The U.S. Federal Reserve has issued a stop and desist order to United Texas Financial institution (UTB), one of many few U.S. monetary establishments that continues to offer companies to cryptocurrency firms.
The central financial institution cited “vital deficiencies” in governance, significantly in compliance with anti-money laundering legal guidelines (AML) and threat administration associated to cryptocurrency purchasers and overseas correspondent banking actions.
AML Compliance Deficiencies
The order, agreed to by UTB and the Federal Reserve Board, was issued following an investigation carried out in Could 2023.
investigation Revealed The Dallas-based firm was discovered to have had deficiencies in its board oversight and senior administration’s response to regulatory compliance, the monetary regulator’s assertion careworn, posing dangers to overseas correspondent banking and cryptocurrency purchasers.
“The investigation revealed vital deficiencies concerning the Firm’s compliance with relevant legal guidelines, guidelines and laws referring to overseas correspondent banking companies and cryptocurrency purchasers, significantly these associated to threat administration and anti-money laundering,” the stop and desist order reads.
The order requires UTB to strengthen its Financial institution Secrecy Act (BSA) and anti-money laundering packages, and the Fed has given the financial institution’s board of administrators 90 days to submit a complete plan that features strengthening oversight and reviewing its buyer due diligence program.
Cryptocurrency banks come beneath elevated scrutiny
The enforcement motion is a part of a broader pattern of U.S. regulators focusing on monetary establishments with ties to the cryptocurrency trade.
Final month, Pennsylvania-based monetary establishment Prospects Financial institution confronted the same investigation from the Federal Reserve. The financial institution, as soon as a most well-liked associate for cryptocurrency firms, agreed to elevated regulatory oversight after the Fed recognized anti-money laundering deficiencies.
UTB drew consideration in 2023 when it stepped in to fill the void created by the collapse of Signature and Silvergate, two of the biggest U.S. monetary establishments beforehand servicing the cryptocurrency sector.
With these monetary establishments closed, cryptocurrency firms have struggled to seek out banking companions within the U.S., forcing many to consolidate across the few remaining banks keen to work with them or search such companies overseas.
Traditionally, U.S. crypto firms have confronted challenges in securing reliable banking relationships, a scenario that has solely worsened as regulators proceed to crack down on monetary establishments servicing the sector.
Enforcement actions in opposition to these establishments have additionally compelled as soon as crypto-friendly banks to reduce their involvement. New York-based Metropolitan Financial institution, for instance, started scaling again its crypto-related companies final yr, together with ties to main purchasers like Crypto.com.
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