Maryland Legal Alert for Financial Services
FDIC Action on FinTech Bank Partnerships
On March 29, 2024, the Federal Deposit Insurance Corporation (FDIC) released two recent consent orders it entered with an Ohio bank and a New York bank, highlighting the obligation of banks to monitor their fintech partners for compliance with consumer protection requirements and applicable financial laws and regulations.
In connection with the consent order involving the bank in New York, the FDIC determined that the bank violated the Bank Secrecy Act, the Electronic Funds Transfer Act and the Truth in Savings Act. As a result, the consent order required the bank to increase supervision of its third-party partners and their compliance with data collection and risk assessment rules, update its anti-money laundering program, and address consumer law violations, including those by third party fintech partners.
In connection with the consent order involving the bank in Ohio, the FDIC targeted the bank’s prepaid credit card partnerships. Similar to the New York case, the order required this bank to update its anti-money laundering and anti-terrorist program to better monitor the bank’s third-party partners and to improve the detection and reporting of suspicious activity.
Practice Pointer: With growing utilization of, and scrutiny on fintech partnerships, banks should evaluate these partnerships for compliance with consumer protection, data collection, and anti-money laundering laws. To prevent regulatory action, banks should update their internal protocols to ensure adequate supervision over these partners and continued compliance with applicable laws and regulations.
For more information, contact Christopher R. Rahl or Natalie C. Gibson.