On June 14, 2024, the Federal Reserve Board issued an enforcement action against Evolve Bancorp, Inc. and Evolve Bank & Trust for deficiencies in the bank's anti-money laundering, risk management, and consumer compliance programs. The Board is requiring the bank to improve its policies and programs in those areas, in addition to requiring other remedial improvements.
Evolve partners with various financial technology companies that, in turn, provide access to banking products and services to their end customers. In 2023, the Federal Reserve Board examiners found that Evolve engaged in unsafe and unsound banking practices by failing to have in place an effective risk management framework for those partnerships. Evolve also did not maintain an effective risk management program or controls sufficient to comply with anti-money laundering laws and laws protecting consumers.
The Board ordered Evolve Bancorp and Evolve Bank to, among other things:
Submit a written plan to strengthen board oversight of the management and operations of the Bank and the Bank’s compliance with the BSA/AML Requirements and the OFAC Regulations;
Submit a written plan to enhance the Bank’s risk management of its Open Banking Division (OBD);
Submit improved lending and credit risk management policies and procedures for OBD that includes underwriting standards and policies and procedures to ensure compliance with loan documentation and collateral requirements to minimize exceptions;
Submit a written plan to enhance interest rate risk management practices that are appropriate for the size and complexity of the Bank;
Submit an acceptable enhanced written internal audit program for the Bank;
Retain an independent third party to conduct a comprehensive review of the effectiveness of the Bank’s program for compliance with the BSA/AML Requirements; and
Submit a written BSA/AML compliance program and customer due diligence program.
Read the FRB’s press release here.
The consent order can be found here.