Evolve Bank & Trust is facing significant regulatory action from both the Federal Reserve and the Arkansas State Bank Department due to compliance breaches. The order specifically points out issues with anti-money laundering measures and consumer protection, especially in its dealings with fintech companies and major players in the cryptocurrency industry like FTX.
The regulators have mandated extensive reforms at Evolve Bank & Trust following the discovery of inadequate risk management and compliance systems. The focus of concern is primarily on the bank’s Open Banking Division, which provides services to various fintech partners. This arrangement has attracted a high level of regulatory scrutiny, affecting not only consumer operations but also posing risks to broader financial stability.
The scrutiny extends to Evolve’s involvement in the crypto sector, where it serves as a banking partner to Blockfi and offers financial services to FTX customers. It was revealed that Evolve did not have a direct relationship with Blockfi, instead partnering with Deserve, a credit card platform, to issue Blockfi credit cards.
Recent examinations have uncovered deficiencies in Evolve’s controls related to anti-money laundering and consumer protection, which may have had indirect effects on its partnerships with various companies.
According to the cease and desist order issued on January 10, 2024, Evolve Bank & Trust has been found lacking in its risk management and compliance with laws and regulations concerning anti-money laundering, including the Bank Secrecy Act and regulations issued by the U.S. Department of the Treasury.
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