US authorities fine Pakistan's NBP $55mn for 'money-laundering', 'compliance failures'

US authorities fined National Bank of Pakistan (NBP) $55 million in separate orders, with the US Federal Reserve Board announcing a $20.4-million penalty for anti-money laundering violations, while New York State Department of Financial Services said the bank agreed to pay a $35-million penalty for failure to maintain an 'effective and compliant anti-money laundering program'.

The US Federal Reserve Board announcement can be found here.

New York State Department of Financial Services penalty

Similarly, Superintendent of Financial Services Adrienne A. Harris announced that NBP and its New York branch have agreed to pay $35 million in penalties pursuant to a Consent Order entered into with the New York State Department of Financial Services (DFS).

"The Consent Order resolves the Department’s investigation into compliance deficiencies at the Branch with respect to Bank Secrecy Act/Anti-Money Laundering (BSA/AML) requirements," the statement added.

“The National Bank of Pakistan allowed serious compliance deficiencies in its New York branch to persist for years despite repeated regulatory warnings,” said Superintendent Harris. “Foreign banks that enjoy the privilege of operating in New York have an obligation to maintain effective controls, and the Department will continue to promote financial transparency and take action to protect the global financial system when those obligations are not met.”

It said that following examinations conducted by the Department and the Federal Reserve Bank of New York (FRBNY) 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.

"As a result, in 2016, the Department and the FRBNY took enforcement action against the Bank in the form of a Written Agreement in which the Bank acknowledged its oversight and compliance deficiencies and agreed to remediate them.

"As reflected in the examinations following the Written Agreement, however, the Branch’s overall condition and its risk management and compliance programs continued to deteriorate. These continued failures revealed that the Branch’s senior management were unwilling or unable to promote a culture of compliance, adequate resources were not provided for compliance programs, and the Bank failed to adequately supervise the Branch by allowing problems to worsen year after year. The conditions at the Branch demonstrated severe weaknesses, and unsafe, unsound conditions requiring urgent restructuring."

Under the settlement reached today, it said, in addition to payment of a $35 million penalty, the National Bank of Pakistan will be required to create a written plan, acceptable to the Department, detailing enhancements to the policies and procedures of the Bank’s BSA/AML compliance program, its Suspicious Activity Monitoring and Reporting program, and its customer due diligence requirements.

"Additionally, at the Department’s discretion, the Bank may be required to engage an independent consultant to conduct a comprehensive evaluation of the Bank and the Branch’s remediation efforts — an evaluation that could lead to the imposition of a full monitorship."

"DFS acknowledges the Bank’s cooperation with the investigation and its ongoing remedial efforts.

"The Department coordinated this investigation with the FRBNY which has reached a separate settlement with the Bank."

Read the DFS statement here.