL to Pakistan Stock Exchange, a copy of which is available with Dawn.com.
The case stems from 2015, when US authorities moved against the bank after finding deficiencies in the risk management and Bank Secrecy Act/Anti-Money Laundering compliance programme at HBL’s New York branch.
"Despite HBL's sincere and extensive remediation measures, DFS is still not appreciating... the significant progress that HBL has made at its branch in New York," read the letter filed by the bank.
"HBL shall vigorously contest this [order] in the scheduled administrative hearing and the courts of law in the United States."
The US Federal Reserve had barred HBL from conducting any dollar-clearing transactions or accepting any new accounts for US dollar clearing in December, 2015. However, HBL had clarified at the time that it maintains its US licence and would continue to provide services as usual.
The HBL had said that during an examination, the US regulators found deficiencies in the risk management and BSA/AML compliance programme at HBL’s New York branch and, subsequently, escalated the enforcement actions from the “written agreement” to a “consent order” in the case of New York State Department of Financial Services and a “cease and desist order” in the case of Federal Reserve Bank of New York.
The order by US regulators had "impose[d] certain additional requirements to remediate on the branch and provide mechanisms for enforcement if the remediation is not met”, a press release issued by HBL said at the time.
The banking circle took the situation seriously and called it a bad omen for the country as well as the banking industry.
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On DawnNews
Aug 28, 2017 02:16pm
looks like unofficial sanctions have started.
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Aug 28, 2017 02:19pm
It's appeared that another Pakistani bank involved in white collar crime and corrupt practices (possibly money laundering activities). These type of incidents put Pakistan in disgraceful position, and, as a result, its citizens are treated suspiciously and disrespectfully!
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Aug 28, 2017 02:22pm
No sir, this investigation statrted in 2015. Lot of US and Overseas banks had been fined in billions in the past few years. It appears this is another way of extracting tax from big financial institutions. In HBL case if it is correct than it will drive the bank towards insolvency.
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Aug 28, 2017 02:23pm
This is a non-issue and can be managed quite easily by ensuring all CPEC loans are routed through the New York branch of the HBL. The DFS shall than happily consider reducing the penalty to nearly a third of the current $630m. This $310m can then be written off by the investors as cost of doing business with their strongest all weather friend.
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Aug 28, 2017 02:30pm
None of us know the full detail of the case, therefore, any positive or negative comments are pre mature.
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Aug 28, 2017 02:32pm
Old US tactic to grilling their old friends when US is not in need of them.
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Aug 28, 2017 02:46pm
Very sad.
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Aug 28, 2017 02:49pm
God that i left HBL long before. It was good for nothing.
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Aug 28, 2017 02:55pm
They'll have to pay if they want to maintain their correspondent bank relationship. Otherwise they will be locked out of the international financial system.
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Aug 28, 2017 02:55pm
The noose is slowly starting to tighten. Yes people continue living in denial.
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Aug 28, 2017 03:03pm
Great job...
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Aug 28, 2017 03:04pm
Under the prevailing circumstances, what else can the Habib Bank Limited do?
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Aug 28, 2017 03:05pm
I am Umair Ayub, it's not just banks but also the companies based in US like Arthur Lawrence & ZT Wealth that are now being scrutinized by US officials on this. Their bank accounts have been seized and they aren't able to pay anything at all.
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Aug 28, 2017 03:09pm
Habib bank should have known it cannot run operations in the US the way it does in Pakistan. Money laundering is a serious offence under US law.
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Aug 28, 2017 03:18pm
Good. Open your branch somewhere else and Inshallah you will prosper.
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Aug 28, 2017 03:23pm
Is it true? Its really shocking news.
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Aug 28, 2017 03:33pm
@ali they learnt these tricks from you only...
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Aug 28, 2017 04:17pm
@Mazhar Abbas What world do you live in ?
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Aug 28, 2017 04:27pm
Specter of the notorious BCCI all over again??
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Aug 28, 2017 04:29pm
Shocking for huge penalties.
