TechFlow reported on September 5 that the U.S. Federal Reserve (Fed) issued a cease and desist order to United Texas Bank on September 4, stating that the bank had serious risk management system deficiencies in its crypto client business. The decision was based on a review conducted in May this year, which revealed problems with the bank's corporate governance structure, board and senior management supervision, foreign agent banking, and virtual currency client services.
The Fed specifically highlighted the bank's "significant deficiencies" in its anti-money laundering (AML) measures and Bank Secrecy Act (BSA) compliance. In response, United Texas Bank's board of directors has agreed to submit a plan to strengthen BSA/AML compliance oversight. The bank's latest quarterly report shows that it has 75 employees and manages approximately $1 billion in assets.
Niko Demchuk, legal director at crypto compliance firm AMLBot, told Decrypt that the impact of such cease and desist orders goes far beyond the recipient and its customers. "Each cease and desist order plays an important role in the market," he noted. "Other banks will work to gain more insights into where exactly they are not compliant with current AML regulations to improve their own internal AML processes." Demchuk added that the mention of crypto assets will serve as a warning to other banks dealing with crypto assets to review their risk management systems to ensure that all risks are considered and mitigated.
