US fines National Bank of Pakistan for anti-money laundering violations
What's the story
The United States federal regulators imposed fines worth $55 million on the National Bank of Pakistan (NBP) for non-compliance and anti-money laundering violations. The fines have been imposed by the US Federal Reserve--the central bank of the country--and by the state of New York's Superintendent of Financial Services Adrienne A Harris. The regulators will require the bank to improve its anti-money laundering program.
Context
Why does this story matter?
This is the second Pakistani bank that has been fined by US regulators for non-compliance with anti-money laundering laws. Pakistan's largest bank, HBL, also faced a similar fine in 2017, where US regulators imposed a penalty of $225 million over violation of anti-money laundering laws. Notably, Pakistan is already on the "grey list" of the global anti-money laundering watchdog--the Financial Action Task Force--since 2018.
Details
Federal Reserve imposed a $20.4 million fine
The Federal Reserve imposed a $20.4 million fine after the regulatory bodies in its examination on March 4, 2021, found "significant deficiencies" in the NBP's New York branch's "risk management and compliance with federal laws, rules, and regulations." The Reserve further noted that the deficiencies were related to anti-money laundering (AML) compliance and the Bank Secrecy Act (BSA) of the US.
Information
NBP failed to fulfil its agreement to correct deficiencies
Notably, NBP had entered into a "written agreement" with the authorities on March 16, 2016, to correct the "deficiencies." However, the bank failed to "achieve full compliance with each and every provision of the written agreement," the Federal Reserve's order said.
Federal Reserve
Reserve asks NBP to implement its recommendation within 60 days
The Reserve has ordered NBP to take "affirmative action" on Corporate Governance and Management Oversight, Bank Secrecy Act, and AML Compliance Programme, Customer Due Diligence; Suspicious Activity Monitoring and Reporting; Transaction Monitoring System. It also tasked NBP to implement its recommendations within 60 days of the order and asked it to designate an officer for "coordinating and submitting" to the Reserve its written plans.
2nd penalty
$35 million penalty by state of New York
NBP has also agreed to pay $35 million pursuant to a consent order it entered into with the New York State Department of Financial Services. It resolves the department's investigation into compliance deficiencies in NBP's New York branch with respect to BSA/AML requirements. NBP allowed "serious compliance deficiencies in its New York branch to persist for years despite repeated regulatory warnings," Superintendent Harris said.
NBP
No findings of improper transaction, willful misconduct: NBP
In a notice to Pakistan Stock Exchange on Friday, NBP said there were no findings of improper transactions or willful misconduct. NBP said the New York branch was under new management since May 2020, and it has substantially enhanced its compliance program, which the bank added had also been recognized by U.S. regulators. The development also triggered an over 7% drop in NBP's shares.
Information
Pakistani state owns over 75% of NBP
Notably, NBP is a foreign bank operating in the US. It has its headquarters in Pakistan. According to Reuters, it is one of the largest commercial banks in the country, and the Pakistani state owns 75.20% of NBP.