Recently, the U.S. Federal Reserve has taken action against United Texas Bank (UTB) due to what they described as “significant deficiencies” in the bank’s governance. These deficiencies were primarily related to the bank’s adherence to anti-money laundering (AML) laws and its management of risk associated with virtual currency customers and foreign correspondent banking.
The cease-and-desist order, which was agreed upon by UTB and the Federal Reserve, follows an examination that took place in May of 2023. During the investigation, it was revealed that the Dallas-based institution lacked proper oversight from its board and senior management in terms of complying with regulations.
As a result of the order, UTB is now obligated to improve its Bank Secrecy Act (BSA) and anti-money laundering programs. The bank’s board of directors has been given a 90-day deadline to implement a comprehensive plan that addresses the weaknesses in oversight and revises its customer due diligence program.
This enforcement action is part of a larger trend where U.S. regulators are targeting financial institutions with ties to the cryptocurrency industry. UTB, which had become a prominent banking partner for crypto companies following the collapse of other lenders, is now under scrutiny for its compliance failures.
Challenges for Crypto Firms
The closure of banks like Signature and Silvergate has left many crypto companies struggling to find banking partners in the U.S. The remaining institutions that are willing to work with the sector are now facing increased regulatory pressure, leading some to scale back their services.
The Federal Reserve’s cease-and-desist order against United Texas Bank serves as a stern reminder to financial institutions about the importance of compliance with anti-money laundering laws and regulations. This enforcement action highlights the challenges that crypto companies face in securing reliable banking relationships in the current regulatory environment.
