Silvergate faces penalties totalling USD63M from US regulatory agencies
(MENAFN) Silvergate Capital Corporation and its affiliated Silvergate bank faced significant penalties totaling USD63 million from US regulatory agencies due to deficiencies in their anti-money laundering (AML) practices, according to statements released Monday. The Federal Reserve imposed a fine of USD43 million, highlighting shortcomings in transaction monitoring compliance with AML laws.
Additionally, the Department of financial Protection and Innovation of California, as the state regulator, levied an additional USD20 million fine on Silvergate for similar compliance lapses. Separately, the Securities and Exchange Commission (SEC) announced penalties against Silvergate Capital Corporation, specifically charging the company, its former CEO, and other executives for misleading investors about their compliance programs.
The SEC's enforcement action alleged that Silvergate Capital and its former executives failed to disclose critical information about the company's losses stemming from expected securities sales following the collapse of the crypto firm FTX. Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, emphasized the importance of transparency, especially during financial crises, stating that public companies must truthfully inform investors.
In a settlement agreement, Silvergate neither admitted nor denied the allegations but agreed to a final judgment requiring payment of a USD50 million civil penalty and a permanent injunction. Former CEO Alan Lane and former Chief Risk Officer Kathleen Fraher also agreed to pay civil penalties of USD1 million and USD250,000, respectively.
The financial penalties and regulatory actions against Silvergate come in the aftermath of the 2023 banking crisis in the US, during which Silvergate Bank, heavily exposed to cryptocurrencies, failed abruptly due to the sharp downturn in crypto prices and the collapse of FTX in late 2022. The case underscores heightened regulatory scrutiny and enforcement in the cryptocurrency sector, aiming to strengthen compliance and mitigate risks associated with financial instability and market volatility.
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