The FSA said the failings at the privately owned bank, which has twelve branches in the UK as well as in the UAE and Africa, lasted for almost three years and “exposed the firm to an unacceptable risk of money laundering”.
Specifically, the FSA was concerned that half of the deposits of the approximately 45% of its customers based outside of the UK came from jurisdictions which, “according to independent international organisations”, had less stringent AML requirements or were perceived to have higher levels of corruption than the UK.
The City watchdog said its investigation identified that during the period 15 December 2007 to 15 November 2010, Habib failed to establish and maintain adequate controls for assessing the level of money laundering risk posed by its customers.
In particular, the FSA said, while Habib maintained a high risk country list, it excluded some of these high risk countries on the basis that it had group offices in them. However, the FSA concluded that Habib’s local knowledge of these countries did not negate the higher risk of money laundering they presented. The FSA also found that Habib failed to conduct adequate enhanced due diligence in relation to higher risk customers.
Habib’s money laundering reporting officer Syed Itrat Hussain was responsible for oversight of Habib’s AML systems and controls, but failed to ensure that these systems and controls were adequate, said the FSA. Hussain has now retired from the financial services industry.
Tracey McDermott, acting director of enforcement and financial crime, said: “Habib’s failings were unacceptable. Habib’s belief that local knowledge of a country through a group office mitigated the higher money laundering risk posed by that country was entirely misconceived.
“Firms must take a dynamic approach to assessing money laundering risk so they can adapt to the ever-evolving risks of financial crime. It is a basic requirement that firms know their customers and understand the risks they pose. The requirement for enhanced due diligence recognises that some customers present a greater risk of money laundering than others and that firms therefore need to do more to identify, manage and control that risk. Habib fell short in this regard.”
On Hussain, McDermott added that where “individuals fail to meet their regulatory responsibilities we will not hesitate to take action”.
