"There is no specific wrongdoing," HBL Chief Executive Noman Karamat Dar told a press briefing. "Yes there are mistakes, but we are saying that the fine for these mistakes is disproportionate." HBL, which has announced it plans to surrender its US banking licence, has been embroiled in accusations over money-laundering compliance failures by its New York operation for more than a decade.
But the case has gained added weight amid growing political tensions between Washington and Islamabad following US President Donald Trump's demand last week that Pakistan do more to cut off sanctuaries for Afghan Taliban insurgents. The DFS, which has pursued several aggressive enforcement actions against foreign banks, has said HBL's compliance systems were "dangerously weak" and "serious and persistent failings" at its New York unit appeared to affect the entire enterprise.
It singled out HBL's connections with Saudi Arabia's largest private bank Al Rahji, which has been linked by the US Senate and in the media to Al Qaeda and the financing of extremism.
It has also identified instances of so-called "wire-stripping", whereby a bank deliberately strips out information related to a payment, such as the originator or beneficiary, that may raise suspicions. Dar admitted that the bank had made a mistake in not identifying some transactions but attributed it to human error.
The bank has said operations outside the United States would not be affected and it would contest any fine. Dar said whatever happened, there would be no long-term effect. "Our liquidity, profitability and strength is enough to take the bank forward," he said.
Until April 2015, government held a 42.5 percent stake in HBL, the country's oldest bank. But it sold its shares as part of a privatisation drive, bringing in more than $1 billion. The DFS, however, still lists HBL as majority owned by the government.
OUR STAFF REPORTER ADDS: Habib Bank Limited (HBL) has decided to defend itself against the New York State Department of Financial Services' observation to impose $630 million for compliance failure.HBL President and Chief Executive Officer Nauman Karamat Dar while briefing media about the issue here on Tuesday said the bank is not involved in any specific wrongdoing. "HBL has done nothing wrong," he said.
He said the hearing of the notice would be on September 27, 2017 and the HBL's legal team is preparing to appear to defend the bank. He also announced that the bank will approach the New York Supreme Court if the regulator imposes a $630 million fine on the bank. He was expecting that HBL team will be able to clarify its position before the regulator.
However, he admitted bank branch's failure to comply with the regulations of US regulator. He said that the HBL's New York branch was only dealing in clearing of dollar transactions of the bank. He said HBL branch committed some mistakes but these were related to general safety and soundness. He admitted the negligence on the part bank's branch. However, he was of the view that the fine is disproportionate.
He said HBL is country's leading bank having a large branch network, system and liquidity. It might affect profitability on a short term basis, but will never affect its business and customers. Dar said HBL has voluntarily closed its New York branch and the bank is providing services to its customers through its corresponding banks. He said HBL closed the account of Saudi bank Al Rajhi in 2014 on the directives of US regulator. He said the penalty is a commercial and regulatory matter and it has no link with the diplomatic and political issues.
Copyright Business Recorder, 2017
Copyright Reuters, 2017