National Bank of Pakistan to pay $55.M fines for failing to comply with AML regulations

The National Bank of Pakistan and its New York branch have agreed to pay $55.4 million in total penalties to the New York State Department of Financial Services (NYDFS) and the Federal Reserve Board for deficiencies in the bank's risk management and anti-money laundering (AML) compliance program, according to the agencies.

Under a consent order with the NYDFS, the bank will pay a $35 million penalty, plus an additional $20.4 million penalty under a settlement with the Federal Reserve Board.

The bank must also create a written plan, which must be approved by the NYDFS, that details enhancements to its Bank Secrecy Act (BSA) and AML compliance program, as well as its suspicious activity monitoring and reporting program and 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," according to the NYDFS.

The specifics: The NYDFS and the Federal Reserve Board conducted examinations in 2014 and 2015, finding "inadequate BSA/AML compliance programs, serious issues with its transaction monitoring system, and significant shortcomings in managerial oversight," according to the NYDFS. As a result, the bank "acknowledged its oversight and compliance deficiencies and agreed to remediate them" as part of a 2016 agreement with these agencies.

In short, the bank failed to follow through on its promises. "he National Bank of Pakistan allowed serious compliance deficiencies in its New York branch to persist for years despite repeated regulatory warnings," said NYDFS Superintendent Adrienne Harris.

The overall condition of the National Bank of Pakistan's New York branch's risk management and compliance program "continued to deteriorate," according to NYDFS examinations following the bank's 2016 agreement. "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 National Bank of Pakistan was chastised by the NYDFS for keeping the manager and senior compliance officer of the New York branch "despite their demonstrated track record in failing to fix comprehensively the issues at the branch." The bank fired the manager and compliance officer in early 2020 after six examinations revealed repeat deficiencies, and hired new leadership to increase the number of compliance staff from seven to 24. Despite the fact that the bank's performance improved in 2020, the regulators concluded that it "continued to operate in an unsatisfactory manner with an inadequate compliance program."

The National Bank of Pakistan's cooperation and recent efforts to achieve compliance were recognized in the NYDFS order.

In response to the settlements, the bank stated, "There were not findings of improper transactions or willful misconduct. The New York branch has been under new management since May 2020 and has substantially enhanced its compliance program."

"U.S. regulators have recognized the many positive changes resulting from new management," the bank added. "The National Bank of Pakistan and the New York branch are fully committed to satisfying the regulators’ expectations."

By fLEXI tEAM