US authorities slap NBP with $55mn in fines for non-compliance

• US Federal Reserve imposes $20.4 mn fine.
• New York's superintendent of financial services slaps $35 mn fine.
• Fine imposed after authorities find “significant deficiencies” in NBP's “risk management and compliance with federal laws, rules, and regulations”. 

Two US authorities on Thursday imposed fines worth $55 million on the National Bank of Pakistan (NBP) and its New York branch. 

The fines have been imposed by the US Federal Reserve, the central bank of the country, and Superintendent of Financial Services Adrienne A Harris of the state of New York.

The Federal Reserve imposed a $20.4 million fine after the regulatory body, along with the New York State Department of Financial Services in its examination on March 4, 2021, found “significant deficiencies” in the NBP branch’s “risk management and compliance with federal laws, rules, and regulations”. 

In the order, the reserve also noted that the deficiencies were related to anti-money laundering (AML) compliance and the Bank Secrecy Act (BSA) of the US.

The order noted that NBP had entered into a “written agreement” with the authorities on March 16, 2016, to correct the “deficiencies”. The order noted that the most recent examination had found that NBP had failed to “achieve full compliance with each and every provision of the written agreement”.

The reserve noted that after their failure to comply with the US laws, the NBP and the federal Reserve have “mutually agreed to enter into this Cease and Desist Order and Order of Assessment of a Civil Money Penalty."

Under the actions, the US Federal Reserve has ordered NBP to “affirmative action” on “Corporate Governance and Management Oversight”; Bank Secrecy Act, and AML Compliance Programme, Customer Due Diligence; Suspicious Activity Monitoring and Reporting; Transaction Monitoring System.

The reserve has tasked the bank to implement its recommendations within 60 days of the order. It has also asked NBP to designate an officer within 10 days who will be “responsible for coordinating and submitting” to the Reserve Bank its written plans.

Penalty by state of New York

Separately, state of New York’s Superintendent of Financial Services Adrienne A Harris announced that NBP has agreed to pay $35 million over the compliance deficiencies at its New York branch.

“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,” she noted.