US Fed Hits Crypto-Friendly Texas Bank With Cease and Desist Order Due To ‘Oversight’ Issues
- The US Federal Reserve issued a cease and desist order after identifying significant deficiencies' in United Texas Bank's crypto dealings.
- The bank's management must now submit a plan within 90 days to meet anti-money laundering (AML) regulations.
- US crypto firms are looking to international banks to partner with amid tighter compliance pressures, especially in AML and Bank Secrecy Act (BSA) regulations.
The Fed identified significant deficiencies' in the United Texas Bank's risk management and dealings with crypto customers.
After examining the crypto-friendly bank and finding oversights' by the bank's senior management, the Fed issued a cease and desist order on September 4.
Read on to find out how increasing oversight affects the relationship between banks and crypto businesses.
Fed Ordered United Texas Bank to Strengthen ComplianceA cease and desist order is a legal request to stop an illegal or allegedly illegal activity.The cease and desist order mandated that the United Texas Bank's board of directors submit a detailed action plan to strengthen its compliance with BSA and AML requirements.
The formal plan must include regular reviews and proper staffing and should be submitted in 90 days. United Texas Bank has 75 employees and manages about$1M in total assets, as per its latest quarterly report.
Banks Reconsider Crypto Relationships Amid Increasing Regulatory PressuresThe closures of Silvergate and Signature - two other crypto-friendly banks - have highlighted the increasing challenges associated with crypto businesses. With fewer options domestically, US crypto companies are looking to international banks to partner with.
The Head of Industry Affairs at Blockchain Association, Dan Spuller, recently tweeted the cease and desist order shows that Operation Chokepoint 2.0' is ongoing. Operation Chokepoint 2.0' refers to the government's perceived efforts to block banks from engaging with crypto businesses.
@FederalReserve Enforcement Action: A Cease and Desist Order for United Texas Bank in Dallas as Operation #Chokepoint 2.0 Continues
- Dan Spuller (@DanSpuller) September 4, 2024
In early August, the Fed took similar action against Pennsylvania-based Customers Bancorp and Customers Bank, identifying deficiencies in AML practices and risk management.
Looking AheadBanks are becoming more cautious amid tightening compliance pressures. Stricter regulatory oversight might lead crypto businesses to develop their own financial systems orturn to foreign banks.
Either way, it might facilitate the financial industry to become more decentralized.
References- Material Loss Review of Signature Bank of New York (fdicoig.gov)
- Cease and Desist Order Issued (federalreserve.gov)
- United States Of America Before The Board Of Governors Of The Federal Reserve System Washington, D.C. (federalreserve.gov)
- United Texas Bank Reports (visbanking.com)
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