Crypto Friendly Evolve Bank Under Scrutiny: Cease and Desist Order Issued 

The Federal Reserve and Arkansas State Bank Department have mandated sweeping reforms at Evolve Bank & Trust following significant compliance breaches. The order highlights issues in anti-money laundering efforts and consumer protection, especially in its dealings with fintech companies and prominent crypto players like FTX.

Compliance Concerns Trigger Regulatory Action Against Evolve Bank

Evolve Bank & Trust, based in West Memphis, Arkansas, has entered a cease-and-desist agreement after federal and state regulators uncovered inadequate risk management and compliance systems.

According to the U.S. central bank, these deficiencies primarily concern the bank’s Open Banking Division, which facilitates services for various fintech partners. This arrangement, the Federal Reserve detailed, has led to substantial regulatory scrutiny, impacting both consumer operations and broader financial stability.

The scrutiny further extends to Evolve’s role within the crypto sector, serving as a banking partner to Blockfi and providing financial services to FTX customers. Evolve reportedly lacked a direct connection with Blockfi; instead, it collaborated with Deserve, a credit card platform, to issue Blockfi credit cards.

The court filing reports that recent examinations have exposed that Evolve’s lax controls around anti-money laundering and consumer protection may have indirectly affected these partnerships.

“Supervisors conducted a further examination of the Bank, issued on January 10, 2024, that identified additional deficiencies with respect to the bank’s risk management and compliance with applicable laws, rules, and regulations relating to anti-money laundering, including the Bank Secrecy Act; the rules and regulations issued thereunder by the U.S. Department of the Treasury,” the cease and desist order states.

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