As a seasoned analyst with decades of experience navigating the intricacies of the financial sector, I find myself increasingly concerned about the ongoing saga of crypto banks and their regulatory woes. The latest cease-and-desist order issued against United Texas Bank (UTB) by the Federal Reserve is yet another chapter in this tumultuous narrative, highlighting the challenges these institutions face in adhering to anti-money laundering (AML) laws and maintaining robust risk management practices.
The U.S. Federal Reserve has instructed United Texas Bank (UTB) – one of the few U.S. banks that continue serving cryptocurrency businesses – to halt its operations in this area.
As an analyst, I’ve come across a statement from the central bank highlighting substantial issues in their governance structure, primarily focusing on compliance with Anti-Money Laundering (AML) regulations and effective risk management associated with virtual currency users and foreign correspondent banking.
AML Compliance Deficiencies
As a researcher, I’m sharing that the sequence we’re implementing today, following an agreement between UTB and the Federal Reserve, is a result of the comprehensive evaluation conducted in May 2023.
The investigation revealed the Dallas-based company’s shortcomings in board oversight and senior management’s handling of compliance regulations. A statement from the monetary authority highlighted that these deficiencies pose risks in foreign correspondent banking and virtual currency clientele.
In the report, it was found that there were major issues in areas such as foreign correspondent banking and dealing with virtual currency clients, particularly when it came to risk management and adherence to laws, regulations, and anti-money laundering rules.” The cease-and-desist order indicated.
The directive requires UTB to improve its Bank Secrecy Act (BSA) and anti-money laundering measures. In addition, the institution’s board of directors has been granted 90 days to submit a detailed plan that focuses on enhancing supervision and revising their customer due diligence protocol.
Scrutiny of Crypto Banks Intensifies
The most recent regulatory move is consistent with a wider pattern, where American authorities are focusing on financially-linked entities associated with the cryptocurrency sector.
As a researcher, I recently discovered that last month, a bank based in Pennsylvania, Customers Bank, found itself under increased scrutiny from the Federal Reserve. Previously known as a favored partner for cryptocurrency companies, this institution agreed to stricter regulatory supervision following the identification of gaps in their anti-money laundering compliance by the Fed.
As a crypto investor, I’ve noticed the rise of UTB in the limelight, stepping up to bridge the void created by the fall of Signature and Silvergate in 2023. These two significant U.S. lenders were once pillars in our sector before they ceased operations.
Due to the shutdown of these institutions, crypto businesses in the U.S. have found it challenging to locate banking collaborators. Consequently, many companies have merged towards the limited number of those still willing to work with them domestically, or they’ve resorted to sourcing such services overseas.
Over time, cryptocurrency companies based in the U.S. have encountered difficulties in establishing dependable partnerships with banks. This issue has become more pronounced as regulatory bodies intensify their efforts to restrict financial institutions that cater to this particular industry.
As a crypto investor, I’ve noticed that the crackdown on crypto-related activities by institutions has led some banks, which were previously supportive of cryptocurrencies, to diminish their involvement. For example, last year, Metropolitan Bank in New York started winding down its crypto services, even severing connections with prominent clients like Crypto.com.
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2024-09-08 00:36