The Federal Reserve has issued a cease-and-desist order to United Texas Bank, based in Dallas, due to significant failings in its anti-money laundering (AML) compliance, particularly concerning cryptocurrency clients. The order, delivered Wednesday, is part of increasing scrutiny on banks serving the digital asset industry.

What’s Behind Fed’s Crypto Crackdown?

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• Federal Reserve orders the United Texas Bank to address AML compliance failures, especially in crypto transactions.
• The bank must submit a detailed action plan within 90 days to avoid further legal action.
• Growing regulatory pressure highlights increased risks for banks working with cryptocurrency businesses.

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United Texas Bank has agreed to the order without admitting any wrongdoing, thus avoiding a formal legal fight. Under the agreement, the bank is to file within 90 days a detailed, five-point plan of action on various heads, including “hiring adequate staff” and “ongoing reviews to ensure the bank is in conformity with AML requirements.”

Governance, customer due diligence, and monitoring suspicious activity, including crypto-related transactions, were some major weaknesses underlined in the Federal Reserve directive. While the bank had facilitated the operations of virtual asset customers, its compliance program fell inauspiciously short of federal law compliance.

Fed Extends Crackdown to Crypto-Related Compliance

This move follows action against Customers Bank, another bank hailed as crypto-friendly. Recently, the Federal Reserve instructed Customers Bank to improve its compliance with anti-money laundering legislation and the Bank Secrecy Act, as well as its risk management in digital assets.

Both point to heightened vigilance on the part of the Federal Reserve regarding banks in the cryptocurrency arena. Violations of regulations are associated with considerable financial and legal risk.

Increasing Heat on Crypto-Friendly Banks

Regulators who have been increasing their scrutiny view the failure of huge crypto-friendly banks like Signature and Silvergate as an indication of the level of financial risks that digital assets represent. In this direction, the Federal Reserve and the FDIC have become leading federal agencies that ensure that banks follow more rigid compliance practices, especially with anti-money laundering and the Bank Secrecy Act.

Due to increased regulatory pressure, many crypto firms seem to find alternatives, either by reaching out to international financial institutions or by developing their own decentralized economic systems. This shift suggests a possible evolution in managing crypto business finances without dependence on traditional banking structures.

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