Habib Bank Limited (HBL) is one of the largest banks in Pakistan with a vast range of banking products and transaction services. The company was in news recently when it was caught by the Financial Regulatory Authorities in New York for malpractices and understatement of its monetary assets.
According to the settlement with the Department of Financial Services (DFS) of New York State, HBL is liable to wrap up its operations and pay the fine within 14 days which amounts to $225 million which sounds humungous but seems tiny compared with the initial fine of $630 million. There are rumors that King Aga Khan had to intervene in this matter and resolve the issue by bringing the initial enormous fine to a bearable amount. Just last year, the balance sheets of Habib Bank Limited reflected a strong financial position by stating a net profit after tax of $327 million.
The terms and conditions of this pact also include the withdrawal of HBL’s license to operate in New York which they have agreed to give up after operating in the country since 1978. The charges are based on the violation of rules and regulations defined by the state of New York to conduct the banking processes within their vicinity.
Maria Vullo, the Financial Services Superintendent, stated
The bank has repeatedly been given more than sufficient opportunity to correct its glaring deficiencies, yet it has failed to do so,
The charge sheet further elucidates the discrepancies that took place in the operational processes that around 13000 transactions were not properly screened and scrutinized and the criterion was not satisfied. The appalling situation is that the bank is accused of transferring and receiving funds for customers that they termed as “good guy” and these unidentified customers have been allegedly members of terrorist groups and associated with gangs involved in arms trading.
HBL had become the target of an enforcement action by DFS for more than 50 separate violations allegedly committed between 2007 and 2017.
The hearing at 27th Sept has been postponed because the case has been settled and the concerned parties have decided to accept the decision. HBL after enjoying a good reputation for more than three decades had to halt and permanently close its operations because of serious accusations that could not be defended by the bank.
The management of HBL has stated that any decision regarding shareholders’ dividends, employees’ bonuses, and other such strategic decision will be taken later. As of now, the company has declared that its financial position is firm and the capital base will allow the payment of fine smoothly.