On August 24, 2017, the New York State Department of Financial Services (“NY DFS“) issued a Notice of Hearing and Statement of Charges to the New York Branch of Habib Bank Limited and Habib Bank Limited, the largest bank in Pakistan, based upon its determination that “compliance failures at the New York Branch are serious, persistent and apparently affect the entire Habib banking enterprise.” The NY DFS asserted that the Bank’s compliance function is dangerously weak and indicates “a fundamental lack of understanding of the need for a vigorous compliance infrastructure, and the dangerous absence of attention by Habib Bank’s senior management for the state of compliance at the New York Branch.” The deficiencies cited include the New York Branch’s failure to comply with New York and Federal laws and regulations concerning anti-money laundering (“AML“) compliance, including the Bank Secrecy Act.

The Superintendent is seeking to impose a civil monetary penalty upon the Respondents in an amount of up to approximately $620 million.

A hearing is scheduled for September 27, 2017, before the NY DFS’s Deputy Superintendent for Compliance. The Bank is contesting the NY DFS’s allegations and has indicated that it plans to challenge the penalty and surrender its DFS banking license, thus eliminating its only U.S. branch.

On August 24, 2017, the NY DFS also issued two companion orders. One expands the scope of a review of prior transactions for AML and sanctions issues that was already underway under the terms of an earlier consent order; the other outlines the conditions under which the Bank could surrender its NY DFS banking license, including the retention of a consultant selected by NY DFS to ensure the orderly wind down of the Bank’s New York Branch. Read more here.