Banks criticized for their handling of flood insurance and cryptocurrency issues by the Federal Reserve
In a recent development, United Texas Bank in Dallas, Texas has received a cease-and-desist order from the Federal Reserve for violations of the Bank Secrecy Act, specifically for money laundering issues. The enforcement order is backed up by the Texas Department of Banking.
The order, which does not detail what exactly spurred the enforcement actions, has prompted other banks to review their internal Anti-Money Laundering (AML) processes, particularly those dealing with crypto assets. This includes First Interstate Bank, whose CEO, Kevin Riley, announced his intention to step down in June.
The examination of United Texas Bank found "significant deficiencies" in its risk management and compliance systems in its dealings with foreign correspondent banking and virtual currency customers. In response to the cease-and-desist, United Texas Bank will revamp its AML oversight, corporate governance practices, customer due diligence practices, and monitoring and reporting of suspicious activities.
Dan Spuller, head of affairs at crypto lobbying group Blockchain Association, posted on social media site X that the enforcement order against United Texas Bank is the continuation of Operation Chokepoint 2.0. However, the Federal Reserve declined to comment beyond the press release and associated orders regarding the spur for the enforcement actions.
Meanwhile, Niko Demchuk, head of legal at crypto compliance firm AMLBot, stated that each cease-and-desist order plays a significant role in the market. Each infraction by First Interstate Bank could result in a fine of up to $2,000, according to the order.
Interestingly, the mention of crypto assets in the enforcement orders may alert banks to review their risk management systems and ensure all risks are considered and mitigated. This could potentially lead to a broader review of AML practices across the industry.
It's worth noting that a search for recent enforcement actions against community banks in Montana and Texas involving violations of the National Flood Insurance Act or the Bank Secrecy Act did not yield any concrete results. However, First Interstate Bank in Billings, Montana has been ordered to pay $70,000 to the National Flood Insurance Program for violations of the National Flood Insurance Act.
As always, for the most current or detailed enforcement actions, official federal agency websites such as the FDIC, FinCEN, or state banking regulators' releases might provide the latest announcements.
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