US Federal Reserve orders Union Bank of Texas to cease crypto activities due to AML and BSA risk management failures

The United States Federal Reserve has issued a cease and desist order to United Texas Bank, highlighting significant concerns over the bank's risk management, particularly in its dealings with cryptocurrency clients.

This order, dated 4th September 2024, follows a May examination of the bank. It revealed issues in corporate governance, particularly within the board of directors and senior management, leading to a lack of oversight. The Federal Reserve identified notable deficiencies in the bank's risk management, especially regarding foreign correspondent banking and virtual currency customers. Compliance with anti-money laundering (AML) measures and the Bank Secrecy Act (BSA) was found lacking.

Despite the severity of the findings, the order does not detail specific failures concerning crypto regulations. United Texas Bank has since initiated steps to rectify these issues. The bank's board of directors has committed to improving oversight of its BSA and AML compliance.

Fed bans have huge impact on other banks

Niko Demchuk, head of legal at AMLBot, commented that such enforcement actions have far-reaching effects beyond the involved bank. He noted that other banks would closely monitor this case to enhance their AML processes. The reference to crypto assets in the order is likely to trigger broader scrutiny among banks dealing with digital currencies. Demchuk believes that banks with robust AML systems should not be overly concerned but acknowledges the current lucrative state of the crypto market, prompting many banks to explore crypto partnerships.

Federal Reserve tightens controls on bank crypto assets

United Texas Bank, with 75 employees and around $1 billion in managed assets, is the latest in a series of banks to face regulatory action related to cryptocurrency. This is part of a broader trend of increased regulatory scrutiny on banks involved with crypto assets.

source：VISBANKING

In early August, the Federal Reserve also issued a similar order to Customers Bancorp and its subsidiary, Customers Bank, in Pennsylvania, for deficiencies in their risk management and AML practices. These actions have sparked debates within the crypto community, with some suggesting a coordinated effort by the U.S. government to limit crypto’s access to traditional banking services.