United Texas Bank (UTB) has recently come under fire from the U.S. Federal Reserve for significant deficiencies in its governance, particularly regarding anti-money laundering (AML) laws and risk management associated with virtual currency customers and foreign correspondent banking. An examination conducted in May 2023 uncovered shortcomings in board oversight and senior management’s handling of compliance regulations, prompting the issuance of a cease-and-desist order by the central bank.
The cease-and-desist order mandates that UTB enhance its Bank Secrecy Act (BSA) and anti-money laundering programs to address the identified deficiencies. Furthermore, the institution’s board of directors has been given 90 days to submit a comprehensive plan outlining the steps that will be taken to strengthen oversight and revise its customer due diligence program. These enforcement measures reflect a growing trend of U.S. regulators cracking down on financial institutions with ties to the cryptocurrency industry.
UTB’s situation is particularly noteworthy as it had risen to prominence by accommodating crypto companies left stranded after the collapse of major U.S. lenders like Signature and Silvergate in 2023. The closure of these institutions had already posed challenges for crypto firms in finding banking partners within the U.S. With the recent enforcement actions and regulatory scrutiny, the options have become even more limited, forcing many companies to consolidate around the remaining few willing to work with them or seek offshore services.
The difficulties faced by U.S. crypto firms in securing reliable banking relationships have been exacerbated by ongoing regulatory crackdowns on financial institutions serving the sector. Not only have enforcement actions led to increased oversight and compliance requirements, but they have also prompted banks that were once friendly to the crypto industry to scale back their involvement. This was evident in the case of New York-based Metropolitan Bank, which decided to reduce its crypto services, including severing ties with major clients like Crypto.com.
The cease-and-desist order issued against United Texas Bank by the U.S. Federal Reserve underscores the growing challenges faced by financial institutions catering to the cryptocurrency industry. Compliance failures related to anti-money laundering laws and risk management have put UTB in the regulatory spotlight, signaling a broader trend of increased scrutiny on banks offering services to crypto companies. As regulators continue to crack down on the sector, the availability of banking partners for U.S. crypto firms is expected to further decline, posing significant challenges for the industry’s growth and development.
Leave a Reply