Before regulators abruptly seized the lender last week, U.S. prosecutors were looking into Signature Bank’s connections to cryptocurrency clients.
The SEC and federal prosecutors were investigating the bank’s operations.
The AML failures worried the investigators.
Before New York regulators decided to close the bank last weekend, the US Justice Department was looking into Signature Bank’s interactions with cryptocurrency clients.
Attorney General’s Office investigated Signature Bank
According to a Wednesday Bloomberg article, US prosecutors in Washington and Manhattan were specifically concerned about gaps in the New York bank’s anti-money laundering procedures. According to the report, the authorities were examining whether the bank adequately screened new clients and whether it kept an eye on transactions for signs of illegal activity.
Additionally, the Securities and Exchange Commission (SEC), the agency that only brings civil lawsuits, was looking into the operations of the collapsed bank.
The federal prosecutors and regulator reportedly expressed interest in Signature Bank’s operations after issuing many warnings to businesses that deal with clients from the cryptocurrency industry and money associated to them. Federal authorities are required to receive reports of suspicious transactions from American banks.
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Although they even denied verifying the probe rumours, neither the US prosecutors nor the securities regulator have filed any official charges against the bank or its personnel. It is also unknown whether the investigation’s results had anything to do with the bank’s sudden closure.
Defunct US Banks
The cryptocurrency sector was well-known for its interactions with Signature Bank, which also housed significant sums of money from various well-known crypto firms. Moreover, the bank provided a real-time settlement system for cryptocurrencies called Signet that was built on a blockchain.
To “protect depositors,” the New York state regulator shut down Signature Bank on Sunday, placing it in the FDIC’s (Federal Deposit Insurance Corporation) custody. It was the third US bank to fall in four days. The first bank to fail was crypto-friendly Silvergate Bank, which announced voluntary liquidation and did not seek FIDC receivership. Silicon Valley Bank also went under the FIDC receivership.
The US government will save Silicon Valley Bank and Signature Bank, and it has already given clients access to their deposits, whether they are insured or not. The Biden administration also emphasised that Wall Street, not American taxpayers, will foot the bill for the security of the depositors of the two banks.
Federal prosecutors are apparently looking into the collapse of Silicon Valley Bank, focusing especially on any probable violations of the executives’ stock trading regulations.
Due of Silvergate Bank’s connections to the now-defunct cryptocurrency exchange FTX and Alameda Research, the Justice Department was looking into all three of the bankrupt institutions.