OCC orders crypto bank Anchorage to revamp AML program

Dive Brief:

The Office of the Comptroller of the Currency (OCC) ordered Anchorage Digital Bank on Thursday to overhaul its anti-money laundering (AML) program and hire a Bank Secrecy Act (BSA) officer after the regulator said it found failures in the firm’s AML and BSA compliance program.
The bank failed to implement internal controls for customer due diligence and procedures for monitoring suspicious activity, the OCC said in its consent order. The bank also failed to hire a BSA officer or implement adequate BSA training for its staff, according to the regulator.
Anchorage, which specializes in digital asset custody, became the first crypto firm to receive a national trust bank charter in January 2021, converting it from a state-chartered trust company based in South Dakota to a federally regulated entity.

Dive Insight:

The bank "has begun corrective action and is committed to taking all necessary and appropriate steps to remedy the deficiencies identified by the OCC," the regulator said.

"The OCC holds all nationally chartered banks to the same high standards, whether they engage in traditional or novel activities," Acting Comptroller Michael Hsu said in a statement. "When institutions fall short, we will take action and hold them accountable to ensure compliance with federal laws and regulations."

The OCC’s consent order mandates the firm hire a BSA officer and create a compliance committee of at least three members — the majority of whom cannot be employees or officers of the bank or any of its subsidiaries or affiliates. The regulator also ordered the bank to review its high-risk clients.

In a statement to Banking Dive, Anchorage said it is proud to be held to the same standards as traditional federally chartered banks and is working to reinforce a new digital asset standard for internal BSA and AML controls and procedures.

"Meanwhile, we maintain the steadfast belief that we should not be the only such federally regulated digital asset bank," the bank said. "This shouldn’t deter others from working together with the OCC to establish regulatory precedent; instead, we hope it encourages others to follow suit knowing that a workable path forward exists."

Anchorage was co-founded by Diogo Mónica in 2017, and uses a digital asset management system that stores customers' passcodes online through a combination of multiparty, multifactor authentication, advanced fraud detection and specialized hardware.

Thursday’s OCC order comes as the bank is ramping up its strategy to partner with financial institutions that want to provide their customers with custody services for their digital assets.

The bank reached a $3 billion valuation last December, when it raised $350 million in a Series D funding round. The bank said it would put the funds toward enhancing its infrastructure solutions, expanding its product offerings and hiring staff.