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OCC Orders AML Improvements for the First National Digital Bank

Anchorage Digital Bank, the first crypto company to receive a national trust bank charter, recently became the first crypto bank ordered by federal authorities to improve its anti-money laundering (AML) compliance. 

In January 2021, the Office of the Comptroller of Currency (OCC) granted Anchorage Digital Bank conditional approval to become the first federally-chartered cryptocurrency bank.  Anchorage Digital Bank’s 2021 conditional approval authorized the bank to take custody of digital assets as a fiduciary.  As part of that approval, however, the bank entered into an agreement with the OCC that set stringent operating standards including requiring written Bank Secrecy Act (BSA), AML, and Office of Foreign Asset Control compliance guidelines, as well as a third-party risk management compliance program. 

Just 15 months later, however, on April 21, 2022, the OCC and Anchorage Digital Bank entered into a Consent Order outlining the bank’s failure to adopt an effective AML program comporting with the BSA.  In particular, the OCC found that the bank lacked proper internal controls for customer due diligence, procedures for monitoring suspicious activity, and internal compliance training.  In a press release discussing the measures, the Acting Comptroller of the Currency, Michael J. Hsu, stated “[t]he OCC holds all nationally chartered banks to the same high standards, whether they engage in traditional or novel activities. When institutions fall short, [the OCC] will take action and hold them accountable to ensure compliance with federal laws and regulations.”

As part of the Consent Order, the OCC took the additional step of requiring that the bank install a compliance committee composed of at least three members, with the majority being outsiders, to oversee and monitor the bank’s compliance with the Consent Order.  The Consent Order also requires the bank to submit to the OCC a written action plan detailing its strategy to remedy BSA and AML compliance deficiencies.  The bank will be required to install an independent BSA Officer to help incorporate risk-based policies and procedures with regard to customer accounts, implement a suspicious activity monitoring and reporting program, and carry out an annual BSA audit.

The OCC’s quick action suggests that while crypto banks are here to stay, the OCC will hold them to the same stringent standards as traditional banks.  Crypto companies seeking a federal bank charter must take caution to implement and maintain robust compliance programs that meet the BSA’s requirements.

This post was authored by Julia Nestor, Mark Bini and Joanna Howe.

Tags

fintech, anti money laundering, cryptocurrency

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