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Aug 28, 2017 04:30pm
@Anti-Corruption_Pakistani Yes , it is warning to banking system of the bank.
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Aug 28, 2017 04:38pm
The real culprits are the executives in HBL who are huge gob smaking salaries, perks and gold plated pensions. The bank should recuperate these loses by forfeiting their pensions.
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Aug 28, 2017 04:39pm
Actual truth is that this bank was under the radar for quite some time regarding money laundering and transferring funds to banned organizations.
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Aug 28, 2017 04:47pm
As usual, the USA is trying to punish a Pakistani entity. It's all part of the insanity of Donald Trump's administration. Why shouldn't Pakistan also close down US businesses here?
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Aug 28, 2017 04:52pm
Same BCCI script in action!
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Aug 28, 2017 05:17pm
Serious reputation risk for HBL. A testing time for its senior management to deal with this crisis.
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Aug 28, 2017 05:22pm
Remember Bank of Credit and Commerce International? This is an encore.
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Aug 28, 2017 05:36pm
100% sanctions and US attempting to control pak banking by force. HBL provides fantastic services above global standard and finding that they risk such fines to protect their pakistani customers is also something to be proud of.
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Aug 28, 2017 05:47pm
@Mazhar Abbas HBL is shutting down its US branch so obviously it is BOT a non-issue.
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Aug 28, 2017 05:50pm
@Syed Anjum Ali nothing to do with Trump. Investigating was going on since 2015
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Aug 28, 2017 05:52pm
@Abid they are not risking fines to protect Pakistani customers in IS. They are shutting the New York branxh
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Aug 28, 2017 05:58pm
HBL should have closed branch operations when they first received the regulators' notice. I doubt litigation will help.
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Aug 28, 2017 06:27pm
Our people & institutions should learn to follow law of the land where they do business. The action against HBL started in 2015 & has nothing to do with current stalemate b/w two nations. We should be reasonable in our response.
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Aug 28, 2017 06:53pm
So, now Overseas Pakistanis in the USA, can bank through with The Bank of China and HSBC. The latter, is known to be very efficient in transferring funds internationally.
The Bank of China, offers typically low interest rates, but maybe our leadership can work out a special package and deal for our Overseas Pakistanis, thereby ensuring that the flow of expatriate dollars, so urgent for our economy in these trying times, can continue unhampered.
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Aug 28, 2017 08:02pm
If a foreign bank competes with US bank on its own soil, this is the price it pays. It gets driven out unless its a large international bank. Free market, what free market. It's protectionism in disguise.
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Aug 28, 2017 08:25pm
HBL is one of the leading banks in pakistan. this scenario would hamper the confidence of business community.
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Aug 28, 2017 08:41pm
@saqib ... Didn't you read the article? These violations of US banking practices goes back to 2015. Donald Trump was not even in office in 2015.
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Aug 28, 2017 09:59pm
Can some one tell us what was missing in HBL-New York Branch AML System ? i doubt that the branch was following simple AML-KYC ?
May be HBL NY branch did not have AML Transaction Monitoring System or they had AML-TSM but ignore to take action when AMLTSM identified or pointed out some suspicious transaction ?
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Aug 28, 2017 10:12pm
American and their hunger will never end, I hope justice is served
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Aug 28, 2017 10:14pm
@Anti-Corruption_Pakistani, did you read the news carefully, it is not about them involving in illegal activities, it is about not following SEC guideline to put the compliance system to make sure no illegal activity happens. If they would have involved in illegal activity their penalty would have been high with jail time for management. Issue is with their Security and Compliance management team for not following up ahead of time and keeping govt agencies happy.
