The Federal Reserve Board denied the application of a digital-first bank for membership in the Federal Reserve System, citing weaknesses in the bank’s anti-money laundering (AML) protocols as part of its decision.

The Fed announced its conclusion regarding Wyoming-based Custodia Bank in a press release Friday. Custodia applied in October 2020; membership would have ensured its customer deposits would be covered by the Federal Deposit Insurance Corporation (FDIC).

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Aaron Nicodemus is the Editor-in-Chief of Compliance Week. He previously worked as a reporter for Bloomberg Law and as business editor at the Telegram & Gazette in Worcester, Mass. Email: aaron.nicodemus@complianceweek.com LinkedIn:...