The National Bank of Pakistan (NBP) has agreed to pay $55.4 million in penalties levied on its New York branch by US authorities for prior compliance programme shortcomings and delays in implementing compliance-related upgrades.
There were no illegal transactions or intentional wrongdoing found by the state-run bank on Friday, it said in a statement.
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US authorities punished NBP with $55 million for noncompliance.
The National Accountability Bureau recovered Rs 11.64 million from a private entity that caused losses to NBP.
A new manager has been in charge of the New York branch since May 2020, and the bank says that the branch’s compliance procedures have been a lot better since then.
Regulators in the United States have recognised the several good adjustments brought about by new management. The NBP and its New York office are completely dedicated to meeting the expectations of regulators, “it was added.
According to a statement from the US Department of Financial Services, the NBP allowed major compliance violations at its New York office to go unchecked for years, even though regulators warned them about them.
“Foreign banks operating in New York are required to maintain adequate controls, and the department will monitor financial transparency and take action if those duties are not satisfied,” it said.
According to a Topline Securities analyst, after audits by the Department and the Federal Reserve Bank of New York in 2014 and 2015, NBP’s New York branch was determined to have insufficient bank secrecy and anti-money laundering compliance programmes.
As a consequence, enforcement action was brought against the NBP in 2016 after the bank committed to addressing compliance shortcomings but did not follow through.
As a result, the bank will now face a $35 million penalty, as well as specific commitments to improve its compliance program, according to the analyst.
There was also a $20.4 million penalty levied by the Federal Reserve Board on NBP for anti-money laundering violations. The total penalty came to $55 million, or $9.5 billion (Rs4.6 per share), he said.
The bank earned Rs 25 billion in the first nine months of 2021.
Additionally, the NBP is involved in an ongoing pension liability issue involving possible liabilities in excess of Rs70 billion, for which the corporation has filed a review appeal with the Supreme Court of Pakistan. Further judgement is pending.
“For the aforementioned reasons, the bank has been deferring dividends since 2017,” the analyst said.
He noted that the bank’s penalty and the uncertainty surrounding the outcome of the pension liability case will have a material effect on the bank’s earnings and capital adequacy ratio.
