FDIC Letter Requests Crypto Activity Clarification

FDIC
Federal Deposit Insurance Corporation
25 Jessie Street at Ecker Square, Suite 2300
San Francisco, California 94105

Division of Risk Management Supervision
San Francisco Regional Office
(415) 546-0160

Via Electronic Mail

March 8, 2024

XXXXX
Chief Executive Officer
XXXXX

Subject: Notification of Engaging in Crypto-Related Activities
Request for Additional Information

Dear XXXXX

On June 16, 2023, you notified the FDIC of XXXXX (Bank) engagement with XXXXX additional companies engaged in crypto-related activities in response to Financial Institution Letter 16-2022, Notification of Engaging in Crypto-Related Activities.

Based on our review of the information provided, and in light of inconsistencies identified at the prior examination between the described purpose and actual activities within the merchant processing function, additional information is needed to understand the activity. Please see the attachment for questions seeking clarification of the Bank’s activities. Within 45 days of the date of this letter, please provide a response addressing each of the items, as applicable, and supporting documentation. Furthermore, if additional crypto-related companies have been on-boarded, or if the Bank is considering engaging with additional crypto-related companies, please provide a detailed description of the current or proposed activities.

If you have questions, please contact Division of Risk Management Supervision Assistant Regional Director Perissa Ali Clark at XXXXX@FDIC.gov or b6 for Case Manager b8 b8 at b8 or b6,b8 or Division of Depositor and Consumer Protection Assistant Regional Director Matt Sheeren at XXXXX@FDIC.gov or b6 or Review Examiner b8 at b8 or b6,b8. Documents can be sent electronically as a PDF through the FDIC Secure Email portal at XXXXX@FDIC.gov. Information about how to use secure email and FAQs about the service can be found at https://www.fdic.gov/secureemail/.

Sincerely,

/s/ Paul P. Worthing

Paul P. Worthing
Regional Director

cc: b8

Attachment – Additional Information Request

Please provide the following information for XXXXX, XXXXX, XXXXX, XXXXX (collectively referred to as “Companies”):

  1. Are any of the Companies’ deposits held at XXXXX owned by the customers or end-users of the Companies? If not, please explain how the source, use, and purpose are identified and confirmed.

If the answer is Yes, please see request items 2 – 6 below and provide a response addressing each of the items. If the answer is No, please provide a response indicating what services the Bank is providing to each of the Companies.

  1. Any due diligence on each of the Companies provided by the Independent Sales Organization (ISO) that offered the partnership to the Bank.

  2. Any risk assessments and due diligence performed by the Bank to supplement the ISO-provided risk assessments and due diligence.

  3. A detailed description of the specific service the Bank is providing to each of the respective Companies.

  4. If payments are involved, indicate what type (such as wire, ACH, etc.)

  5. A spreadsheet detailing the following activities for each Company:

  6. Month-end deposit balances during 2023
  7. Month-end transaction volume (both incoming and outgoing) during 2023

Please provide the following additional information for XXXXX:

  1. A detailed description of the partnership with the bank, what activity the bank will perform, and what activity the entity will perform on the bank’s behalf

  2. According to recent press reports, XXXXX has filed an application with XXXXX to XXXXX. To the extent possible, explain what, if any, impact this will have on your partnership with XXXXX.

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