No penalty by Federal Reserve Bank: UBL boosting anti-money laundering efforts in New York

KARACHI: United Bank Limited (UBL) on Friday said the Federal Reserve Bank of New York has not slapped any penalty on the bank and it reached an agreement with the regulator to improve the anti-money laundering controls of its branch in the US.

“UBL and its New York branch have entered into a written agreement with the Federal Reserve Bank of New York (FRBNY), effective July 2, 2018 upon termination of the earlier written agreement (WA) entered into on 28 October, 2013, which was primarily related to the New York branch’s international remittance services,” UBL said in a statement to Pakistan Stock Exchange.

“The WA 2018 requires UBL to take steps to strengthen its Bank Secrecy Act and anti-money laundering compliance, customer due diligence and suspicious activity monitoring and reporting programmes.”

UBL said it (FRBNY) is undertaking all steps to further strengthen its compliance framework to comply with the agreement.

“Although it imposes no civil penalty on UBL, the disclosure regarding signing of WA 2018 is being made as an update to the (old) written agreement,” it added. “As stated in the WA 2018, it is common goal of FRBNY, UBL and New York branch that the New York branch operates in compliance with all applicable federal and state laws, rules and regulations.”

Topline Research said UBL has started to lower its scope of operations in New York “that will serve to lower the bank’s regulatory risks”.

“We believe that the above development is neutral for UBL,” the brokerage said in a flash note.

Analyst Mustafa Mustafa at Taurus Securities said UBL agreed to hire an independent consultant to conduct a comprehensive review of the branch’s compliance with the US AML laws and report its findings, subject to the approval of the US FED.

“The review shall be completed within 60 days of the approval to hire the consultant. Within 60 days of the submission of the compliance report the bank shall submit an enhanced compliance program along with a revised customer due-diligence program, to become compliant with the federal AML laws. In addition, the bank shall also design an enhanced suspicious activity monitoring and reporting program,” Mustafa said in a report.

In the recent past, UBL surfaced as the second Pakistani bank whose international banking operation was brought into limelight of anti-money laundering authorities in the US.

In August last, Habib Bank Limited decided to close down its operation in New York after the New York State Department of Financial Services slapped penalty on the bank on its failure to satisfy the financial regulator about its compliance with the regulatory laws.

Moreover, Pakistan managed to avert being placed on the black list of the Financial Action Task Force after caretaker Finance Minister Shamshad Akhtar presented a strong case about the country’s measures to combat money laundering and terrorist financing, at a meeting with the global financial watchdog in Paris.

Reuters adds from Washington: The Federal Reserve on Thursday ordered UBL to toughen its anti-money laundering policies as the regulator faulted the Pakistani bank for not doing enough to track suspicious transactions.

The Thursday order is at least the second time that the Fed has sanctioned the Pakistan-based bank in recent years. In 2013, the Fed ordered United Bank to closely monitor remittances from New York City to Karachi and faulted the bank’s anti-money laundering oversight.