The U.S. Federal Reserve has issued a cease-and-desist order against United Texas Bank (UTB), one of the few remaining American financial institutions still catering to crypto companies.
The central bank cited “significant deficiencies” in its governance, particularly in its adherence to anti-money laundering (AML) laws and risk management tied to virtual currency customers and foreign correspondent banking.
AML Compliance Deficiencies
The order, agreed upon by UTB and the Federal Reserve, comes after an examination conducted in May 2023.
The investigation revealed the Dallas-based company’s shortcomings in board oversight and senior management’s handling of compliance regulations. A statement from the monetary authority highlighted that these deficiencies pose risks in foreign correspondent banking and virtual currency clientele.
“Whereas, the examination identified significant deficiencies related to foreign correspondent banking and virtual currency customers, specifically risk management and compliance with applicable laws, rules, and regulations relating to anti-money laundering,” the cease-and-desist order stated.
The order obligates UTB to enhance its Bank Secrecy Act (BSA) and anti-money laundering programs. The Fed has also given the institution’s board of directors 90 days to file a comprehensive plan that addresses strengthening oversight and revising its customer due diligence program.
Scrutiny of Crypto Banks Intensifies
The latest enforcement action is part of a broader trend of U.S. regulators targeting financial institutions with ties to the cryptocurrency industry.
Last month, Customers Bank, a Pennsylvania-based lender, came under similar scrutiny from the Federal Reserve. Once a preferred partner for crypto firms, the institution agreed to increased regulatory oversight after the Fed identified lapses in its anti-money laundering compliance.
UTB had gained prominence after stepping in to fill the gap left by the collapse of Signature and Silvergate in 2023, two of the largest U.S. lenders that previously served the crypto sector.
With the closure of these institutions, crypto companies have struggled to find banking partners in the U.S. Many firms have had to consolidate around the few remaining ones willing to work with them or seek such services offshore.
Historically, U.S. crypto firms have faced challenges in securing reliable banking relationships. This has worsened as regulators continue their crackdown on financial institutions serving the sector.
Enforcement actions against these institutions have also pushed once crypto-friendly banks to reduce their involvement. For instance, last year, New York-based Metropolitan Bank began scaling back its crypto services, including ties with major clients like Crypto.com.