Customers Bank to strengthen AML compliance after Fed scrutiny

The directors of crypto-friendly Customers Bancorp and its subsidiary Customers Bank, headquartered in Malvern, Pennsylvania, will polish their writing skills over the next two months in preparation for an enforcement action the United States Federal Reserve Board executed against them.

Customers Bank did not do well on “recent examinations and inspection” by the Philadelphia Federal Reserve Bank and is already taking measures to address deficiencies the Fed identified in the bank’s management and Anti-Money Laundering (AML) practices, according to the agreement, which was dated Aug. 5 and released on Aug. 8.

The small bank has 23 branches in 11 states and a stable of crypto customers. It offers the distributed ledger-based Customer Bank Instant Transfer (CBIT) service, which it launched in 2021 on the Tassat platform. The CBIT service allows Customer Bank clients to transfer money to one another instantly and round the clock.

The Fed says plan better programs and report

The agreement with the Fed stipulated that Customers Bancorp and Customers Bank would submit a series of documents within the next 60 days on improving bank practices. The directors of Customers Bancorp will submit a plan to strengthen oversight of AML compliance, including Bank Secrecy Act (BSA) requirements and regulations of the US Treasury’s Office of Foreign Assets Control (OFAC).

In addition, within the same timeframe, the bank will submit a revised BSA/AML compliance program, a customer due diligence program, a revised program for reporting suspicious activity to law enforcement and supervisory authorities and a revised OFAC compliance program.

Customers Bancorp and Customers Bank will develop a plan “to improve risk management practices with respect to the Organization’s digital asset strategy.”

Link to the 2023 banking crisis

Also within 60 days, Customers Bank will engage a transaction review consultant to look at the bank’s transaction monitoring activity from March 1, 2023, to Aug. 31, 2023, to assess whether the bank properly identified and reported suspicious activities. A written report will be produced on the consultant’s findings.

From March through August 2023, the US banking industry was mired in a crisis that saw the collapse of several crypto-friendly institutions, such as Silvergate, Signature and Silicon Valley Bank. Customers Bank remained solvent and retained its crypto clients through this period. However, it limited deposits on CBIT to 15% of its total deposits.

Customers Bank did not immediately respond to a Cointelegraph request for comment.