Nikolas Sargeant
The Federal Reserve has taken decisive action against United Texas Bank in Dallas, issuing a cease-and-desist order on Wednesday. This move targets the crypto-friendly bank's apparent failures in maintaining adequate anti-money laundering (AML) safeguards, particularly concerning its cryptocurrency clients.
Agreeing to the order to avoid formal proceedings, United Texas Bank's management must now develop and submit a comprehensive five-part action plan within 90 days. This plan aims to address the AML compliance issues, with a focus on proper staffing and regular reviews of personnel needs.
The Fed's order highlighted several areas of concern, including governance, customer due diligence, and monitoring of suspicious activities, especially in relation to cryptocurrency transactions. This development suggests that while United Texas Bank sought to cater to virtual asset businesses, its risk management and compliance measures fell short of regulatory expectations.
Parallel Compliance Crackdown on Customers Bank
In a similar vein, Customers Bank recently faced its own regulatory challenges. The Federal Reserve mandated that this crypto-friendly institution bolster its compliance with anti-money laundering laws and adhere to Bank Secrecy Act standards. Additionally, Customers Bank was instructed to enhance its risk management practices for digital assets.
The Fed's intervention came after identifying significant deficiencies, resulting in an enforcement action requiring Customers Bank to submit detailed plans for improvement.
Regulatory Pressure Reshapes Crypto Banking Landscape
The intensifying regulatory scrutiny is causing a shift in the banking sector's approach to cryptocurrency businesses. The collapse of crypto-friendly banks like Signature and Silvergate has underscored the inherent risks associated with serving digital asset companies.
Regulatory bodies, including the Federal Reserve and FDIC, are now imposing stricter compliance measures, particularly in the realms of anti-money laundering and Bank Secrecy Act regulations. This heightened focus stems from concerns over potential money laundering, fraud, and the volatility of cryptocurrencies, which pose substantial financial and legal risks to banks.
As domestic banking options dwindle, cryptocurrency firms are exploring alternative avenues, such as international banking partnerships or developing proprietary financial systems. This transition presents both challenges and opportunities, potentially accelerating the crypto industry's move towards more decentralized financial structures.
