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FDIC Enforcement Decisions and Orders

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{{10-31-92 p.I-61}}
   [8018] In the Matter of National Bank of Pakistan, Karachi, Pakistan, Chicago, Illinois Branch, Docket Nos. FDIC-92-183c&b, 92-065-B-FB, 92-065-CMP-FB (8-11-92).

   Board denies request for a private hearing because bank has not demonstrated how its situation is so different from other institutions' as to warrant special treatment. Allegation of innocence and concern for the Bank's specialized clientele do not demonstrate that a private hearing would be in the public interest.

   [.1] Practice and Procedure—Hearings—Public or Private
   Private hearings may be granted on the basis of safety and soundness concerns; it is Respondent's burden to show that its situation differs so significantly from those involving other banks as to warrant special treatment.

In the Matter of

NATIONAL BANK OF PAKISTAN
Karachi,Pakistan
(Foreign Bank)
and
NATIONAL BANK OF PAKISTAN
Karachi,Pakistan
Chicago, Illinois Branch
(State Licensed Insured Branch of a
Foreign Bank)
DECISION AND ORDER OF THE
FEDERAL DEPOSIT INSURANCE
CORPORATION ON REQUEST FOR
PRIVATE HEARING

FDIC-92-183c&b
92-065-B-FB
92-065-CMP-FB

BACKGROUND

   On June 17, 1992, the Federal Deposit Insurance Corporation ("FDIC") and the Board of Governors of the Federal Reserve System ("FRB") jointly issued a Notice of Charges and of Hearing and Notice of Assessment of a Civil Money Penalty Issued Pursuant to Sections 8(b) and 8(i) of the {{10-31-92 p.I-62}}Federal Deposit Insurance Act, as Amended ("Notice"), and a Temporary Cease and Desist Order Issued Pursuant to Section 8(c) of the Federal Deposit Insurance Act, as Amended. The Notice alleged that the Chicago, Illinois, branch of the National Bank of Pakistan, Karachi, Pakistan ("Bank"), was engaged in violations of the Bank Secrecy Act and sought the issuance of a cease and desist order and assessment of civil money penalties.
   On July 6, 1992, the Bank filed a Response to the Notice containing a request for a private hearing (paragraph 18). That request stated:

    [A] public hearing will not be in the public interest as the statements contained in the Notice of Charges do not accurately reflect the business operations of National Bank of Pakistan, Chicago Branch, nor do such statements accurately reflect the intention of the National Bank of Pakistan and its branches located in the United States to comply fully with all requirements of both State and Federal regulatory authorities.

   In addition, on July 6, the Bank sent a letter to the FRB, with a copy to the FDIC, requesting a private hearing.1

That letter also alleged that a private hearing was required because the charges were unfounded. However, it also emphasized the importance of the Bank to Pakistanis residing in the United States and to American business people doing business in Pakistan, the Middle East, and Asia. The letter alleged that the Pakistani community in this country is a "tightly knit one," and that loss of confidence in the Bank would disrupt activities beyond the Chicago Branch's local operations.
   On July 20, 1992, FDIC Enforcement Counsel filed an Opposition to the request for a private hearing. FRB Enforcement Counsel had previously filed an Opposition. Neither counsel responded to the arguments raised in the July 6, 1992 letter, although they did respond to the contention in paragraph 18 of the Bank's Response of that same date.

DISCUSSION

   [.1] In In the Matter of The Citizens Bank of Clovis, Clovis, New Mexico, FDIC-91-406b, 2 FDIC Enf. Dec. & Ord. (P-H) ¶8012 (March 2, 1992), the Board of Directors ("Board") of the FDIC set forth the standard for judging requests for private hearings. Because of the presumption in 12 U.S.C. § 1818(u)(2) in favor of public hearings, the Board concluded that private hearings should be granted on the basis of safety and soundness concerns. Furthermore, in order to justify a request for a private hearing, "a bank needs to demonstrate in concrete fashion how the effects of [a particular] proceeding differ so significantly from those involving other banks as to warrant special treatment." Id. at I-48.
   Reviewed under this standard, the Board must deny the request for a private hearing. Essentially, the Bank bases its request on two factors: (1) its alleged innocence of the charges leveled against it, and (2) the reaction of the Pakistani community.
   This first factor—alleged innocence— does not distinguish the Bank from other banks involved in similar proceedings and cannot serve as justification for the request. If the Board were to grant private hearings based on a respondent's protestations of innocence, there would be no public hearings at all, because all respondents would use that allegation to avoid the public hearing. The purpose of the statute would be completely undermined.
   Reliance on the second factor is also misplaced. Although the thrust of the Bank's argument concerning the Pakistani community is unclear to the Board, the Bank appears to argue that publicity will cause a run on the Bank or a loss of business. If the Board has correctly understood the Bank's contention, it is not factually based and must be rejected as purely speculative. The Citizens Bank of Clovis, ¶8012, at I-48. This type of speculation does not distinguish this proceeding from any other, and granting a private hearing based on it would totally undercut the purpose of the statute. Ibid.
   Moreover, at least some of the discussion in the July 6, 1992, letter undercuts the Bank's argument. If the Bank is correct in asserting that the Pakistani community is tightly knit and that the Bank has a particular importance to those people, it seems unlikely that allegations of violations of the Bank Secrecy Act would cause persons engaged in legitimate banking


1 This letter was apparently served on enforcement counsel for both agencies.
{{11-30-92 p.I-63}}activities to desert the Bank. Presumably, the Bank serves their particular needs in a way in which no other bank is able. Accordingly, the allegations furnished by the Bank in support of its request for a private hearing fail to convince the Board that such a hearing is required by the public interest.

ORDER

   For the foregoing reasons, it is hereby ORDERED that the request for private hearing is DENIED.
   By direction of the Board of Directors.
   Dated at Washington, D.C., this 11th day of August, 1992.

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