Cryptocurrency bank with Hoosier connections draws banking regulators’ scrutiny

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Federal banking regulators have issued a consent order against San Francisco-based Anchorage Digital Bank, a cryptocurrency startup that recently announced plans to establish a central Indiana office.

The Office of the Comptroller of the Currency granted Anchorage conditional approval for a federal bank charter in January 2021, making it the first cryptocurrency company to attain this status.

Anchorage co-founder and CEO Nathan McCauley is a native Hoosier who grew up in Wayne County and graduated from Taylor University.

The company offers custodial services to banks and institutional investors such as hedge funds, venture-capital funds, pensions, endowments and labor unions whose holdings include cryptocurrencies.

But in the consent order, issued April 21, the OCC said Anchorage has failed to adopt and implement a program for complying with Bank Secrecy Act and anti-money-laundering regulations.

The consent order also notes that Anchorage “has begun corrective action and is committed to taking all necessary and appropriate steps to remedy the deficiencies identified by the OCC.”

Among other things, the Bank Secrecy Act requires banks to monitor and report suspicious activity and file reports of cash transactions that exceed $10,000 per day. The purpose of the regulations is to detect and deter things like terrorist financing, money-laundering and other illegal activity.

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

In a statement provided to IBJ via email, Anchorage said the OCC’s findings “reflect areas for improvement that were identified by the OCC in 2021 in its supervisory capacity. As the OCC acknowledged in the consent order, we have already been working to strengthen the areas identified and will continue to bolster these areas, reinforcing a new, digital asset standard for internal BSA/AML controls and procedures.”

The consent order requires that Anchorage submit a written action plan for compliance; establish a suspicious-activity monitoring and reporting program; establish a Bank Secrecy Act officer on its board; and implement an employee training program, among other things.

As of January, when Anchorage announced its plans for an Indiana office, the company’s 200 employees included a handful in Indiana. The company has not yet opened an office here and hasn’t yet established a timeline for doing so, it told IBJ last week.

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