The Federal Reserve has issued a cease and desist order against United Texas Bank, a financial institution known for its dealings in the cryptocurrency sector. The action was prompted by the bank’s poor risk management practices and identified deficiencies in its operations related to cryptocurrency clients.
In a report dated September 4, the Fed detailed findings from an investigation conducted in May, which revealed shortcomings in the bank’s governance structure. The order indicated that the bank’s board of directors and senior management had failed to adequately oversee the compliance of their operations involving foreign correspondent banking and virtual currency customers. Specific concerns were raised regarding the bank’s adherence to anti-money laundering regulations and the Bank Secrecy Act.
While the order did not specify the exact regulatory violations pertaining to the crypto clients, the Fed noted that United Texas Bank had already initiated steps to enhance its compliance measures. The bank’s board is expected to present a formal plan aimed at improving oversight of its compliance with legal requirements, particularly those related to the Bank Secrecy Act and anti-money laundering protocols.
United Texas Bank, which employs around 75 staff members, manages approximately $1 billion in assets. This regulatory action follows a similar enforcement initiative by the Fed against another bank, Customers Bancorp, that was issued a cease and desist order in August for comparable risk management deficiencies.
These recent measures have led to renewed discussions about potential systemic efforts to restrict banks’ interactions with the cryptocurrency industry, a phenomenon some industry advocates have termed “Operation Chokepoint 2.0.” This perception has sparked concern about the evolving regulatory landscape for crypto-friendly financial institutions and their operations in the United States.