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Aug 28, 2017 10:57pm
This is a great setback for HBL in particular but in general the big importers & exporters will suffer their businesses, as all their proceeds were transmitted via HBL NY Branch. All importers & exporters will now switch their a/c (s) to other banks. And HBL will get another financial dent at home. The HBL was perfectly functioning before privatization, people says it was privatize at low figures. The management after privatization behaved very arrogantly with small & medium size customers, and forced them to transfer their a/c(s) to smaller branches, and larger branches converted to 'corporate branch' I had an opportunity to discuss & defend the small customers a/c(s) stakes, but the senior bank officer spells were insulting & outrages, he dam care for small a/c holders. Before concluding I told the officer that small & medium customers will always pay you ,while your bank may get a major blow from corporate customers as big a/c means big dealings ,big loans and big defaults.
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Aug 28, 2017 11:09pm
Money laundering is not acceptable and will not be tolerated in the USA. Remember, you can do these illegal acts in Pakistan only.
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Aug 28, 2017 11:31pm
China and Russia need to take the lead and create a parallel banking system bypassing US hold on the world banking. This is the US financial nuclear bomb they seem to love and use lately. When will the world unite and stand up to the only rogue nation that abuses nations according to it's whims. There are many countries that don't like how another operates. Has anyone ever tried to muster a coalition to impose sanctions? Never.
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Aug 28, 2017 11:33pm
First Axact and now this HBL. Pakistanis are always involved in shady stuff.
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Aug 29, 2017 12:06am
All politics. Banks are the first ones who get screwed.
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Aug 29, 2017 12:13am
Good Riddance...!
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Aug 29, 2017 12:29am
@Mazhar Abbas You have little clue, what you suggest makes little sense.
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Aug 29, 2017 01:24am
From quite sometime US govt. is imposing UNFAIR penalties on many foreign companies such as Toyota, BP, etc. Message is simple, US is business unfriendly country. Do not invest your money in US, avoid business with US.
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Aug 29, 2017 05:05am
The case of HSBC was far worse in 20112/13 where about 23,000 money laundring cases were 'proved' and still they were penalized for a very small amount, whereas BCCI was isolated and closed for even a smaller fault.
It is called discrimination in my opinion.
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Aug 29, 2017 05:28am
@saqib Investigations started in Obama admin 2015
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Aug 29, 2017 05:54am
In Pakistan there almost all private Banks are indulging in such type of activities and bear in their records innumerable violations to the set principals of Banking Practice.I have in my knowledge a Bank where its Management exercised draped eyes over the bungling and corrupt practices by virtue of paying fake bills that were applied on Govt accounts by its middle Management where working executives and officials bagged large amount of money through various maneuverings ,manipulations and other activities by paying share to all those who facilitated these fraudulent conversions.
In Pakistan you may criticize Senior Bureaucrats,Pak Army Generals and many other officials of all departments but Bank Managements enjoy complete immunity of media,think tanks and regulators.
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Aug 29, 2017 06:25am
Not only Pakistan government and army,even private banks in Pakistan are asked to do more.
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Aug 29, 2017 07:17am
@ali friend ?
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Aug 29, 2017 08:09am
@Anti-Corruption_Pakistani "white collar crime and corrupt practices (money laundering activities). These type of incidents put Pakistan in disgraceful position"
There are other kinds of incidents that put Pakistan in a disgraceful position everywhere, like the establishment decisions over 3-4 decades. But then we cannot publish those, can we?
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Aug 29, 2017 09:35am
Bad news, I hope HBL can sustain this loss and look for other markets
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Aug 29, 2017 10:35am
Currently there is not a single Pakistani bank that can do business in USA. Us authorities purposely go after Pakistani banks and impose so many restrictions that it is almost impossible to carry out there operations. There paranoia is of course just that, paranoia. They simply want that people who want to send money to Pakistan should only be able to use western companies like western union. It is really as simple as that. A decade back there were several options to send money to Pakistan. These days, there is zero official Pakistan remittance options. All three - UBL, HBL and National bank - all used to have remittance operations and all three have been forced to terminate it. Perhaps this is something the Pakistani government needs to look into.
