The federal government continues to take greater notice of crypto-linked financial institutions
Customers Bank, a crypto-friendly financial institution based in Malvern, Pennsylvania, is taking steps to strengthen its Anti-Money Laundering (AML) measures following scrutiny from the US Federal Reserve. The Federal Reserve Board’s recent enforcement action highlighted deficiencies in the bank’s management and AML practices, prompting the bank to improve its compliance protocols.
The Federal Reserve’s examination, conducted by the Philadelphia Federal Reserve Bank, revealed concerns about the bank’s oversight and adherence to the Bank Secrecy Act (BSA) and regulations from the US Treasury’s Office of Foreign Assets Control (OFAC). As a result, Customers Bank has been directed to address these issues promptly.
⛔️ℹ️ Note: Both Signature and Silvergate banks were under similar Federal investigations for money laundering violations right before they collapsed
Many of the crypto firms using Silvergate and Signature fled to $CUBI after they imploded. Customers Bank is next⏳ https://t.co/ia8Q0hsqjd pic.twitter.com/UiqsNPfEIH
— Rho Rider (@RhoRider) August 8, 2024
Customers Bank operates over 20 branches across 11 states and caters to a significant number of cryptocurrency clients. One of its notable services is the Customer Bank Instant Transfer (CBIT) system, launched in 2021, which allows clients to transfer funds instantly using distributed ledger technology. Despite its crypto-friendly stance, the bank has been instructed to improve its risk management practices related to its digital asset strategy.
Under the agreement with the Federal Reserve, Customers Bank and its parent company, Customers Bancorp, must submit detailed plans within 60 days to enhance their AML compliance. These plans include revising the BSA/AML compliance program, improving customer due diligence, and strengthening protocols for reporting suspicious activities to law enforcement and regulatory bodies. Additionally, the bank must update its OFAC compliance program.
To ensure these improvements are effectively implemented, Customers Bank will engage an independent consultant to review its transaction monitoring activities from March to August 2023. This period coincides with a turbulent time for the US banking industry, during which several crypto-friendly banks collapsed. Although Customers Bank remained solvent and retained its crypto clients, it limited deposits on its CBIT platform to 15% of total deposits as a precaution.
