Fed Orders United Texas Bank to Halt Crypto Dealings Due to Risk Management Issues

The United States Federal Reserve recently issued a cease and desist order to United Texas Bank, citing significant flaws in the bank’s handling of crypto clients and its overall risk management systems. The order, dated September 4, follows a review conducted in May, where the Fed uncovered serious governance lapses and oversight failures by the bank’s board of directors and senior management.

The examination specifically identified problems in how United Texas Bank managed risks related to foreign correspondent banking and its virtual currency customers. The Fed highlighted that the bank had not fully complied with anti-money laundering (AML) regulations and the Bank Secrecy Act (BSA). However, the order did not elaborate on the exact nature of these non-compliance issues regarding its crypto clientele.

United Texas Bank Takes Corrective Measures

In response to the Fed’s findings, United Texas Bank has begun taking steps to improve its compliance with BSA and AML requirements. The bank’s board has agreed to implement a formal plan aimed at enhancing its oversight of regulatory compliance.

United Texas Bank, with a workforce of 75 employees and managing approximately $1 billion in assets, has acknowledged the need to reinforce its internal controls. These efforts are part of the bank’s ongoing adjustments to address the regulatory shortcomings identified by the Federal Reserve.

This is not the first time the Federal Reserve has cracked down on banks involved in the crypto space. Just last month, on August 8, the Pennsylvania-based Customers Bancorp and its subsidiary, Customers Bank, were similarly reprimanded for inadequate risk management and AML practices. The Fed’s actions have led to renewed speculation about a potential government-led campaign, often referred to as “Operation Chokepoint 2.0,” designed to limit banks’ involvement in the cryptocurrency industry.

Dan Spuller, head of affairs at the Blockchain Association, echoed these concerns. He described the order against United Texas Bank as part of an ongoing effort to stifle crypto-friendly financial institutions.