The U.S. Federal Reserve recently issued a cease-and-desist order against United Texas Bank (UTB), citing “significant deficiencies” in governance related to anti-money laundering (AML) laws and risk management for virtual currency customers and foreign correspondent banking. This order comes after an examination conducted in May 2023, revealing shortcomings in board oversight and senior management’s handling of compliance regulations.
The order obligates UTB to enhance its Bank Secrecy Act (BSA) and anti-money laundering programs, highlighting the need for improved compliance with applicable laws, rules, and regulations. The institution’s board of directors has been given 90 days to file a comprehensive plan addressing strengthening oversight and revising the customer due diligence program.
This enforcement action is part of a broader trend of U.S. regulators targeting financial institutions with ties to the cryptocurrency industry. Institutions like Customers Bank have also faced increased regulatory oversight for lapses in anti-money laundering compliance. UTB, once a preferred partner for crypto firms, stepped in to fill the gap left by the collapse of other major U.S. lenders serving the sector.
The closure of major institutions like Signature and Silvergate has left many crypto companies struggling to find banking partners in the U.S. The regulatory crackdown on financial institutions serving the sector has made it increasingly difficult for crypto firms to secure reliable banking relationships. This has led to consolidation around a few remaining banks willing to work with them or seeking services offshore.
The enforcement actions against financial institutions have also pushed once crypto-friendly banks to reduce their involvement in the sector. Institutions like Metropolitan Bank have started scaling back their crypto services, including ties with major clients. This shift in banking services has further complicated the landscape for crypto companies operating in the U.S.
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