US packs off Pak’s top Habib Bank for terrorist financing

US banking regulators have ordered Pakistan’s leading Habib Bank to pull the shutter on its New York office after nearly 40 years, for repeatedly failing to heed concerns over possible terrorist financing and money laundering, officials said.

Habib, Pakistan's largest private bank, neglected to respond to compliance problems and red flags on transactions that potentially could have promoted terrorism, money laundering or other illicit ends, New York banking officials said.

The Department of Financial Services, which regulates foreign banks, also slapped a $225 million fine on the bank, although that is much smaller than the $629.6 million penalty initially proposed.

Habib has operated in the United States since 1978, and in 2006 was ordered to tighten its oversight of potentially illegal transactions but failed to comply. New York regulators said Habib facilitated billions of dollars of transactions with Saudi private bank, Al Rajhi Bank, which reportedly has links to al Qaeda, and failed to do enough to ensure that the funds were not laundered or used for terrorism.

The bank also used a “good guy” list — a group of customers who supposedly presented a very low risk of illicit transactions — to wave through at least $250m in transactions with no screening at all. Characters on the list included a leader of a Pakistani terrorist group, a notorious international arms dealer, and the former Deputy Prime Minister of Iraq under Saddam Hussein.

"DFS will not tolerate inadequate risk and compliance functions that open the door to the financing of terrorist activities that pose a grave threat to the people of this State and the financial system as a whole," DFS said.