Maryland Legal Alert for Financial Services
FDIC Proposes Stricter Record-Keeping Rules for Fintech Partnerships
FDIC Proposes Stricter Record-Keeping Rules for Fintech Partnerships
The Federal Deposit Insurance Corporation (FDIC) proposed a new rule aimed at addressing risks associated with fintech partnerships. The proposed rule imposes stricter record-keeping requirements by mandating that federally insured depository institutions (IDIs) either maintain a ledger of beneficial owners of accounts accessed by third-party fintech providers or have unrestricted access to a ledger maintained by a third-party fintech provider to reconcile accounts each day and track end-user funds on a real-time basis. This rule would only apply to for-benefit-of (FBO) accounts with a “transactional feature” (i.e., accounts in which customers can make purchases or transfer funds). The FDIC exempted certain third-party FBO accounts, such as custodial trust accounts and accounts set up by broker-dealers.
To ensure compliance with the proposed rule, the FDIC will mandate that IDIs establish and maintain written policies and procedures incorporating the rule’s requirements, complete an annual certification of compliance stating that the IDI has implemented and tested the record-keeping requirements, and submit an annual report that includes information regarding:
- Any material changes to the IDI’s IT systems relevant to compliance;
- A list of account holders with custodial deposit accounts;
- Testing results of the IDI’s recordkeeping requirements; and
- Independent validation of any records maintained by third parties.
The proposed rule does not address how the FDIC expects IDIs to demonstrate that there is unrestricted access to the ledger or daily reconciliation of accounts, nor did the proposed rule address whether the FDIC would treat beneficial owners of pooled deposits as direct customers of the IDI under the Bank Secrecy Act.
The proposed rule seeks to address the delays that often occur when attempting to pass through deposit insurance to customers of third-party fintech providers in the event of an IDI failure (because the FDIC relies on the records of IDIs when making determinations regarding insurance coverage). Comments on the proposed rule will be open for 60 days once it is published in the Federal Register.
For more information, contact Christopher R. Rahl or Tamia J. Morris.