Federal Banking Agencies Address Risks in Bank-Fintech Partnerships

Federal Banking Agencies Address Risks in Bank-Fintech Partnerships

According to an article by Venable, federal banking agencies issued a joint statement and a request for public information (RFI) on July 25, 2024, to address potential risks in bank-fintech partnerships. The RFI seeks feedback on various aspects of these arrangements, including deposits, payments, and lending, as well as their structure, benefits, risks, and risk management practices.

The Federal Reserve, FDIC, and OCC have been examining bank-fintech partnerships and identified several risks that necessitate enhanced compliance and operational measures. The joint statement and RFI emphasize that banks must carefully manage these partnerships with robust risk management frameworks, reflecting a broader supervisory focus on third-party risk management. 

Recent enforcement actions highlight this focus, including consent decrees with banks for inadequate risk management and the collapse of fintech Synapse, which lost significant customer funds.

Key issues outlined by the article include the need for better access to transaction records, clear definitions of roles and responsibilities, effective oversight and governance, and comprehensive risk assessments. Banks are advised to ensure proper oversight of fintech partnerships, including compliance with anti-money laundering regulations and consumer protection laws.

Recent enforcement actions noted in the article underscore the ongoing initiative to enhance risk management and oversight in bank-fintech partnerships. The joint statement and RFI align with past guidance on third-party risk management, urging banks to prioritize these areas to avoid compliance and operational issues. The agencies expect robust management practices and adherence to legal requirements to safeguard against risks associated with fintech partnerships.