Karachi, Feb.28 : Two unnamed American states have reportedly imposed restrictions on a Pakistani bank, also unnamed, over fears of terror-related financing.

According to well-placed banking sources, the two states have restricted the bank in question from dealing in foreign exchange transactions, transfers of credits to foreign banks and importing and exporting currency or securities.

But, the sources said, these states do not include New York, where the Federal Reserve Board and the New York State Banking Department in December announced the execution of a written agreement among a Pakistani bank based in Karachi; the bank's branch in New York; the Federal Reserve Bank of New York; and the New York State Banking Department.

The agreement addresses the Bank Secrecy Act and anti-money laundering compliance at that Pakistani bank's New York branch, including policies and practices relating to the provision of correspondent banking services, the sources said, while refusing to state whether the bank that had signed the agreement in New York in December was the one facing restrictions in two US states.

Asked what had prompted the US states to take this action, the sources were quoted by the Daily Times as saying that it was a news report carried by a section of the Pakistani press accusing this bank and others of involvement in terrorist money transfers from the UK.

The sources, however, said, that the state governments in the US are still taking time in providing this bank a "clean chit" against the accusations of terror money tranfers.

In December 2001, all Pakistani banks operating in the US were asked to stop daily financial transactions in accordance with new laws enacted by the United States following the Sept 11 attacks. Banks in other Muslim countries were also asked to suspend transactions.

Sources said that Pakistani banks had become the target of a new round of bashing following Indian Security Adviser M K Narayanan's accusations at the 43rd Munich Conference on Security Policy earlier this month.

According to Narayanan, terrorists have manipulated the stock markets in India to generate funds and use legitimate banking channels to fund their operations. He claimed that conduits through which such funds find their way to terrorist organisations include established banking channels, and named one Pakistani bank without substantiating his claim.

According to Indian daily The Hindu, whatever the truth, Narayanan's reference to the stock market was just 53 words of an 1,800 word argument on the problem of terror financing.