KBRA Comments on Customers Bancorp, Inc., and Customers Bank Written Agreement with the Board of Governors of the Federal Reserve System
On August 8, 2024, the Federal Reserve Bank of Philadelphia entered into a Written Agreement with Customers Bancorp, Inc. (NYSE: CUBI) and its subsidiary, Customers Bank, addressing compliance deficiencies in their digital asset strategy. The agreement highlights weaknesses in BSA/AML requirements and OFAC regulations. Customers must engage an independent third party to review suspicious transactions from March 1 to August 31, 2023. While these issues reflect negatively on the bank's risk management, KBRA notes that Customers had initiated corrective actions prior to the agreement and hired a new Chief Compliance and AML Officer. The Federal Reserve cited no law violations and issued no fines. KBRA acknowledges Customers' efforts to strengthen regulatory capital ratios as a mitigating factor.
l'8 agosto 2024, la Federal Reserve Bank di Philadelphia ha stipulato un Accordo Scritto con Customers Bancorp, Inc. (NYSE: CUBI) e la sua filiale, Customers Bank, per affrontare le carenze di conformità nella loro strategia sugli asset digitali. L'accordo evidenzia le debolezze nei requisiti BSA/AML e nelle regolamentazioni OFAC. I clienti devono coinvolgere una terza parte indipendente per esaminare le transazioni sospette dal 1 marzo al 31 agosto 2023. Sebbene queste problematiche riflettano negativamente sulla gestione del rischio della banca, KBRA osserva che Customers aveva già avviato azioni correttive prima dell'accordo e assunto un nuovo Chief Compliance e AML Officer. La Federal Reserve non ha citato violazioni di leggi e non ha emesso multe. KBRA riconosce gli sforzi di Customers per rafforzare i ratio di capitale regolamentare come un fattore attenuante.
El 8 de agosto de 2024, la Reserva Federal del Banco de Filadelfia firmó un Acuerdo por Escrito con Customers Bancorp, Inc. (NYSE: CUBI) y su filial, Customers Bank, para abordar las deficiencias de cumplimiento en su estrategia de activos digitales. El acuerdo destaca debilidades en los requisitos de BSA/AML y en las regulaciones de OFAC. Los clientes deben contratar a un tercero independiente para revisar las transacciones sospechosas del 1 de marzo al 31 de agosto de 2023. Si bien estos problemas reflejan negativamente en la gestión de riesgos del banco, KBRA señala que Customers había iniciado acciones correctivas antes del acuerdo y había contratado a un nuevo Oficial de Cumplimiento y AML. La Reserva Federal no citó violaciones a la ley y no impuso multas. KBRA reconoce los esfuerzos de Customers para fortalecer los ratios de capital regulatorio como un factor atenuante.
2024년 8월 8일, 필라델피아 연방준비은행은 Customers Bancorp, Inc. (NYSE: CUBI) 및 그 자회사 Customers Bank와 함께 그들의 디지털 자산 전략에서의 준수 부족을 해결하기 위한 서면 계약을 체결했습니다. 이 계약은 BSA/AML 요건 및 OFAC 규제의 약점을 강조하고 있습니다. 고객은 2023년 3월 1일부터 8월 31일까지 의심스러운 거래를 검토하기 위해 독립적인 제3자를 참여시켜야 합니다. 이러한 문제는 은행의 위험 관리에 부정적인 영향을 미치지만, KBRA는 Customers가 계약 이전에 시정 조치를 시작했으며 새로운 준수 및 AML 책임자를 고용했다는 점을 언급합니다. 연방준비은행은 법 위반 사항을 인용하지 않았고 벌금도 부과하지 않았습니다. KBRA는 고객이 규제 자본 비율을 강화하려는 노력을 완화 요인으로 인정합니다.
Le 8 août 2024, la Federal Reserve Bank de Philadelphie a conclu un accord écrit avec Customers Bancorp, Inc. (NYSE: CUBI) et sa filiale, Customers Bank, pour aborder les carences de conformité dans leur stratégie d'actifs numériques. L'accord souligne les faiblesses concernant les exigences BSA/AML et les règlementations OFAC. Les clients doivent engager une tierce partie indépendante pour examiner les transactions suspectes du 1er mars au 31 août 2023. Bien que ces problèmes aient un impact négatif sur la gestion des risques de la banque, KBRA note que Customers avait déjà entamé des actions correctives avant l'accord et avait recruté un nouveau Responsable de la Conformité et de l'AML. La Federal Reserve n'a signalé aucune violation de loi et n'a pas infligé d'amendes. KBRA reconnaît les efforts de Customers pour renforcer les ratios de capital réglementaire comme un facteur atténuant.
