The US Fed issued a cease and desist order against cryptocurrency-friendly United Texas Bank

The United States Federal Reserve has issued a cease and desist order against United Texas Bank (UTB), one of the few US financial institutions still serving crypto businesses.

The central bank cited “significant deficiencies” in its governance, particularly in its adherence to anti-money laundering (AML) laws and risk management linked to virtual currency customers and foreign correspondent banking.

AML compliance deficiencies

The order, agreed by UTB and the Federal Reserve, comes after a review conducted in May 2023.

The investigation revealed deficiencies in the Dallas-based company’s board oversight and senior management’s handling of compliance regulations. A statement from the monetary authority highlighted that these deficiencies pose risks to 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 anti-money laundering laws, rules and regulations” , indicated the cease and desist order.

The order requires UTB to improve its Bank Secrecy Act (BSA) and anti-money laundering programs. The Fed has also given the institution’s board of directors 90 days to submit a comprehensive plan that addresses strengthening oversight and reviewing its customer due diligence program.

Scrutiny of crypto banks is intensifying

The latest enforcement action is part of a broader trend by US 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 companies, the institution agreed to increase regulatory oversight after the Fed identified lapses in its anti-money laundering compliance.

UTB had risen to prominence after stepping in to fill the void left by the 2023 collapse of Signature and Silvergate, two of the largest US 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 companies have had to consolidate around the few that remain willing to work with them or seek these services abroad.

US crypto companies have historically 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 scale back their involvement. For example, last year New York-based Metropolitan Bank began scaling back its crypto services, including ties to major clients like Crypto.com.

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