New York Tells Top Pakistan Bank to Hire Laundering Monitor

  • Habib Bank must limit dollar clearing, new accounts, DFS says
  • Regulator's order issued without fines, details of findings

New York’s banking regulator ordered Habib Bank Ltd. to limit its dollar-clearing activities and hire a monitor to oversee its internal financial controls, saying Pakistan’s largest lender had failed to improve its operations in the U.S. since irregularities were flagged there almost a decade ago.

In an order Thursday, New York’s Department of Financial Services forbade the bank from taking on new correspondent accounts in the U.S. without written approval. It called for Habib to hire an outside monitor to oversee its anti-money laundering controls and its dollar clearing transactions, with an eye toward ensuring that none of those transactions violated U.S. sanctions imposed through the Treasury Department’s Office of Foreign Assets Control.

“We take our regulatory responsibilities seriously,” Manochere Alamgir, general manager of Habib’s New York branch, said in a phone interview. “We have already taken several steps to address and mediate those concerns and we intend to make sure everything gets done in a way that is acceptable to all the stakeholders, including the regulators.”

The consent order filed by DFS doesn’t identify any wrongful conduct, specify any transactions that violated sanctions laws or assess any financial penalty. It references a similar agreement between Habib and New York state in 2006, saying Habib didn’t “achieve full compliance with each and every provision” of the earlier agreement.

Habib Bank’s shares fell as much as 4.9 percent in trading Friday on the Karachi stock exchange, contributing to a 0.4 percent drop in the benchmark KSE100 Index. As of 10:10 a.m. in Karachi, the bank’s shares were down 4.7 percent.

As of earlier this year, Habib Bank was Pakistan’s largest lender, as measured by assets. The Pakistani government privatized the bank in April, selling its 42 percent stake for $1.02 billion.

The order resulted from a recent examination of the bank conducted by DFS and Federal Reserve Bank of New York, according to the state regulator.

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