In a recent development, the Federal Reserve issued a cease and desist order to United Texas Bank (UTB) on Aug. 29, demanding it to halt the offering of cryptocurrency services. This action came after a thorough examination carried out by the Federal Reserve Bank of Dallas and the Texas Department of Banking earlier in May 2023. The examination uncovered various issues related to the bank’s corporate governance, oversight, and compliance with anti-money laundering (AML) regulations.
The examination by the financial authorities highlighted deficiencies in UTB’s risk management practices and compliance with the Bank Secrecy Act (BSA) and AML requirements. Specifically, the bank was found to have shortcomings in its handling of foreign correspondent banking and virtual currency customers. As a result, the Federal Reserve mandated that UTB must develop and submit plans to address these deficiencies within a strict timeframe.
Under the directives of the cease and desist order, UTB’s board of directors has been given 90 days to draft a plan demonstrating compliance with BSA and AML regulations. Additionally, the bank faces a shorter deadline of 60 days to fulfill a broader set of requirements, including enhancing board oversight of BSA and AML policies compliance, implementing a corporate governance plan based on third-party recommendations, and revising the BSA/AML compliance program.
Moreover, UTB is required to establish an improved customer due diligence program, enhance its suspicious activity monitoring and reporting system, and ensure compliance with Office of Foreign Assets Control (OFAC) regulations within 60 days. The bank must also provide quarterly progress reports outlining its efforts to comply with the orders.
The crackdown on UTB by the Federal Reserve is part of a wider initiative aimed at monitoring and regulating the cryptocurrency industry. This move has raised concerns within the crypto community, with some industry insiders alleging that the enforcement actions are part of an overarching strategy by the U.S. government to clamp down on the crypto sector. The incident involving UTB has drawn comparisons to previous initiatives, such as Operation Choke Point, and fueled suspicions about government interference in the industry.
The recent actions taken by the Federal Reserve against United Texas Bank reflect a growing trend of regulatory scrutiny and compliance requirements in the cryptocurrency sector. UTB’s response to these directives and its ability to address the identified deficiencies will be closely monitored by financial authorities and market observers.
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