Fed Issues Cease and Desist Order for Crypto-Related Compliance and Risk Management Deficiencies
The Federal Reserve Board (Fed) is cracking down on banks dealing with crypto clients. The Fed, along with the Texas Department of Banking (TDB), issued a cease and desist order against a Texas-based bank for failing to comply with regulations and manage risks associated with its crypto clients.
Crypto Compliance Under Scrutiny
The Fed’s action highlights its growing focus on strengthening risk management and compliance in banks dealing with crypto clients. The Fed is taking a firm stance on holding institutions accountable for compliance with BSA/AML and OFAC regulations, especially in emerging financial sectors.
What Happened?
An examination in May 2023 revealed “significant deficiencies” in the bank’s BSA/AML compliance program, specifically “related to foreign correspondent banking and virtual currency customers.”
What’s Next for the Bank?
The bank must submit a plan within 90 days to strengthen board oversight of its compliance with BSA/AML and OFAC requirements. The bank must also submit multiple plans within 60 days to enhance its:
* Corporate governance
* BSA/AML compliance
* Customer due diligence
* Suspicious activity monitoring and reporting
* Compliance with OFAC regulations
All plans are subject to approval by the Fed and TDB.
This is a reminder to all financial institutions that the Fed is serious about enforcing compliance with regulations, especially when it comes to crypto-related activities.
