- The Federal Reserve has accused a cryptocurrency-friendly bank of lax compliance procedures.
- The Pennsylvania-based bank will have to submit detailed improvement plans within 60 days.
Customers Bank, once dubbed the “favorite bank” for cryptocurrencies, has agreed to undergo rigorous oversight after the Federal Reserve found “deficiencies” in the bank’s compliance with U.S. sanctions and anti-money laundering laws.
Among other things, customers will have to give the Federal Reserve 30 days’ notice before “any new strategic initiative, product, service or third-party relationship” related to its crypto business.
Following the collapse of Signature and Silvergate banks in 2023, many cryptocurrency companies have turned to customers, according to a 2023 Bloomberg report that called it “crypto’s new favorite bank.”
The bank has tried to downplay those ties, however, by capping deposits in its Customers Bank Instant token, according to Bloomberg, and removing from its website a webpage offering real-time payments to cryptocurrency businesses and a 2021 press release touting a list of “first institutional cryptocurrency clients.”
Last month, CoinDesk reported that the bank had dropped a number of crypto hedge funds that it had as clients.
The most recent review of customer activities by the Fed’s regional branch in Philadelphia found “significant deficiencies related to the Bank’s risk management practices,” as well as compliance with the Bank Secrecy Act, anti-money laundering laws and sanctions issued by the Treasury Department’s Office of Foreign Assets Control (OFAC).
The bank entered into a “written agreement” with the Federal Reserve — one of several types of “enforcement actions” — to strengthen compliance, know-your-customer procedures, suspicious activity monitoring and risk management with respect to its crypto activities.
The Federal Reserve did not detail Customers Bank’s deficiencies in risk management or compliance.
Join the community to receive our latest stories and updates
The Pennsylvania-based subsidiary of Customers Bancorp Inc. is the 80th largest bank in the United States, with $21 billion in assets under management, according to the Federal Reserve.
Aleks Gilbert is DL News” DeFi correspondent based in New York. You can contact him at aleks@dlnews.com.
