National Bank of Pakistan in a notice sent to Pakistan Stock Exchange (PSX) disclosed that it reached an agreement with US regulators of NBP’s New York branch with fines of $55 million arising due to historical compliance weakness and delays in making compliance related enhancements.
However, there were no findings of improper transactions or willful conduct as per the notice.
Latest press release by U.S Department of Financial Services stated: “The National Bank of Pakistan allowed serious compliance deficiencies in its New York branch to persist for years despite repeated regulatory warnings. 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”.
READ MORE: US central bank imposes $20.4 million penalty on NBP
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.
As a result, enforcement action against NBP was taken in 2016 where NBP agreed to improve compliance deficiencies which later on it failed to do so. As a result, the bank will now be subject to $35 million penalty in addition to certain deliverables for the improvement in its compliance program.
READ MORE: NBP lends Rs18.8bn in Hascol’s Rs54bn scam
In addition to the fine by U.S Department of Financial Services, Federal Reserve Board also imposed $20.4million penalty against NBP on anti-money laundering violations totaling penalty to $55million which translates into Rs9.7billion (Rs4.6/share). In 9M2021, the bank has so far reported earnings of Rs25billion.
Analysts at Topline Securities said that previously HBL also faced a similar fine in 2017 where the U.S regulators initially imposed a penalty of US$630million on HBL on non-compliance of Anti-money laundering laws, which was later revised down to US$225million.
NBP is also faced with a pending pension liability case with potential liabilities of over Rs70 billion under which the company had filed a review petition in Supreme Court of Pakistan where further judgement is still awaited. The bank due to the aforementioned reason has skipped dividends since 2017, we believe.
