Federal Reserve Issues Cease and Desist Order to United Texas Bank

The Federal Reserve issued a cease and desist order to United Texas Bank (UTB) on Aug. 29, directing it to stop offering crypto services. This action follows an examination by the Federal Reserve Bank of Dallas and the Texas Department of Banking which identified deficiencies in the bank’s corporate governance and compliance with anti-money laundering regulations.

The examination revealed issues related to foreign correspondent banking and virtual currency customers, and found inadequate risk management and compliance with the Bank Secrecy Act and AML requirements.

60 to 90 days to comply

As a response to these findings, UTB must submit plans to comply within 60 to 90 days. Within 90 days, UTB’s board of directors must present a plan demonstrating compliance with BSA and AML rules. Within 60 days, the bank must strengthen board oversight, corporate governance, and revise its compliance program.

UTB must also enhance its customer due diligence program, improve suspicious activity monitoring, and enhance compliance with OFAC regulations within 60 days. The bank must also submit quarterly progress reports detailing its compliance efforts.

Second crypto-friendly bank hit within a month

On Aug. 8, the Federal Reserve also hit Pennsylvania-based Customers Bank with an enforcement action for similar reasons. Gemini’s co-founder criticized the crackdown, referencing “Operation Choke Point 2.0.”

Operation Choke Point 2.0, as explained by U.S. Senator Bill Hagerty, is believed to be a coordinated effort by Joe Biden’s administration to regulate the crypto industry.