United States ousts Pak's biggest pvt bank on terror funding fear

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The HBL branch also facilitated transactions worth billions of dollars with a Saudi private bank, the Al Rajhi Bank, with reported links to al-Qaeda, without "adequate anti-money laundering and counter-terrorist financing controls". Last month, the regulator had intimated HBL that it would impose the $629.6 million penalty after finding these deficiencies in the risk management and Bank Secrecy ActAnti-Money Laundering compliance programme at the NY branch.

The quantum of the fine, at $225 million, is substantial, coming in at more than two-thirds of last year's total profit after tax, but poses no risk to the stability of the bank or the country's financial system, as was feared.

This action has been taken because of terrorist funding on this Pakistani bank.

The bank was also ordered to surrender its license to operate in the state, effectively removing it from the U.S. financial system. In 2006, the USA authorities had ordered the bank to tighten its oversight of potentially illegal transactions but it failed to comply.

In orders issued Thursday, New York's Department of Financial Services said, managers in Habib's branch office in Manhattan failed for more than a decade to shore up weak anti-money-laundering controls and sanctions compliance.

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Habib has approved at least 13 thousand such transactions which encourage terrorist activities.

Officials also said Habib has repeatedly failed to correct "glaring deficiencies" in its internal safeguards meant to prevent money laundering and terror financing. 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. Not only this, the bank improperly used a "good guy" list to rubber stamp transactions worth at least Dollars 250 million in transactions, including those by an identified terrorist and an global arms dealer, AFP reported regulators as saying.

But the sum was "manageable" and the medium-term outlook for the bank should not be affected, it said in a research note.

At that time, HBL vowed to vigorously contest fine in the scheduled administrative hearing and the courts of law in the United States as "being unjustified capricious, unreasonable not supported by facts or law and as being time barred". Habib officials did not immediately respond to request for comment on DFS' actions.