US banking regulators ordered Pakistan's Habib Bank to shutter its New York office after nearly 40 years, for repeatedly failing to heed concerns over possible terrorist financing and money laundering, officials said Thursday.
Habib, Pakistan's largest private bank, neglected to watch for 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 state's 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.
"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 Superintendent Maria Vullo said in a news release.