SBP fines four banks with Rs272mln on noncompliance

KARACHI: The central bank has slapped around Rs272 million worth of penalties on four commercial banks for noncompliance with various legal obligations, it said on Wednesday amid a latest four-month reprieve given by the global financial watchdog to Pakistan.

The State Bank of Pakistan (SBP) slapped the fines of Rs271.6 million in the first quarter (July-September) of the current fiscal year of 2019/20 as the banks failed to comply with the regulatory instructions related to customer due diligence, anti-money laundering, foreign exchange and general banking operations.

“These actions are based on deficiencies in the compliance of regulatory instructions and do not constitute a comment on the financial soundness of the entity,” the SBP said.

The banks include BankIslami, Soneri Bank, Bank of Punjab and Al Baraka Bank Pakistan.

Last week, Pakistan stayed on the Financial Action Task Force (FATF) grey list of countries with deficiencies in anti-money laundering (AML) and combating the financing of terrorism laws (CFT). The country was given February next as the deadline to meet all the remaining six action plans in the list of 27.

Since the country largely met the action plans, the FATF ruled out any possibility of Pakistan falling into the black list.

BankIslami was slapped with the biggest fine of Rs116.3 million followed by Al Baraka Bank (Rs86.1 million), Soneri Bank (Rs59.2 million) and Bank of Punjab (Rs10 million).

Apart from the penal action, the central bank advised these banks to improve their practices and strengthen process to avoid recurrence of such violations in future.

Bank Al Baraka was advised to conduct an internal inquiry on breaches of regulatory instructions and take disciplinary action against the delinquent officials.

In the past too, the banks have faced fines for violating customer, due diligence, know your customer laws and flaws in their general banking and foreign exchange operations.

One bank was fined for breaching anti-money laundering regulations.

Pakistan is a member of the Asia Pacific Group, which is a regional body of FATF and requires its members to undergo mutual evaluation on the compliance of its anti-money laundering and countering the financing of terrorism framework.

The country usually receives reprieve from the FATF. The last one it got was in February when the lockdown led by coronavirus pandemic upturned the global economy as a whole.

The country’s economy was not hurt when it remained in the grey list in 2008, 2012 and 2015.

Pakistan had been on the FATF grey list till February 2015 and yet the country made some huge international transactions such as bond issue, sukuk issue and privatisation.