Customers Bank, once called crypto’s “favourite bank,” has agreed to stringent monitoring after the Federal Reserve found “deficiencies” related to the bank’s compliance with US sanctions and laws meant to combat money laundering.
Among other things, Customers will have to give the Federal Reserve 30 days notice before “any new strategic initiative, product, service, or relationship with third parties” related to its crypto business.
After the 2023 collapse of Signature and Silvergate banks, many crypto businesses turned to Customers, according to a 2023 Bloomberg report that referred to it as “crypto’s new favourite bank.”
The bank has tried to downplay those ties, however, capping deposits in its Customers Bank Instant token, according to Bloomberg, and removing from its website a webpage offering crypto businesses real-time payments and a 2021 press release touting a list of “inaugural institutional crypto clients.”
Last month, CoinDesk reported the bank had dropped a number of crypto hedge funds it had counted as customers.
The most recent examination of Customers’ business by the Fed’s regional branch in Philadelphia found “significant deficiencies related to the Bank’s risk management practices,” as well as compliance with the Bank Secrecy Act, anti-money laundering laws, and sanctions issued by the Treasury Department’s Office of Foreign Assets Control, or OFAC.
The bank has entered a “written agreement” with the Federal Reserve — one of several types of “enforcement action” — to beef up compliance, know-your-customer procedures, suspicious activity monitoring, and risk management with regards to its crypto business.
The Federal Reserve did not detail the ways in which Customers Bank was deficient in its risk management or compliance.
The Pennsylvania-based subsidiary of Customers Bancorp Inc. is the 80th-largest bank in the US, with $21 billion in assets under management, according to the Federal Reserve.
Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.