Customers Bank Enforcement Action and the Future of Banking

Customers Bank Enforcement Action has sent shockwaves through the financial industry. The action was taken due to alleged misconduct related to the bank's mortgage lending practices.

The action was brought by the Office of the Comptroller of the Currency (OCC), which is responsible for chartering and supervising national banks. This is a serious matter, as it suggests that the OCC has found significant problems with Customers Bank's lending practices.

Customers Bank is a small bank with a relatively small asset size compared to other banks. Despite its size, the bank's alleged misconduct has still had a significant impact on the industry.

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The U.S. Federal Reserve has taken enforcement action against Customers Bancorp and its subsidiary, Customers Bank.

The action follows a recent probe that uncovered significant shortcomings in the bank's risk management and AML practices, specifically in its digital assets business.

The central bank has found major drawbacks in how the bank manages risks associated with crypto, directing the bank to overhaul its risk-management policies.

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The bank must ensure that its staff has the expertise and proper resources to effectively manage these risks.

Customers Bank's client list includes top names such as Galaxy Digital, Coinbase, and Circle.

The bank has been called out for inadequately policing illicit activity, particularly with digital asset clients.

Customers Bank has agreed to fix the compliance shortcomings flagged by Fed examiners.

The bank has begun to take measures to address the identified deficiencies.

The enforcement action doesn't involve any monetary penalty, but it sends a strong message about the importance of robust risk management and compliance practices in the financial industry, especially for firms engaged in crypto businesses.

Here are some key steps the bank must take to address the enforcement action:

The U.S. Federal Reserve has taken action against Customers Bancorp, the parent company of Customers Bank, due to significant deficiencies in risk management practices and compliance related to anti-money laundering laws.

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Customers Bank has been known for doing business with crypto exchange platforms and stablecoin issuers, and the Federal Reserve has identified major drawbacks in how the bank manages risks associated with crypto.

The bank has already started taking action to address the identified deficiencies in its Anti-Money Laundering Act and Bank Secrecy Act compliance.

Customers Bank needs to submit a written plan within 60 days to improve its organization's risk management practices related to its digital asset strategy.

This plan should include measures to ensure that those in charge of the digital asset strategy have the necessary expertise, authority, staffing, and resources.

The bank must also cover the steps that will enable timely assessment and reporting of risk exposure associated with the digital asset strategy.

The enforcement action doesn't involve any monetary penalty, but it sends a strong message about the importance of robust risk management and compliance practices in the financial industry, especially for firms engaged in crypto businesses.

Customers Bank has been instructed to strengthen its customer due diligence and suspicious activity reporting to bolster its ability to detect and prevent money laundering activities.

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Customers Bancorp has pursued a business strategy that involves offering banking services to digital asset customers and operating an instant payments platform.

The bank must institute a system of internal controls to ensure ongoing compliance with the BSA/AML Requirements, including customer due diligence and suspicious activity monitoring.

This system must include documentation to verify customer identity, source of wealth, and business activities, as well as understanding normal and expected transactions.

The bank must give prior written notice to the central bank for any plans to create, test, or launch a new intra- or inter-bank instant payments platform or network.

The far-flung nature of these platforms demands that banks rethink and reinvent their customer-facing and back-office operations.

Nearly half of financial institution executives are concerned about the shift to faster everything, and 57% of those experiencing higher levels of fraud are skeptical about open banking and faster payments due to risks outweighing rewards.

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