According to "The Block" report, the U.S. Federal Reserve said that United Texas Bank, a bank with ties to the cryptocurrency industry, had "significant deficiencies" in its cryptocurrency customer and risk management.
The Federal Reserve inspected the Dallas bank in May 2023 and found problems with its governance and oversight of its board of directors and senior management. The central bank stated in the prohibition order issued on Wednesday (4th):
"However, this inspection identified significant deficiencies related to foreign correspondent banking and virtual currency customers, particularly risk management and compliance with applicable laws, rules and regulations related to anti-money laundering ("AML")... "
The Fed added that United Texas Bank has since taken steps to strengthen its bank secrecy laws and anti-money laundering programs. Next, the bank's board of directors is required to submit a written plan describing how it will "increase the board's oversight of the bank's compliance with BSA/AML requirements," including plans to change its "customer due diligence practices."
United Texas Bank has partnered with cryptocurrency companies in the past, specifically with the Stellar Foundation and on Circle’s USDC stablecoin. According to reports, the international fast remittance company MoneyGram will cooperate with Stellar in 2021 to allow users to use USDC to settle payments and convert payments into the user’s local currency. MoneyGram’s network is integrated on the Stellar blockchain, and United Texas Bank is the clearing bank between Circle and MoneyGram.
This is the second time in a month that the Federal Reserve has taken enforcement action against a cryptocurrency-related bank. In August, the Federal Reserve said it found "significant deficiencies" in Customers Bancorp, Inc.'s risk management and compliance with anti-money laundering laws.
Some in the cryptocurrency industry have accused the Fed of implementing so-called Operation Chokepoint 2.0, a term used by some to speculate on the possibility of a broader and coordinated crackdown. Dan Spuller, head of industry affairs at the Blockchain Association, said on the social platform on Wednesday:
"Federal Reserve Enforcement Action: Cease and Desist Order Issued against United Texas Bank in Dallas, Operation Chokepoint 2.0 Continues."
@FederalReserve Enforcement Action: A Cease and Desist Order for United Texas Bank in Dallas as Operation#Chokepoint2.0 Continueshttps://t.co/ZeNCsiyevn
— Dan Spuller (@DanSpuller) September 4, 2024
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