Crypto bank Anchorage on notice over lax money laundering protections

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The US banking watchdog has reprimanded crypto bank Anchorage for failing to meet anti-money laundering (AML) standards, reports Bloomberg.

In a Consent Order issued to the San Francisco-headquartered firm on Thursday, the Office of the Comptroller of the Currency (OCC) said it had 30 days to provide a report on how it will fix the issues.

The OCC said that Anchorage didn’t have:

  • Internal controls for customer due diligence.
  • Procedures for monitoring suspicious activity. 
  • A qualified officer to make sure it didn’t flout the banking secrecy act (BSA).

Anchorage didn’t admit or deny the allegations but agreed to address the problems. In a statement Anchorage said it has “already been working to strengthen the areas identified and will continue to bolster these areas, reinforcing a new, digital asset standard,” (via Bloomberg, our emphasis).

The OCC also demanded that the bank establish a Compliance Committee within 15 days. At least three members will be directors not employed by Anchorage and the committee will ensure that it sticks to the provisions detailed across the 25-page cease and desist order.

Amongst other things, it will also have to hire a BSA officer, train staff on AML rules, and begin submitting suspicious activity reports.

“The OCC holds all nationally chartered banks to the same high standards, whether they engage in traditional or novel activities,” said the Acting Comptroller of the Currency Michael J. Hsu in a statement. 

“When institutions fall short, we will take action and hold them accountable to ensure compliance with federal laws and regulations.”

Anchorage was the first crypto firm to get OCC accreditation

Anchorage mainly works with institutional investors managing the purchase of cryptocurrencies like Bitcoin and Ether.

In January 2021 Anchorage became the first crypto bank to receive OCC accreditation. Its OCC charter made it the first national bank for digital assets in the US.

Previously it had operated as Anchorage Trust in South Dakota. However, it now operates as Anchorage Digital Bank allowing financial institutions to access cryptocurrency markets.

And with the new name came an agreement with the watchdog to stick to the BSA and implement an acceptable AML program.

“Anchorage Digital Bank is the first entity to have both the tech and the regulatory clarity that serious institutional participation in crypto demands,” it said in an announcement post from the chief exec and president.

However, acting OCC head Hsu is a lot more cautious about crypto than the previous administration, led by Brian Brooks.

Since taking office in May, Hsu has ordered a review into pro-crypto policies actioned under Brooks.

Read more: OCC chief likens DeFi to credit default swaps in 2000s, warns of crash

In September, Hsu raised some concerns about cryptocurrency in a speech to The Blockchain Association. Specifically, he suggested that stablecoin lending could cause a DeFi crash.

“Crypto and DeFi today are on a path that looks similar to [credit default swaps] in the early 2000s. Fortunately, this group has the power to change paths and avoid a crisis.”

Earlier this month Anchorage announced support for 11 new cryptocurrencies, including custody of NFTs like Bored Ape Yacht Club (BAYC) and DeFi projects like Terra (LUNA).

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