The Federal Reserve recently issued a cease and desist order to United Texas Bank, instructing them to halt their cryptocurrency services. This directive came after an examination carried out by the Federal Reserve Bank of Dallas and the Texas Department of Banking uncovered various deficiencies in UTB’s operations. The evaluation highlighted shortcomings in the bank’s corporate governance, oversight, and adherence to anti-money laundering (AML) regulations. Additionally, concerns were raised regarding UTB’s management of foreign correspondent banking activities and virtual currency clients.
In response to the identified deficiencies, United Texas Bank is required to submit several compliance plans within a strict timeline. Within 90 days of the issuance of the order on August 29, UTB’s board of directors must present a comprehensive plan that demonstrates compliance with the Bank Secrecy Act (BSA) and AML regulations. Furthermore, the bank must address a broader set of requirements within 60 days, including strengthening board oversight of BSA and AML policies, developing a corporate governance plan based on third-party recommendations, and revising their BSA/AML compliance program.
In addition to these measures, United Texas Bank must also design an improved customer due diligence program, enhance their suspicious activity monitoring and reporting system, and devise a strategy to bolster compliance with Office of Foreign Assets Control (OFAC) regulations – all within a 60-day period. Furthermore, UTB is mandated to submit quarterly progress reports detailing their efforts to comply with the regulatory orders. It is worth noting that the bank has already initiated steps to fortify its BSA/AML compliance program and reduce its risk exposure following the examination.
The regulatory action taken by the Federal Reserve against United Texas Bank is not an isolated incident within the cryptocurrency sector. Customers Bank, a Pennsylvania-based institution known for its crypto-friendly approach, was also subject to enforcement action by the Fed for similar reasons. This crackdown has raised concerns within the industry, with Gemini’s co-founder highlighting the continuity of “Operation Choke Point 2.0.” This initiative, as elucidated by U.S. Senator Bill Hagerty, is believed to be a concerted effort by the Biden administration to curb the growth of the crypto industry through regulatory constraints.
