KARACHI: National Bank of Pakistan (NBP) has said that its New York branch continued to make progress against the enforcement actions for ensuring compliance related to Anti-Money Laundering (AML) laws.
The NBP New York Branch received enforcement actions in February 2022 from the Federal Reserve Bank and the New York State Department of Financial Services.
READ MORE: HBL pays monetary penalties over Rs476 million during CY22
The Branch has provided regular quarterly and half-yearly progress reporting to its regulators. The management and the Board of Directors continue to provide close oversight of the branches, remedial actions and are committed to ensure compliance with the conditions agreed in the enforcement actions, the NBP said in its annual report for the year ended December 31, 2022.
The management actions implemented by the Bank and Branch, and their associated validation by Internal Audit will be subject to review by the Branch’s regulators.
During the year ended December 31, 2019, a case was filed in the District Court for the Southern District of New York against the Bank by the relatives of several US citizens killed in Khost, Afghanistan, during a terrorist attack carried out at Camp Chapman, a US base. The complaint was later extended to several other random terrorist attacks carried out against US servicemen in Afghanistan by various terrorist organisations.
READ MORE: HBL’s annual profit declines to Rs34.4 billion amid high taxation
The Bank was sued for its alleged role in knowingly facilitating, aiding and abetting, conspiring and providing material support and banking services to several notorious terrorist groups and terrorist fundraisers.
The plaintiff alleged that the Bank transferred funds by using its New York branch to convert the donations they received from outside Pakistan into US dollars. It has been alleged that the Bank was in a position of knowing and preventing the money transfers.
In January 2021, the case was primarily dismissed on the grounds of its non-compliance with the drafting requirements of the civil procedures applicable. Further, three more amended complaints were filed and dismissed, and the fourth complaint was finally dismissed by the court pursuant to the Bank’s Motion to Dismiss the case.
READ MORE: Faysal Bank declares Rs11.44 billion annual after tax profit for CY22
The complainants had ultimately failed to state a preliminary case against the Bank as a result of the unsubstantiated and baseless nature of the complaints.
The plaintiffs have filed an appeal against the dismissal of the motion and NBP has filed its counter reply and the case is sub judice.
Based on the merits of the appeal, the management is confident that the appeal shall be decided in favour of the Bank and therefore, no provision has been made in these unconsolidated financial statements.
NBP further stated that it was continued to remain committed to ensure compliance with all the applicable laws, rules, regulations, and codes in the spirit of good governance.
To this end, the Board continued to effectively challenge management to ensure strategic directions to investments throughout the Bank’s operations in new technological platforms for effective AML/CFT/CPF controls, data accuracy and authenticity, internal controls, etc. were well-throughout.
As widely reported and disclosed in previous reporting periods, in February 2022, the Bank entered into consent orders with The Federal Reserve Bank of New York, and the New York State Department of Financial Services (NYDFS), the US regulators of NBP’s New York branch.
READ MORE: UBL declares over Rs32 billion profit after tax for CY22
These orders included two civil money penalties totalling USD 55.4 million (PKR 9.8 billion) that focused on historical weaknesses in the Compliance Program that persisted from 2016 and beyond, which were paid within the deadline.
It is important to note that the US Regulators made no findings of improper transactions or wilful misconduct.
Since then, substantial improvements have been made to comply with the orders and to the branch’s controls. Going forward, the Board remains fully committed to satisfying the regulators’ expectations.
