Pakistani banks routinely indicted for money laundering and terror financing

By Rahul Kumar

New Delhi, Oct 6: Recently Habib Bank Limited (HBL), Pakistan's largest private sector bank with international branches, faced allegations of helping global terror organisation Al-Qaeda, leading to deaths and injuries to hundreds of people in Afghanistan.

Pakistani newspaper Dawn reported that a US court said terror financing by Habib Bank led to attacks that killed and injured 370 people in Afghanistan during 2021 and 2019. Also, nearly 370 individual complainants are demanding compensation from the bank. The bank is contesting these charges in the US court refuting the allegations as 'meritless'.

This is, however, not the first time that Pakistani banks, or even the Habib Bank, are facing allegations and investigations of a serious nature.

India Narrative spoke with geopolitical analyst Mark Kinra who says: "It is not the first time that HBL has been accused of terror-related activities in the US. In 2007, Habib Bank was sued by the widow of journalist Daniel Pearl for financially helping Al-Qaeda and other terrorist groups. In 2017, it had to shut down its only US branch and was penalised $225 million for illicit money transfers".

Kinra says that not just Habib Bank, but several other Pakistani banks have faced scrutiny over the years.

Earlier this year the National Bank of Pakistan paid $55 million in fines for non-compliance and money laundering in New York. News agency Reuters reported: "The Federal Reserve Board and Federal Reserve Bank of New York, and the New York State Department of Financial Services (NYDFS) announced on Thursday that the NBP's New York branch would be fined up to $55.4 million for non-compliance and anti-money laundering violations".

Kinra says: "In 2020, six Pakistani banks were found to be involved in 29 suspicious transactions amounting to $2.5 million between 2011 and 2012. These banks included Allied Bank, United Bank (UBL), Habib Metropolitan Bank, Bank Alfalah, Standard Chartered Bank Pakistan, and Habib Bank (HBL)".

The indictment of Habib Bank is important because of the New York district court's remarks. "The complaints allege that the defendant took deliberate steps to help customers evade international sanctions regimes, and in doing so incurred business risk that ultimately led to the defendant's expulsion from the US. Those allegations are sufficient …," the court said.

As Pakistan's largest bank, HBL is also active in the Shanghai Cooperation Organisation Interbank Consortium (SCO-IBC) for over a decade. At the recently held SCO Heads of State meet in Samarkand, Uzbekistan, HBL was present as Pakistan's only bank with focus on regional trade and investment.

HBL became the first Pakistani bank to open a branch in China, also becoming one of the few foreign banks to operate from the communist country. It has been spearheading the $62 billion China Pakistan Economic Corridor (CPEC) project by providing banking and financial services.

"Since the establishment of CPEC in 2013, HBL has formed a dedicated China coverage team comprised of Chinese and Pakistani bankers in Karachi, Lahore, and Islamabad to provide financial services exclusively to Chinese firms. The bank opened a branch in the Gwadar Free Zone in 2016 for Chinese investors and people who were developing factories there," says website Global Village Space.

The bank's woes came to limelight just a month after a team of the France-based watchdog, Financial Action Task Force (FATF), travelled to Pakistan on a three-day visit to check if Pakistan had made progress in closing down financing of terror activities and curbing international terror groups.



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