On September 4, the Federal Reserve Board (Fed) released enforcement actions against a Texas-based bank, addressing regulatory violations and compliance lapses.
The Fed, joined by the Texas Department of Banking (TDB), issued a cease and desist order against the bank for compliance and risk management failures related to its crypto clients. A May 2023 examination identified “significant deficiencies” in the bank’s BSA/AML compliance program, particularly “related to foreign correspondent banking and virtual currency customers.” Under the order, the bank is required to submit a plan within 90 days to strengthen board oversight of the bank’s compliance with BSA/AML and OFAC requirements. The bank is also required to submit multiple plans within 60 days to enhance its corporate governance, BSA/AML compliance, customer due diligence, suspicious activity monitoring and reporting, and compliance with OFAC regulations. All plans are subject to approval by the Fed and TDB.
Putting It Into Practice: The cease and desist order underscores the Fed’s growing focus on strengthening risk management and compliance in banks dealing with crypto clients and reaffirms its commitment to holding institutions accountable for BSA/AML and OFAC compliance, particularly in emerging financial sectors (see here and here).