The pro-cryptocurrency Signature Bank was being investigated for money laundering by U.S. prosecutors in Washington and Manhattan before being shut down on March 12. The bank was being investigated for whether it took the appropriate actions to prevent possible money laundering by its clients. They were also under the lens of the Securities and Exchange Commission in a separate investigation.
Criminal probe prompted by checks regarding the bank’s actions against money laundering
Justice Department officials were looking into whether Signature Bank took the necessary precautions to thwart suspected money laundering by its clientele as it investigated them. The regulators were said to be especially concerned about whether the bank was taking preventative steps to scrutinize transactions for “signs of wrongdoing” and thoroughly screening account holders. A request for comment was not answered by a representative of the bank. The company’s new owner, the Federal Deposit Insurance Corp., also did not respond to inquiries.
N.Y.’s financial regulator denies allegations of being anti-crypto
As of September of last year, a third of Signature Bank’s deposits came from the cryptocurrency market. However, the bank revealed in December of last year that it would eliminate $8 billion from its crypto-related deposits. On March 13, former Signature Bank board member Barney Frank stated that the regulators wished to “send a very powerful anti-cryptocurrency message.” However, New York’s financial regulators stated that the probe had “nothing to do with cryptocurrencies” but rather was motivated by what it called “a serious crisis of trust in the bank’s management” following Silvergate Capital and Silicon Valley Bank’s demise.
The U.S. Treasury Department and other bank authorities declared in a joint statement that all of the depositors of Signature Bank and Silicon Valley Bank would be compensated in full and “no losses will be incurred by the taxpayer”. According to reports, Signature and its employees have not been charged with any misconduct, and the inquiries could be over without any indictments or further SEC or Department of Justice action (DOJ).
To reduce possible threats to the financial sector, authorities have been encouraging banks and other regulated companies to reduce their exposure to cryptocurrencies and other assets. Following the failure of Silvergate Capital Corp., a company that targeted the cryptocurrency industry, and Silicon Valley Bank of SVB Financial Group last week, Signature has now failed as well.
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