The National Bank of Pakistan (NBP) was fined $55 million by US authorities for violating anti-money laundering regulations.
The Federal Reserve Board announced a $20.4 million (Rs. 3.6 billion) penalty against the National Bank of Pakistan, according to an official statement. The board’s action coincides with that of 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 multiple compliance violations, bringing the total 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.
The bank and its New York branch signed a written agreement with the Federal Reserve Bank of New York and the New York State Department of Financial Services (US regulators) in 2016.
This agreement, among other things, requires the NBP to address certain compliance and risk management issues related to anti-money laundering and the requirements of the US bank secrecy law.
This agreement also calls for the implementation of the necessary systems and controls, as well as the allocation of sufficient resources to ensure full compliance with such requirements.
The bank stated that significant personnel, system, and process changes have been implemented in its New York operations to address identified regulatory weaknesses and ensure senior attention at the Board Committee and Board levels, but a historically weak compliance culture will take time to change effectively, and the bank remains vulnerable in the meantime.
However, the bank’s US operations did not maintain an effective risk management programme or adequate controls to ensure compliance with anti-money laundering laws. The board also directed the bank to improve its anti-money laundering program even further.
Previously, two major banks—Habib Bank Limited and United Bank Limited—faced massive penalties in the United States for the same charges brought by this regulator. These banks eventually shut down their banking operations in US.
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