Signature Bank Probed by US Regulators for Money Laundering Before Collapse
Signature Bank, a pro-crypto bank in the United States, was reportedly under investigation by two government bodies before its closure.
According to a report by Bloomberg, the Justice Department was investigating whether Signature had taken sufficient measures to detect potential money laundering by its clients. The regulator was concerned about whether the bank was proactively monitoring transactions for signs of criminality and was properly vetting account holders.
A separate probe by the Securities and Exchange Commission (SEC) was also “taking a look” at the bank. It is unclear when the investigations began and what effect, if any, they had on the recent decision by New York state regulators to close the bank.
Investigations into Signature Bank
The investigations by the Justice Department and the SEC reportedly may have been initiated after complaints from the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Department of the Treasury that collects and analyzes information about financial transactions to combat money laundering and other financial crimes.
The reports come after a class-action lawsuit by Signature shareholders filed against the bank and former executives for claiming to be “financially strong” only three days before it was shut down.
It is reported that Signature and its staff are not accused of wrongdoing. The investigations may be finalized without any charges or further action by the SEC or the Department of Justice.
Proactive measures to detect money laundering
The Justice Department investigation was mainly focused on whether Signature Bank was taking adequate measures to detect potential money laundering by its clients. The regulator was reportedly concerned whether the bank was taking proactive steps to monitor transactions for signs of criminality and was properly vetting account holders.
The bank may have fallen short of these standards, which led to its closure. Failure to take appropriate steps to detect and prevent money laundering can result in fines, penalties, and reputational damage for banks. This highlights the importance of anti-money laundering (AML) measures for banks and financial institutions, as they are crucial to the regulatory environment.
The SEC is also reportedly investigating Signature Bank but has not commented on the matter. SEC Chair Gary Gensler said on March 12 that it “will investigate and bring enforcement actions if we find violations of the federal securities laws.”
It is not clear what the SEC is investigating or what effect, if any, its investigation will have on the bank.
The closure of Signature Bank highlights the importance of anti-money laundering measures for banks and financial institutions. Regulators scrutinize banks to ensure they take proactive measures to detect and prevent money laundering. Failure to comply with these regulations can result in severe penalties and reputational damage.
As the cryptocurrency industry grows, banks and financial institutions must take appropriate measures to prevent using cryptocurrencies for illegal activities, including money laundering and terrorist financing.