- A cease and desist order has been issued to United Texas Bank following a regulatory examination
- The order, issued by the Federal Reserve and the Texas Department of Banking, highlights significant deficiencies in the bank’s governance and compliance surrounding crypto customers
- United Texas Bank has agreed to strengthen its compliance program around crypto customers and corporate governance practices
The Federal Reserve and the Texas Department of Banking have issued a joint cease and desist order to United Texas Bank, located in Dallas, Texas, following an examination in May 2023. This examination uncovered major shortcomings in the bank’s governance and risk management, particularly concerning its handling of anti-money laundering (AML) compliance and foreign correspondent banking in relation to cryptocurrency users. As part of the order, the bank has committed to making substantial improvements in its compliance programs.
Regulators Uncover “Significant Deficiencies”
United Texas Bank came under scrutiny during a May 2023 examination by the Federal Reserve Bank of Dallas and the Texas Department of Banking. The investigation identified “significant deficiencies” in the bank’s corporate governance and its compliance with AML laws, including violations of the Bank Secrecy Act (BSA). These failures were linked to the bank’s dealings with foreign correspondent banking and virtual currency customers, areas of heightened risk for money laundering.
The order specifically targets weaknesses in the oversight by the bank’s board of directors and senior management and mandates that the board submit an action plan within 90 days to strengthen oversight of AML compliance. The bank must also improve its corporate governance structure, ensuring that its board and committees are adequately equipped to supervise the bank’s operations.
Bank Agrees to Changes
Without admitting or denying the findings, United Texas Bank has consented to the order and agreed to implement measures to address the identified issues. “The Bank has begun to take measures to strengthen its compliance program,” the order states, though regulators insist on further corrective actions. The board of directors is required to submit detailed reports on their progress, with quarterly updates on how the bank is adhering to the order.
Key to the order is the improvement of United Texas Bank’s AML compliance program. The bank must revise its procedures for customer due diligence, ensuring that it collects and analyzes accurate customer information, especially for high-risk accounts. Enhanced internal controls and independent testing will also be implemented to ensure compliance with BSA regulations.
