Two US authorities fine
National Bank of Pakistan
$55.4m for anti-money
laundering violations


ISLAMABAD: Two US authorities announced on Thursday they had imposed a collective $55.4 million fine on the state-owned National Bank of Pakistan (NBP) for serious compliance deficiencies and anti-money laundering violations. 

The US Federal Reserve Board announced that it was imposing a fine of $20.4mn on NBP for anti-money laundering violations while the New York State Department of Financial Services (NYDFS) said it had imposed a fine of $35mn on the Pakistani bank. 

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,” read a press statement from the Board.

The Board said that 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 released a separate press statement announcing that it was imposing a fine of $35mn 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,” said NYDFS Superintendent Harris, adding that foreign banks who operate 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. 

“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,” it said. “The conditions at the Branch demonstrated severe weaknesses, and unsafe, unsound conditions requiring urgent restructuring.” 

The NYDFS said that as per its agreement with the NBP, the bank had agreed to create a written plan that details 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, in addition to the $35mn payment. 

“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,” it added.

National Bank’s point of view

Following the imposition of fines of more than $55 million by United States authorities on the National Bank of Pakistan (NBP), its president Arif Usmani said the penalty was for “historical compliance programme weaknesses and delays in making compliance-related enhancements”, adding that the bank’s system has improved under a new management.

In a letter addressed to the general manager of the Pakistan Stock Exchange (PSX), a copy of which is available with, Usmani noted that there were “no findings of improper transactions or wilful misconduct”.

The US Federal Reserve Board announced a $20.4m penalty against the bank for anti-money laundering violations. According to a press release issued by the Fed, it would also require the bank to improve its anti-money laundering programme.

The Fed went on to say that NBP’s US banking operations “did not maintain an effective risk management programme or controls sufficient to comply with anti-money laundering laws”.

It added that the action was in conjunction with an action by the New York State Department of Financial Services (NYDFS), which imposed a penalty of $35m for “repeated compliance failures”.