HBL bank faces $629million penalty in the US

Background of HBL

Habib Bank Limited known as HBL was founded in 1947 and now has more than 40% of market share in Pakistan’s banking sector. It has more than 1,700 branches in Pakistan and an international network spread over 25 countries.

It was part-privatised in 2004, with the Agha Khan Foundation buying the bulk of the shares. Aga Khan Foundation also owns significant shares in India based DCB Limited.

In April 2015 the Pakistan government approved divesting all of its state-owned shares in HBL for $1.02bn, in the country’s largest-ever equity offering.
It had received a license to open a branch in China last year, making it the first South Asian lender to operate in the world’s number two economy.

Money Laundering Charges

Recently, HBL was fined for $630 million. HBL’s compliance was “dangerously weak” and that “serious and persistent” failings found at its New York branch appeared to affect the entire Habib banking enterprise, posing “grave risks” to the banking system according to the The New York State Department of Financial Services.

Why was it fined ?

There are multiple reasons sited out by the DFS while it fined the bank. One of the most prominent reason cited out was that HBL held a U.S. clearing account with Saudi’s largest private bank Al Rajhi, which has been linked in the media and by the U.S. Senate to Al Qaeda and the financing of extremism.

Wire Stripping

HBL was fined primarily because it was involved in the wire stripping. Wire stripping means a bank deliberately strips out information related to a payment, such as the originator or beneficiary, that may raise suspicions. One such instance related to payment of a Chinese weapons manufacturer which was found to be covered under U.S. non-proliferation sanctions.

Problematic Good Guy List

During the Investigation by DFS it was observed that the transactions were not screened because the individuals were on the Good Guy list. However, more than 150 of the 4000 transactions were related to the US sanctioned entities.

Payments to FBI wanted Individuals

DFS has also cited an example of payments being made to the Cyber criminals which are wanted wanted by FBI through the USA Bank Accounts.