Fed Issues Cease and Desist Order to Crypto-Friendly United Texas Bank

United Texas Bank has caught the attention of the Federal Reserve due to its association with crypto clients. On September 4, the Fed issued a cease and desist order against the crypto-friendly bank, saying that an examination conducted in May 2023 identified “significant deficiencies” related to the bank’s dealings with foreign correspondent banking and crypto clients.

According to the Fed, these deficiencies fell short of legal requirements related to the Bank Secrecy Act (BAS) and Anti-Money Laundering (AML) programs.

“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, including the Bank Secrecy Act,” the Fed said in the order.

The order did not mention how the bank’s crypto activities violated these laws.

Order Agreement 

Meanwhile, the bank has consented to the order and must submit an action plan to rectify these deficiencies within 90 days of the order’s effective date. This action plan will include, among other things, measures to improve customer transaction monitoring, risk-focused assessment for customers, and due diligence related to crypto-related dealings.

United Texas Bank is a full-service bank regulated by the Fed. Its latest quarterly report revealed that it has 75 employees and holds around $1 million in assets.

Regulatory Pressure 

The bank has now joined several US crypto-friendly banks facing regulatory pressures due to their association with crypto clients.

During the same month, in August, the Fed also took regulatory action against Customers Bancorp and its subsidiary Customers Bank in Malvern, Pennsylvania, citing significant deficiencies related to the bank’s digital strategy and instant payments network. The action orders the bank to rectify its AML program and mitigate risks associated with its crypto clients.

Customers Bancorp had been viewed as the preferred bank for crypto clients following the implosion of Signature and Silvergate banks in early 2023.