MDI's Crypto Activities Out of Scope
OFFICE MEMORANDUM
Federal Deposit Insurance Corporation
July 27, 2023
To:
Larisa Collado
Chief, Risk Management and Applications, RMS
Sumaya Muraywid
Senior Examination Specialist, RMS
XXXXX
Consumer Compliance Technology Specialist, DCP
Through:
Laura A. Rapp
Assistant Regional Director, RMS
From:
XXXXX
Case Manager, RMS
Subject:
XXXXX Determine the “In Scope/Out of Scope” Applicability of FIL-16-2022 for Crypto-Related Activities (FIL-16-2022)
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Bank Overview/Structure/Summary:
The Bank is XXXXX Minority Depository Institution (MDI) headquartered in XXXXX XXXXX XXXXX XXXXX. The Bank currently operates XXXXX XXXXX XXXXX XXXXX XXXXX. The Bank provides business-banking services to the XXXXX XXXXX. Specific services include remote deposit, E-banking, mobile banking, commercial and investor real estate loans, business loans and lines of credit, Small Business Administration loans, mortgage loans, trade finance and a full range of depository accounts.
The last examination was an FDIC only independent examination with a start date of November 29, 2021, and an as of date of September 30, 2021; XXXXX. However, a joint examination with a start date of January 23, 2023, and an as of date of September 30, 2022, is in the process of review; XXXXX with both agencies agreeing to XXXXX. Due to a XXXXX. The
On September 28, 2022, the Bank proactively notified the FDIC of two activities related to FIL-16-2022 involving XXXXX.
RMS Analysis of “In Scope/Out of Scope” Applicability of FIL-16-2022 Notification of Engaging in Crypto-Related Activities (FIL-16-2022): XXXXX
XXXXX
The Bank terminated its relationship with XXXXX on March 6, 2023, due to the growing risks associated with this company and all accounts are closed. XXXXX is involved with digital assets, and XXXXX provided fund transfer services by utilizing the bank’s domestic and international wire services, and XXXXX had considerable deposit accounts at the Bank which at one time approximated XXXXX. It is believed that there was no digital asset involved activity between the Bank and XXXXX. The Bank had no losses associated with the involvement XXXXX.
Given the activities of XXXXX and that the relationship was terminated on March 6, 2023, and with consultation with the Washington Office, SF RMS considers this activity to be out of scope of FIL 16-2022.
RMS Analysis of “In Scope/Out of Scope” Applicability of FIL-16-2022 Notification of Engaging in Crypto-Related Activities (FIL-16-2022) XXXXX
XXXXX
As described by Bank President XXXXX XXXXX XXXXX.
XXXXX
The average account sizes are small ($120 per President) XXXXX has their own platform and is a XXXXX company. The Bank’s relationship with XXXXX.
XXXXX
XXXXX The relationship was brought into the Bank from their XXXXX Branch. Since the recently completed Risk examination scope did not include a comprehensive review of crypto/digital asset concerns, the subsequent DCP start date May 15, 2023, examination scope included a review of XXXXX account/digital asset activities.
On June 5, 2023, Compliance EIC XXXXX reported that he reviewed the account activity and indicated that the activity is related to investor/venture capital related activities, and that there was no evidence of digital asset involvement related to XXXXX accounts at the Bank. As a result, an “Out of Scope” letter will be sent to the board, with a reminder to notify the Regional Director of any intent to engage in digital assets related activities with XXXXX. The letter will also mention XXXXX. This plan of action was reached in consultation with the Washington Office.
Division of Depositor and Consumer Protection (DCP) Analysis:
San Francisco DCP has been involved with the Bank’s crypto notice and this associated analysis. On June 20, 2023, Consumer Compliance Technology Specialist XXXXX concurred with San Francisco RMS’s determination that the Bank’s relationship with XXXXX and XXXXX is outside the scope of FIL-16-2022.
At the last examination dated XXXXX Compliance was rated XXXXX and CRA was rated XXXXX.
Conclusion/Recommendation:
The region does not believe the bank’s activities fall within the scope of FIL-16-2022 based on the information provided by the bank and reviewed during the ongoing DCP exam. The region will send an out-of-scope letter to the bank notifying it of our determination following the WO’s concurrence.
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