KARACHI: Reacting to a Reuters report on Friday that the US Federal Reserve had barred the Habib Bank Limited from conducting any dollar-clearing transactions or accepting any new accounts for US dollar clearing as of Dec 11, the bank clarified that it maintains its US licence and would continue to provide services as usual.

The HBL said in a press release, “The orders limit the branch’s growth of its US dollar-clearing business, but the branch is allowed to continue to conduct its current dollar-clearing business.”

The US authority moved, the Reuters report said, because the bank “has not complied with US anti-money laundering laws”.

Reuters cited the Fed’s recent assessment: “HBL’s risk management had broken down, as well as its compliance with laws such as the Bank Secrecy Act and regulations issued by the US Treasury Department”.

The HBL press release said that during a recent examination, the US regulators found deficiencies in the risk management and BSA/AML compliance programme at HBL’s New York branch and, subsequently, escalated the enforcement actions from the “written agreement” to a “consent order” in the case of New York State Department of Financial Services and a “cease and desist order” in the case of Federal Reserve Bank of New York.

“These orders impose certain additional requirements to remediate on the branch and provide mechanisms for enforcement if the remediation is not met,” the HBL said.

“HBL cannot accept new foreign correspondent accounts or new customer accounts in New York for US dollar clearing without prior approval of the regulator. It cannot increase its US dollar-clearing business both in terms of number of transactions or the aggregate amount without prior permission of the US regulators,” the press release said.

“HBL takes its regulatory responsibilities very seriously and has been taking actions in advance of even entering these orders to enhance its compliance programme, including engaging outside compliance consultants to review its current programme. We believe that these measures will put us in a position to move quickly on the requirements in the orders,” asserted HBL.

When contacted, the State Bank of Pakistan (SBP) said it was aware and closely monitoring developments. Chief spokesman for the SBP said the central bank was willing to cooperate with US regulators. He said that even in normal situation, the regulators remained in contact.

Banking circle took the situation seriously and called it as a bad omen for the country as well as the banking industry.

Published in Dawn, December 19th, 2015

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