U.S. financial regulators have fined the New York branch of the National Bank of Pakistan (NBP) more than $55 million for anti-money laundering violations and compliance deficiencies.
The fines by the Federal Reserve Board and the New York’s Department of Financial Services (NYDFS) led to a 7% drop in NBP’s shares Friday.
NBP’s “banking operations did not maintain an effective risk management program or controls sufficient to comply with anti-money laundering laws,” the U.S. Federal Reserve Board said in a statement Thursday.
Pakistani authorities have said the fines were agreed upon through a settlement with U.S. regulators and that there has been no “willful misconduct” at NBP’s New York branch.
Under the settlement the NBP will be required to offer a plan “detailing enhancements to the policies and procedures of the Bank’s BSA/AML compliance program, its Suspicious Activity Monitoring and Reporting program, and its customer due diligence requirements,” reads a NYDFS statement.
The government of Pakistan owns more than 75% of the NBP.
In June 2018, the Paris-based Financial Action Task Force (FATF), an international anti-money laundering watchdog, put Pakistan in its “grey-list” because of concerns the country was not doing enough to counter money laundering and terrorism financing.
The Pakistani government is expected to inform the FATF in February 2022 of its progress in tackling financial loopholes which benefit terrorist groups.
Terrorism Concerns
Pakistan’s military and intelligence services have long been accused of maintaining links with and using terrorist groups to further strategic objectives in neighboring India and Afghanistan.
“At the core of such money-laundering penalties lies serious concerns about repeated non-compliance with terrorism financing enabled by Pakistan’s state-owned entities,” Javid Ahmad, a senior fellow at the Atlantic Council, told VOA.
“It’s a slap on the wrist, but Pakistan, like a corporation, has certain financial obligations to its elaborate network of militant shareholders, so it will find other creative ways like the use of cryptos to circumvent banks and stay semi-compliant with [the] AML regime,” he added.
Pakistani authorities deny any involvement with terrorism and contend that the country has suffered immensely from terrorist attacks over the last two decades.
“Pakistan made limited progress on the most difficult aspects of its 2015 National Action Plan to counter terrorism, specifically in its pledge to dismantle all terrorist organizations without delay or discrimination,” the U.S. State Department said in its 2020 Country Report on Terrorism.
