The New York Department of Financial Services (NYDFS) recently reached a $35 million settlement with the National Bank of Pakistan (NBP) and its New York branch to resolve allegations that the branch had serious deficiencies in its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program and, to a lesser extent, its sanctions screening program. The settlement was announced on February 24, 2022 by Superintendent of Financial Services Adrienne Harris for what Harris described as serious compliance deficiencies that were allowed to persist for years in NBP’s New York branch despite repeated warnings.
According to the consent order, an annual examination of NBP’s NY branch conducted jointly by the NYDFS and the Federal Reserve Bank of New York (FRBNY) revealed significant shortcomings with the bank’s transaction monitoring system, internal controls and its managerial oversight. The bank’s new money remittance service was also allegedly implemented without appropriate safeguards such as identification and verification processes or formalized risk-based due diligence controls. After determining that the problems persisted in 2015, the NYDFS and FRBNY initiated an enforcement action against the bank in the form of a Written Agreement in March of 2016. Under the agreement, the bank acknowledged the identified compliance deficiencies and agreed to engage an independent third party to assess the bank’s compliance program and make improvements. However, based on the next five annual examinations, NBP’s compliance program continued to deteriorate despite its efforts to hire new branch leadership in 2019 and more than tripling the number of compliance staff members between 2020 and 2021.
Because of the repeated compliance failures, the bank was assessed a $35 million civil penalty after taking into consideration the bank’s ongoing remedial efforts and cooperation with investigators. Under the settlement, NBP must undertake a number of remedial measures including the submission of a written plan that, subject to NYDFS approval, details the improvements that NBP will make to its BSA/AML compliance program, its Suspicious Activity Monitoring and Reporting program, and the bank’s customer due diligence requirements. The NYDFS may also require NBP to engage an independent consultant to evaluate its remediation efforts – an engagement that could convert to a full monitorship at the discretion of NYDFS. NBP also agreed, as part of the settlement, to continue its full cooperation with NYDFS investigators.