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Aug 29, 2017 01:01pm
@JDSHAMI Obviously how the US will accept money laundering in their country ! (I am not implying that HBL did any wrongdoing) But they will surely accept the money laundered from other countries like Pakistan etc ! Have you ever seen the US or any other developed country returning the laundered money to the rightful owners (public) from where they received the funds ? and why would they return that amount when their economies are truly dependent on that money ?
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Aug 29, 2017 06:28pm
Why people are so obsessed that the investigations started in 2017? Lots of investigations started in last few years. Important thing is that the current Trump administration decided to pick this one up and impose an unreasonable heavy fine which cannot be without political reasons.
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Aug 29, 2017 07:02pm
The CEO and management team has failed me and other shareholders of HBL, customers and the country at large. This Mangement team needs to resign.
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Aug 29, 2017 10:09pm
@Anti-Corruption_Pakistani
Agree. The management team needs to be held accountable for this severe mismanagement. I'm surprised the CEO is still in office. Shameful dereliction of duty.
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Aug 29, 2017 10:37pm
@Mazhar Abbas
Hardly a non-issue. At best it's two years of profits denied to the shareholders by an incompetent management. At worst it's a another huge dent in the reputation of the bank and the country. As I have commented else where the entire management team must be fired and their bonouses for the previous 5 years clawed back.
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Aug 30, 2017 12:43am
@Muhammad Arshad
To the best of my knowledge, HBL New York did not contribute anything significant to the HBL bottom line. So HBL need not do anything to replace the loss of business from NY. The loss of reputation and the potential $630 million fine represents circa two years of profit for the whole HBL !!!
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Aug 30, 2017 01:16am
@Nisar Khan "From quite sometime US govt. is imposing UNFAIR penalties on many foreign companies such as Toyota, BP, etc"
Please review penalties on Citibank, Bank of America and Wells Fargo who are all American banks.
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Aug 30, 2017 01:18am
The message US is giving to all International Banks is very obvious, "Do not do business in America".
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Aug 30, 2017 01:19am
@Karachi Wala "The case of HSBC was far worse in 20112/13 where about 23,000 money laundring cases were 'proved' and still they were penalized for a very small amount,"
HSBC was fined $1 billion and had a consent order.
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Aug 30, 2017 05:03am
Pakistan should just re-nationalise the Habib Bank Limited (HBL) and put (businessman) Nawaz Sharif, Gen. Pervez Musharaf and master cricket player and coach Imran Khan in charge ....
They will all keep a system of checks and balances, ... on each other.
Even the biggest British bank, the Hong Kong and Shanghai ( HSBC ) could not survive THEIR Internal Revenue Service and U. S. Dept. of Justice fines, and folded up business in the USA. What hopes does the Habib bank have ?!??
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Aug 30, 2017 06:20am
@Naseem Ahmad
USA is trying to rob the banks
And make a lot of money. Day light robbery.
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Aug 30, 2017 10:20am
@Pakistani Pakistan govt. should also ban US financial institutions like Western Union to operate in Pakistan.
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Aug 30, 2017 10:40am
HBL should recover all the money looted by it's officers in New York in bad loans purposefully made for kickbacks, neatly pushed under the rug by NAB. People who steal a poor country's money, which amounts to taking morsels of food from the mouth of the already starving you live like Kings in Manhattan, should be put in notice and their assets in Pakistan expropriated
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Aug 30, 2017 11:18pm
Why many commentators seeing this as US-PAK relations issue and attributing motives. The knowledge and information possessed by average readers. Most comments just reflecting prejudice. Sometimes we have to take the reasons given by regulator on face. Value and its possible that bank did actually committed irregularities.
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Nov 23, 2018 08:14am
@Pak political analysis, this comment of yours holds good for Indian banks also, where large corporate loans disbursed @ cost of small depositors and taxpayers money , the recovery rate only 80 percent of these dubious loans resulting in sharp rise in NPS figures of these PSU as well as Pvt. Banks.We never know the intention of Govts. in our countries ,while it compromises with the punishment to be extended to such inefficient banks and their top officers.
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