OCC issues two cease and desist orders – including against first federally charted crypto bank - for AML failings

Action indicates new regulator emphasis on growth and digital assets

Financial institutions should be prepared for their compliance processes to come under increased scrutiny after USAA Federal Saving Bank (FSB) and Anchorage Digital Bank were issued cease-and-desist orders for violations of the Bank Secrecy Act (BSA) and deficiencies in their anti-money laundering (AML) programs. 

In January 2021, Anchorage Digital Bank was granted conditional approval by the Office of the Comptroller of the Currency (OCC) to be converted from a traditional bank to the first federally chartered bank focused on cryptocurrency. Under the conditions, Anchorage agreed to meet AML/BSA requirements, but according to the OCC its efforts in this area have not been adequate and it must implement a robust AML program to ensure compliance with the BSA/AML requirements.

“The OCC holds all nationally chartered banks to the same high standards, whether they engage in traditional or novel activities,” said Michael J. Hsu, Acting Comptroller of the Currency. “When institutions fall short, we will take action and hold them accountable to ensure compliance with federal laws and regulations.”

There are no fines at this stage, but if Anchorage fails to meet the timescales set out by the OCC in which to implement its AML program, it could further penalties - including fines and legal action.

However, in the case of USAA FSB, the OCC has issued a fine alongside the cease-and-desist order to the tune of $60million, while the Financial Crimes Enforcement Network (FinCEN) has also levied a substantial fine. Both regulators say USAA FSB had been warned that its AML procedures were not adequately keeping pace with its growth, but that it failed to respond, meaning it now faces total penalties of around $140million.

FinCEN’s Acting Director Himamauli Das said: “As its customer base and revenue grew in recent years, USAA FSB wilfully failed to ensure that its compliance program kept pace, resulting in millions of dollars in suspicious transactions flowing through the U.S. financial system without appropriate reporting.” He added that USAA FSB received “ample notice and opportunity to remediate its inadequate AML program, but repeatedly failed to do so” giving the regulators no choice but to take serious action.

Collette Allen, Chief Operating Officer at AML specialists SmartSearch said: “These two recent violations – Anchorage for failing to ensure its AML programme was sufficient for a crypto-focussed bank, and USAA FSB for failing to ensure its compliance kept pace with its growth - show the importance of having AML and compliance programmes that are fit for purpose.

“Growth and compliance must be paired, and any deficiencies in AML programmes must be addressed promptly and effectively, because, as we can see from these two examples, the regulators will not hesitate to take action against any financial institutions failing to meet their BSA/AML requirements.

“At SmartSearch we understand it can be difficult for banks and other financial institutions to ensure their compliance programmes keep pace with their growth – especially growth in the digital space.

“Our AML platform has been designed to ensure that customers never need to upgrade. Not only does it keep pace with any regulatory changes and use the very latest technology to ensure highly accurate results, but can also expand alongside growing businesses, ensuring the same level of functionality, and same high level of compliance, no matter how much the customer base expands or the focus of the business shifts.”