Fed hits Texas bank with cease and desist over servicing crypto firms

The United States Federal Reserve has slapped the crypto-friendly United Texas Bank with a cease and desist order citing “significant deficiencies” in the bank’s risk management systems and its dealings with its crypto clients.

In a Sept. 4 cease and desist order , the Fed said it had examined United Texas Bank in May and found issues with its corporate governance structure and “oversights” by the bank’s board of directors and senior management. 

“The Examination identified significant deficiencies related to foreign correspondent banking and virtual currency customers, specifically risk management and compliance with applicable laws, rules, and regulations relating to anti-money laundering including the Bank Secrecy Act," wrote the Fed in its order. 

The Fed said it had identified “significant deficiencies” in the bank’s dealings. Source: Federal Reserve

Notably, the order did not outline how the bank had not been in compliance with regulations concerning its crypto clients. 

The Fed added that United Texas Bank had since taken further measures to bolster its adherence to the Bank Secrecy Act (BAS) as well as its anti-money laundering (AML) program. 

The order noted that the bank’s board of directors had agreed to submit a formal plan on how it will “strengthen board oversight” of its compliance with BSA/AML requirements. 

United Texas Bank currently has 75 employees and manages a total of around $1 billion in assets, according to its latest quarterly report . 

The Federal Reserve issued a similar enforcement action against another crypto-friendly bank in August. 

On Aug. 8, the Fed said it identified significant deficiencies in the risk management systems of the Pennsylvania-based Customers Bancorp and its subsidiary Customers Bank.

Customers Bank did not do well on “recent examinations and inspection” by the Philadelphia Federal Reserve Bank and is already taking measures to address deficiencies the Fed identified in the bank’s management and AML practices, according to its respective C&D order.

Related: Banks face new risks from permissionless blockchains, BIS warns

The recent spate of enforcement actions has reignited accusations that the government is engaged in a coordinated campaign to block banks from engaging with the crypto industry, something its adherents call “Operation Chokepoint 2.0”

Dan Spuller, the head of affairs at crypto advocacy group Blockchain Association, said the cease and desist order against United Texas Bank was the continuation of “Operation Chokepoint.

Source: Dan Spuller

Magazine: Bitcoiners are ‘all in’ on Trump since Bitcoin ’24, but it’s getting risky