Am 8. August 2024 trat die Federal Reserve Bank von Philadelphia in einen schriftlichen Vertrag mit Customers Bancorp, Inc. (NYSE: CUBI) und ihrer Tochtergesellschaft, Customers Bank, ein, um Compliance-Mängel in ihrer Strategien für digitale Vermögenswerte zu beheben. Der Vertrag hebt Schwächen bei den BSA/AML-Anforderungen sowie bei den OFAC-Vorschriften hervor. Kunden müssen eine unabhängige dritte Partei beauftragen, um verdächtige Transaktionen vom 1. März bis zum 31. August 2023 zu überprüfen. Obwohl diese Probleme negativ auf das Risikomanagement der Bank zurückfallen, merkt KBRA an, dass Customers bereits vor dem Vertrag Korrekturmaßnahmen eingeleitet und einen neuen Leiter für Compliance und AML eingestellt hatte. Die Federal Reserve stellte keine Gesetzesverstöße fest und verhängte keine Geldstrafen. KBRA erkennt die Bemühungen von Customers an, die regulatorischen Kapitalquoten zu stärken, was als mildernder Faktor gilt.
- No monetary fines issued by the Federal Reserve
- No violations of law cited in the Written Agreement
- Corrective actions initiated prior to the effective date of the Written Agreement
- New Chief Compliance and AML Officer hired
- Plans to hire additional human resources in compliance areas
- Multi-year effort to strengthen bank and consolidated risk-based regulatory capital ratios above rated peers
- Written Agreement with Federal Reserve Bank of Philadelphia due to compliance deficiencies
- Weaknesses in BSA/AML requirements and OFAC regulations
- Requirement for independent third-party review of suspicious transactions
- Deficiencies reflect adversely on enterprise risk management and compliance policies
Insights
The Federal Reserve's Written Agreement with Customers Bancorp and its subsidiary highlights significant compliance and risk management issues in their digital asset operations. This is a serious regulatory matter that could impact the company's reputation and operations. However, there are some mitigating factors:
- No monetary fines imposed
- No violations of law cited
- Proactive steps taken by management, including hiring a new Chief Compliance and AML Officer
- Strong capital ratios above rated peers
Investors should monitor the company's progress in addressing these issues, as it may affect future growth and regulatory standing. The six-month lookback period for suspicious transactions could potentially lead to additional regulatory actions if significant issues are uncovered.
The Written Agreement reveals substantial deficiencies in Customers Bancorp's compliance framework, particularly concerning BSA/AML requirements and OFAC regulations. This regulatory action, while not as severe as a consent order, still indicates serious concerns from the Federal Reserve. Key legal implications include:
- Mandatory third-party review of high-risk client transactions
- Potential for additional scrutiny or penalties if the review uncovers unreported suspicious activities
- Increased regulatory oversight until all issues are resolved
The absence of monetary fines or cited law violations is positive, but the company must demonstrate swift and thorough compliance to avoid escalated regulatory actions. This situation underscores the legal complexities and risks associated with digital asset strategies in banking.
The Written Agreement highlights the challenges traditional banks face when integrating digital asset strategies. Customers Bancorp's issues with its tokenized payment platform demonstrate the complex regulatory landscape surrounding blockchain and cryptocurrency in banking. Key tech-related insights include:
- Need for robust compliance systems specifically designed for digital asset transactions
- Importance of real-time monitoring and reporting capabilities for high-risk clients in the crypto space
- Potential slowdown in digital asset innovation due to increased regulatory scrutiny
This case serves as a cautionary tale for other banks venturing into digital assets, emphasizing the need for strong risk management and compliance frameworks tailored to these new technologies. It may also lead to increased investment in RegTech solutions across the industry.
As an indication of the nature of weaknesses identified by the Federal Reserve, KBRA notes the requirement for Customers to engage an independent third party to conduct a review of potentially suspicious transaction activity related to high-risk clients to ensure proper reporting from March 1, 2023, to August 31, 2023, a period of substantial client activity due partly to the turmoil at competing digital asset focused banks.
While the nature and magnitude of deficiencies identified by the Federal Reserve, as detailed in the Written Agreement, reflect adversely on Customers' enterprise risk management and compliance policies and procedures, after discussions with management, KBRA understands that corrective actions in certain areas had been initiated prior to the effective date of the Written Agreement. In addition, Customers hired a new Chief Compliance and AML Officer which was announced on August 9, 2024, and plans to hire additional human resources in these areas in the near-term. It is also KBRA’s understanding from discussions with management that the Federal Reserve’s Written Agreement cited no violations of law and has not issued any monetary fines. KBRA recognizes, as a mitigant to the nature of the Written Agreement, management’s multi-year effort to strengthen bank and consolidated risk-based regulatory capital ratios to levels that are currently above rated peers.
Considering the timeline required for various corrective actions, as detailed in the Written Agreement, KBRA plans to continue its ongoing dialogue with management in respect to these matters in an effort to measure its progress in resolving the deficiencies cited in the Written Agreement
About KBRA
KBRA is a full-service credit rating agency registered in the
Doc ID: 1005691
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Shannon Servaes, Managing Director
+1 301-969-3247
shannon.servaes@kbra.com
Jim Zhu, Associate Director
+1 301-960-7057
jim.zhu@kbra.com
Joe Scott, Senior Managing Director
+1 646-731-2438
joe.scott@kbra.com
Business Development Contact
Justin Fuller, Managing Director
+1 312-680-4163
justin.fuller@kbra.com
Source: Kroll Bond Rating Agency, LLC
FAQ
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