U.S. regulators were probing the bank to see whether it scrutinized client transactions as part of its anti-money laundering practices.
Crypto-friendly Signature Bank was under criminal investigation by U.S. authorities over its anti-money laundering practices before its sudden collapse over the weekend, Bloomberg reported Wednesday, citing people familiar with the matter.
According to the report, investigators from the Department of Justice (DOJ) in Washington and Manhattan and people from the Securities and Exchange Commission (SEC) scrutinized the bank’s records.
Signature Bank Faced Criminal Probe Before Collapse
Prosecutors from the DOJ were investigating whether the company took appropriate steps to fight money laundering by examining account holders and monitoring transactions.
The inquiries were not made public at the time of the firm’s closure. However, while speaking to Bloomberg, a spokesperson for the SEC mentioned a statement from Chair Gary Gensler on Sunday when authorities were shutting down the bank.
“We will investigate and bring enforcement actions if we find violations of the federal securities laws,” Gensler said.
It remains unclear when the investigation started and if it led to the regulators’ closure of the bank, as its staff has not yet been accused of any misconduct. The regulators also revealed that they lost faith in Signature Bank’s management after the company failed to provide reliable data.
Recall that during the closure announcement on Sunday, the regulators disclosed that they had taken action to prevent impending contagion, as investors were panicking about Silicon Valley Bank’s (SVB) liquidity issue.
Nonetheless, the Federal Reserve Board, DOJ, and the Federal Deposit Insurance Corporation (FDIC) assured Americans that all Signature Bank depositors would receive their funds.
Investigators Probe SVB
Meanwhile, Signature Bank is not the only collapsed financial institution under fire from U.S. regulators. SVB is currently under investigation by the SEC and DOJ over the stock sales of its executives before the bank’s demise.
That the probes are still in the early stages, and so may not necessarily lead to allegations.