Fed, NYDFS fine Pakistan bank over $50 million for AML deficiencies

Bank Regulatory State Issues Financial Crimes Of Interest to Non-US Persons Federal Reserve NYDFS Enforcement Anti-Money Laundering Bank Secrecy Act

On February 24, the Federal Reserve Board and NYDFS announced an enforcement action against a Pakistan-based bank for alleged anti-money laundering (AML) violations. According to the Fed’s consent order and NYDFS’s consent order, following examinations conducted by the Fed and NYDFS in 2014 and 2015, the bank’s New York branch was identified as having deficiencies in its AML compliance and risk management programs, including compliance with related federal laws, rules, and regulations. According to the NYDFS press release, the bank did not comply with a Written Agreement with the Fed and NYDFS entered into in 2016 in which the bank acknowledged oversight and compliance deficiencies and agreed to remediate them. According to NYDFS, “[t]hese continued failures revealed that the Branch’s senior management were unwilling or unable to promote a culture of compliance, adequate resources were not provided for compliance programs, and the Bank failed to adequately supervise the Branch by allowing problems to worsen year after year. The conditions at the Branch demonstrated severe weaknesses, and unsafe, unsound conditions requiring urgent restructuring.”

Under the terms of the consent orders, the bank is required to pay civil money penalties of approximately $20.4 million to the Fed and $35 million to NYDFS. In addition to the monetary penalties, the bank is required to, among other things: (i) create a written 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; (ii) engage an independent consultant to conduct a comprehensive evaluation of the bank’s remediation efforts; and (iii) submit a status report within 60 days regarding a system of internal controls “reasonably designed to ensure compliance with BSA/AML requirements.” NYDFS acknowledged the bank’s “cooperation with the investigation and its ongoing remedial efforts.”