National Bank of Pakistan (NBP) has been fined $55 million by the US Authorities on the charges of violations of anti-money laundering regulations.
According to the official statement, the Federal Reserve Board announced a $20.4 million (Rs. 3.6 billion) penalty against the National Bank of Pakistan. The board’s action is in conjunction with an action by the New York State Department of Financial Services (NYDFS).
The New York Department of Financial Services has also fined NBP $35 million (Rs. 6.1 billion) for repeated compliance failures, taking the combined penalties to $55 million (Rs.9.7 billion).
“The NBP allowed serious compliance deficiencies in its NY branch to persist for years despite repeated regulatory warnings,” a press released quoted NYDFS Superintendent Adrienne A. Harris as saying.
“Following examinations conducted by the Department and the Federal Reserve Bank of New York in 2014 and 2015, the New York branch was found to have inadequate BSA/AML compliance programs, serious issues with its transaction monitoring system, and significant shortcomings in managerial oversight”, the press release said further.
In 2016, the bank and its New York branch entered into a written agreement with the Federal Reserve Bank of New York and the New York State Department of Financial Services (US regulators). This agreement, inter-alia, requires the NBP to address certain compliance and risk management matters relating to anti-money laundering and the US bank secrecy law requirements.
This agreement also requires the implementation of the requisite systems and controls and the allocation of adequate resources to ensure full compliance with such requirements. The bank stated that it has undertaken significant personnel, systems, and process changes in its New York operations to address the identified regulatory weaknesses and ensure senior attention at Board Committee and Board levels, but a historically weak compliance culture will take time to change effectively and meanwhile, the bank remains vulnerable.
However, the bank’s US operations did not maintain an effective risk management program or control sufficient to comply with anti-money laundering laws. The board further issued an order to the bank for further improvement of its anti-money laundering program.
Previously, two leading banks—Habib Bank Limited and United Bank Limited—had also faced huge penalties in the US on the same charges by this regulator. These banks had ultimately winded up their banking operations in the US.
