KARACHI: The National Bank of Pakistan (NBP) has come to an agreement to pay $55.4 million in fines imposed by US regulators on its New York branch due to historical compliance program deficiencies and delays in making compliance-related enhancements.
The state-run bank in a statement on Friday said that there were no 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, according to the bank.
“US regulators have recognized the many positive changes resulting from new management. The NBP and the New York branch are fully committed to satisfying the regulators’ expectations,” it added.
The US Department of Financial Services in a statement had said the NBP allowed serious compliance deficiencies in its New York branch to persist for years despite repeated regulatory warnings.
“Foreign banks that have the privilege of operating in New York have an obligation to keep effective controls in place, and the department will keep up with financial transparency and take action when those obligations are not met,” it had said.
Following examinations conducted by the Department and the Federal Reserve Bank of New York in 2014 and 2015, NBP’s New York branch was found to have inadequate bank secrecy/anti-money compliance programs, a Topline Securities analyst said in a client note.
As a result, enforcement action against the NBP was taken in 2016 when the bank agreed to improve compliance deficiencies but failed to do so.
The analyst said that as a result, the bank would now be subject to a $35 million penalty in addition to certain deliverables for the improvement in its compliance program.
“In addition to the fine by the US Department of Financial Services, the Federal Reserve Board also imposed a $20.4 million penalty against NBP for anti-money laundering violations, totaling a penalty of $55 million, which translates into Rs9.7 billion (Rs4.6/share),” he added.
The bank has reported earnings of Rs25 billion in the nine months of 2021.
The NBP is also faced with a pending pension liability case with potential liabilities of over Rs70 billion under which the company has filed a review petition in the Supreme Court of Pakistan. Further judgment is still awaited.
“The bank for the aforementioned reasons has skipped dividends since 2017,” the analyst said.
He added that the penalty on the bank and uncertainty over the outcome of the pension liability case would have a significant impact on the bank’s profitability and capital adequacy ratio.
