ISLAMABAD: The state-owned National Bank of Pakistan (NBP) on Friday confirmed it had been fined $55.4 million by two US regulators, but maintained that no “improper transactions or willful misconduct” was found during the examination.
The Federal Reserve Board and the New York State Department of Financial Services (NYDFS) announced on Thursday they fined the NBP for serious compliance deficiencies and anti-money laundering violations.
The US Federal Reserve Board imposed a fine of $20.4 million on NBP for anti-money laundering violations, while the NYDFS separately said it had fined the bank $35 million.
In a statement, the NBP said it had reached agreements with US regulators.
“The agreements include fines totaling US $55.4 million focused on historical compliance program weaknesses and delays in making compliance-related enhancements,” it added. “There were no findings of improper transactions or willful misconduct.”
The NBP said it had enhanced its compliance program since May 2020 when a new management took over the New York branch.
“US regulators have recognized the many positive changes resulting from new management,” it said. “The National Bank of Pakistan and the New York branch are fully committed to satisfying the regulators’ expectations.”
The NYDFS is the New York state government’s department responsible for regulating financial services and products. The Federal Reserve Board, meanwhile, oversees the US central banking system in the country.
“The Federal Reserve Board on Thursday announced a $20.4 million penalty against the National Bank of Pakistan, a foreign bank operating in the United States and headquartered in Pakistan, for anti-money laundering violations,” a press statement from the board said.
It said it would require the NBP to improve its anti-money laundering program.
“The firm’s (NBP) US banking operations did not maintain an effective risk management program or controls sufficient to comply with anti-money laundering laws,” it said, adding that the actions it took were in conjunction with the NYDFS.
The NYDFS issued a separate statement, announcing it was imposing a fine of $35 million on NBP owing to “serious compliance failures.”
“The National Bank of Pakistan allowed serious compliance deficiencies in its New York branch to persist for years despite repeated regulatory warnings,” NYDFS Superintendent Harris said, adding that foreign banks operating in New York needed to maintain effective controls.
The NYDFS said it conducted examinations of NBP’s New York branch with the Federal Reserve Board of New York (FRBNY) in 2014 and 2015 to discover that the state-owned bank had inadequate Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) programs in place.
It also found “serious issues with its [NBP’s] transaction monitoring system and significant shortcomings in managerial oversight.”
The NYDFs said that after the examination, it took enforcement action against the NBP in the form of a written agreement after which the Pakistani bank acknowledged its compliance deficiencies, oversight and agreed to take remedial measures.
However, subsequent examinations by the NYDFS revealed that the overall condition, risk management and compliance programs of the NBP continued to deteriorate.