The bank has yet to conform to previous orders the Fed gave it to improve its operations
The US Federal Reserve has issued a cease-and-desist order to the crypto-friendly United Texas Bank, citing issues with the bank’s risk management systems, particularly in relation to its crypto clients. This order from yesterday follows a May examination of the bank, which uncovered weaknesses in its corporate governance and oversight by its board of directors and senior management.
According to the Federal Reserve’s findings, the bank had “significant deficiencies” in managing risks associated with foreign correspondent banking and virtual currency customers. These deficiencies were mainly in the areas of compliance with anti-money laundering (AML) regulations and the Bank Secrecy Act (BSA). However, the order did not specify exactly how United Texas Bank failed to meet these regulatory standards in its dealings with crypto clients.
In response, United Texas Bank has reportedly taken steps to address these issues. The bank’s board of directors has committed to submitting a formal plan to strengthen its oversight and improve compliance with BSA/AML requirements.
With around 75 employees and managing approximately $1 billion in assets, United Texas Bank is relatively small but has garnered attention for its openness to the crypto industry. The recent enforcement action is part of a broader trend, as the Federal Reserve has targeted other crypto-friendly banks, including Customers Bancorp in Pennsylvania, for similar deficiencies.
This series of regulatory moves has raised concerns within the crypto community, with some suggesting it is part of a broader government effort, dubbed “Operation Chokepoint 2.0,” to discourage banks from engaging with the cryptocurrency industry. Dan Spuller of the Blockchain Association views the Fed’s order as a continuation of this strategy.
