United Texas Bank (UTB) has recently found itself in hot water with the U.S. Federal Reserve due to significant deficiencies in its governance, particularly related to anti-money laundering (AML) laws and risk management. Despite being one of the few remaining American financial institutions catering to crypto companies, UTB’s shortcomings in board oversight and compliance regulations have raised concerns among regulators.
Following an examination conducted in May 2023, the Federal Reserve issued a cease-and-desist order against UTB, highlighting the need for the institution to enhance its Bank Secrecy Act (BSA) and anti-money laundering programs. The central bank emphasized the importance of strengthening oversight and revising the customer due diligence program to mitigate risks associated with foreign correspondent banking and virtual currency clientele.
This latest enforcement action against UTB is part of a broader trend of U.S. regulators targeting financial institutions with ties to the cryptocurrency industry. Similar scrutiny from the Federal Reserve was faced by Customers Bank, a Pennsylvania-based lender, which agreed to increased regulatory oversight after lapses were identified in its anti-money laundering compliance.
UTB had gained significance in the crypto industry after filling the gap left by the collapse of Signature and Silvergate in 2023, two major U.S. lenders that previously served the crypto sector. With limited banking options available for crypto companies in the U.S., the closure of these institutions has forced many firms to either consolidate around the few remaining banks willing to work with them or seek banking services offshore.
Historically, crypto firms in the U.S. have faced challenges in establishing reliable banking relationships. The ongoing crackdown by regulators on financial institutions serving the sector has further exacerbated the situation, with enforcement actions leading once crypto-friendly banks to reduce their involvement in the industry. For example, New York-based Metropolitan Bank scaled back its crypto services last year, including cutting ties with major clients like Crypto.com.