Regulators from the Federal Reserve and the Arkansas State Bank Department have imposed extensive changes at Evolve Bank & Trust after uncovering major compliance violations. The directive sheds light on issues surrounding anti-money laundering efforts and consumer protection, particularly in its interactions with fintech firms and prominent cryptocurrency players like FTX.
Compliance Concerns Spark Regulatory Action Against Evolve Bank
Evolve Bank & Trust, headquartered in West Memphis, Arkansas, has agreed to a cease-and-desist arrangement following revelations of insufficient risk management and compliance frameworks by federal and state overseers.
The deficiencies, as outlined by the U.S. central bank, primarily pertain to the bank's Open Banking Division, which offers services to various fintech partners. This setup, according to the Federal Reserve, has attracted significant regulatory scrutiny, impacting both consumer activities and the broader financial ecosystem.
The scrutiny also encompasses Evolve's involvement in the cryptocurrency realm, acting as a banking collaborator for Blockfi and providing financial solutions to FTX clients. Evolve allegedly did not have a direct partnership with Blockfi; instead, it worked alongside Deserve, a credit card platform, to issue Blockfi credit cards.
A court filing reveals that recent audits have uncovered Evolve's lackadaisical controls around anti-money laundering and consumer protection, which may have indirectly impacted these partnerships.
"Supervisors conducted a thorough examination of the Bank, released on January 10, 2024, which identified additional shortcomings regarding the bank's risk management and compliance with relevant laws, rules, and regulations concerning anti-money laundering, including the Bank Secrecy Act; the rules and regulations issued by the U.S. Department of the Treasury," states the cease and desist order.
What are your thoughts on the cease and desist order issued against Evolve Bank? Feel free to share your opinions and insights on this matter in the comments section below.