Evolve Bank Under Regulatory Scrutiny: Cease and Desist Order Issued
Evolve Bank & Trust, a crypto-friendly bank based in West Memphis, Arkansas, is facing a cease-and-desist order issued by the Federal Reserve and the Arkansas State Bank Department. This action comes after regulators identified significant compliance breaches, particularly in anti-money laundering efforts and consumer protection.
Regulatory Action Against Evolve Bank
The Federal Reserve and state regulators have found that Evolve Bank & Trust’s risk management and compliance systems are inadequate, leading to this regulatory intervention. The issues are particularly focused on the bank’s Open Banking Division, which provides services to various fintech partners. These deficiencies have raised concerns about the bank’s impact on consumer operations and broader financial stability.
Connections with Fintech and Crypto Companies
Evolve Bank’s involvement in the crypto sector, including partnerships with fintech companies and crypto entities like Blockfi and FTX, has further intensified regulatory scrutiny. Although Evolve did not have a direct relationship with Blockfi, it worked with the credit card platform Deserve to issue Blockfi credit cards. This arrangement has come under examination due to concerns about Evolve’s anti-money laundering controls and consumer protection measures.
Findings and Mandated Reforms
According to the cease-and-desist order, examinations conducted in early 2024 revealed additional deficiencies in Evolve’s compliance with anti-money laundering laws, including the Bank Secrecy Act and related regulations issued by the U.S. Department of the Treasury. The order mandates that Evolve Bank undertake comprehensive reforms to address these compliance issues and enhance its risk management practices.
