The U.S. Federal Reserve announced on Thursday that it has taken enforcement action against Customers Bancorp (CUBI.N) due to “significant deficiencies” in the bank’s risk management and anti-money laundering (AML) practices. The Pennsylvania-based bank, which offers digital asset services and operates a tokenized instant payments platform, has come under scrutiny following a recent examination by the Federal Reserve.
The news sent the bank’s stock plummeting, with shares dropping more than 20% in midday trading as investors reacted to the announcement.
While the enforcement action does not include a financial penalty, it mandates that Customers Bancorp undertake a comprehensive overhaul of its policies to address the shortcomings identified by the Fed. The bank is required to enhance its risk management procedures, particularly in its digital assets business. This includes ensuring that staff members have the necessary expertise and that the bank allocates sufficient resources to quickly address any emerging risk exposures.
Additionally, the Federal Reserve has directed Customers Bancorp to strengthen its customer due-diligence processes and improve its reporting of suspicious activities. The bank is also required to regularly report its progress to regulators as it works to address the identified deficiencies.
The bank also agreed to file a plan to improve its risk management practices regarding its “digital asset strategy,” according to the agreement. That includes “measures to ensure that the individuals or groups charged with the responsibility for the Organization’s digital asset strategy possess the appropriate subject matter expertise, stature, independence, and authority; have clearly defined roles and responsibilities; and are allocated adequate resources and staffing,” the Federal Reserve said.
The central bank also asked Customers Bancorp to submit an amended customer due diligence program, which it says should include documents to verify customers’ identities and “identify customers who pose a heightened risk of conducting potentially illicit activities at or through the Bank.”
