Fed Issues Cease and Desist Order to Texas Bank Over Crypto Services

September 05, 2024 10:02 PM AEST | By Team Kalkine Media

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Fed Issues Cease and Desist Order to Texas Bank Over Crypto Services — Image source: Shutterstock

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The United States Federal Reserve has issued a cease and desist order to United Texas Bank, citing “significant deficiencies” in the bank’s risk management systems and interactions with cryptocurrency clients. The order, issued on September 4, follows an examination conducted by the Fed in May, which uncovered issues with the bank’s corporate governance and oversight by its board of directors and senior management.

The Federal Reserve's order highlighted deficiencies in the bank’s management of foreign correspondent banking and virtual currency customers. Specific concerns included inadequate risk management and lapses in compliance with anti-money laundering laws, including the Bank Secrecy Act (BSA). However, the order did not specify the exact nature of the regulatory non-compliance related to the bank’s dealings with cryptocurrency clients.

Following the Fed’s review, United Texas Bank has taken steps to enhance its adherence to BSA and its Anti-Money Laundering (AML) program. The bank’s board has committed to submitting a formal plan aimed at improving oversight and compliance with BSA/AML requirements.

United Texas Bank, which employs approximately 75 staff members, manages around $1 billion in assets according to its latest quarterly report. This action follows a similar enforcement measure against another {crypto}-friendly institution. On August 8, the Federal Reserve issued a cease and desist order to Customers Bancorp, a Pennsylvania-based bank, citing deficiencies in risk management and AML practices. Customers Bancorp is also working to address these identified issues.

These recent enforcement actions have sparked discussions about a potential coordinated effort by the government to limit banks' involvement with the cryptocurrency industry, referred to by some as “Operation Chokepoint 2.0.” Dan Spuller, head of affairs at the Blockchain Association, characterized the cease and desist order against United Texas Bank as part of this broader initiative.

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