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Another chapter of Habib Bank’s ‘irregularities’ opened up in UAE

M Jahangir Hayat

LAHORE: In the wake of the time when Habib Bank Limited (HBL) has announced to complete its US New York operation by March 31, 2020, losing ground for conducting further business there, another chapter of significant ‘irregularities’ by the top bank in its UAE branches has opened.
The State Bank of Pakistan indicated the significant irregularities in one of its report on Habib Bank Ltd.’s operations in the United Arab Emirates, Bloomberg News claimed.
The inspection report was made after the Financial Action Task Force, a global watchdog for illicit financial activities, put Pakistan on its monitoring list.
The SBP reported employees in some of Habib Bank’s U.A.E. branches helped certain customers disguise transactions by issuing pay orders in their own names, while gaps in risk profiling and monitoring reflected an “ineffective compliance function and compliance culture. The central bank said U.A.E. staff ignored rules when opening an account for the son of former South African President, and for relatives of Gabonese President Ali Bongo.
State Bank of Pakistan said its draft and final inspection reports are confidential and as a result, it’s unable to comment “on the veracity of observations purportedly related to inspection reports or inspection process.”
It is said that the draft report on the U.A.E. operations of Habib Bank was prepared soon after an on-site inspection by the central bank. It includes lists of customer accounts that were flagged for allegedly involving various violations by Habib Bank staff. The final report has the same broad conclusions but incorporates input from the bank, and omits the lists of specific accounts.
According to Sagheer Mufti, Habib Bank’s chief operating officer, the problems in the U.A.E. have since been addressed by a sweeping overhaul that the bank started to roll out in the Middle East and other international operations in early 2019, “There were process issues and those process issues pertain to legacy clients and legacy transactions and legacy processes,” Mufti said in an interview, responding to questions about the inspection report.
The Bloomberg report said that the SBP inspection report also said the U.A.E. operation provided banking services to “politically exposed persons” without marking them as PEPs, a category used by banks to highlight the risk of accepting money that results from bribery or corruption. In other cases, priority banking accounts were opened “by granting regulatory exceptions.”
The report added that banks around the world have been tightening up on their dealings with PEPs and other wealthy people after a series of scandals following the 2008 global financial crisis. Regulators have stepped up scrutiny over the past decade and many banks have stopped doing business with clients perceived to be risky.
In a statement, Habib Bank said it has had policies in place for sanctioned countries and for handling PEP accounts for a number of years. “In 2017 a handful of transactions were identified at HBL UAE which contravened our processes and standards. This should never have happened,” the statement said. “Following disciplinary proceedings, the staff members involved are no longer employed by” the bank, it added. The significant irregularities by HBL have come at a time when FATF has expressed its satisfaction over the far-reaching AML and counter-terror financing measures by the government of Pakistan and SBP.
“That would have serious consequences for the economy and its bailout program with the International Monetary Fund,” experts showed concerns. Other demanded strict action against HBL management for continuously indifferent attitude.
Earlier New York Department of Financial Services (DFS) on imposed a fine of USD 225 million Habib Bank Limited and its New York branch for failure to comply with New York laws and regulations designed illicit financial transactions.
On Monday HBL announced that it will complete the voluntary closure of its New York Branch by March 31, 2020, in coordination with New York banking regulators losing.

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