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The United States Federal Reserve has ordered United Texas Bank to cease certain operations, citing significant issues in its handling of cryptocurrency clients and risk management practices. This action comes after a May review, where the Fed identified weaknesses in the bank’s governance and oversight.
In its September 4 cease-and-desist order, the Fed pointed to major deficiencies related to foreign correspondent banking and virtual currency customers. The bank failed to comply with essential regulations concerning anti-money laundering (AML) measures and the Bank Secrecy Act (BSA). However, the Fed did not specify exactly how the bank fell short in its dealings with crypto clients.
In response to the order, United Texas Bank has already implemented measures to improve its compliance. The bank’s board of directors agreed to create a formal plan to enhance oversight and ensure strict adherence to BSA and AML requirements.
United Texas Bank, which employs 75 people and manages around $1 billion in assets, is working to align itself more closely with regulatory expectations. The move follows a broader trend of the Federal Reserve intensifying its scrutiny of crypto-friendly banks.
This enforcement action is not isolated. In August, the Fed issued a similar order to Customers Bancorp, a Pennsylvania-based institution with significant involvement in cryptocurrency. The Fed found deficiencies in Customers Bank’s risk management and AML practices following inspections by the Philadelphia Federal Reserve Bank. Both institutions are now under pressure to fix these issues as the government tightens regulations on banks involved with crypto.
Dan Spuller, head of affairs at Blockchain Association, noted this series of actions reflects ongoing regulatory efforts targeting banks engaged with digital currencies. He described these moves as part of what some call “Operation Chokepoint 2.0.”