Bank-Fintech Guide: Financial Crime Diligence

Bank-Fintech Guide: Financial Crime Diligence

Bank-fintech relationships are under intense regulatory scrutiny – and it’s only increasing.

Lighter-touch approaches are no longer enough to meet regulatory expectations. The recent FDIC consent order against a U.S. partner bank is just the latest reminder of this.

These trends mean diligence processes need to be a top priority. Improving oversight in bank-fintech relationships cannot be done without better onboarding and diligence, especially for financial crime compliance. The OCC’s agreement with Blue Ridge Bank made clear that effective risk management starts with due diligence, pointing to regulatory guidance saying key fintech diligence areas need to cover legal and regulatory compliance and risk management policies, processes, and controls.

But optimizing diligence, oversight, and onboarding isn’t just a concern for banks.

Both banks and fintechs should care that these relationships have appropriate diligence and oversight. Why?

  • Banks will be cut off from new relationships and may lose fintech partners if they draw regulatory attention for oversight deficiencies.
  • Fintechs – if their partner bank faces regulatory issues or simply has to tighten risk management practices due to regulatory scrutiny – may suddenly lose banking provider relationships and their ability to provide services to customers at very short notice.

And this goes beyond just compliance. Almost half of all bank-fintech partnerships fail due to operational and governance challenges, so business teams need to keep this top of mind.

Optimizing Onboarding and Diligence

At onboarding, partner banks and fintechs should align on the expected information, documents, and data that need to be shared initially and going forward. Both sides should prioritize full transparency in diligence to establish a healthy, successful relationship, and make sure that information can easily flow back and forth.

In practice, many compliance teams at partner banks are looking for ways to upgrade financial crime diligence and onboarding processes as they grow their fintech programs.

At the same time, many fintechs are looking for more insight on the financial crime compliance information they’ll be expected to produce.

To help address either of these needs, below, you can download checklists of common information and documents that are frequently requested in bank-fintech financial crime compliance diligence processes.

You can use these checklists as a baseline for either requests you can expect as a fintech or, alternatively, what you should be asking for as a partner bank – though each due diligence process will vary depending on how critical the relationship may be and risk appetites.

Diligence is the launching point for ongoing risk and performance expectations and metrics over the life of a bank-fintech relationship.

Getting this crucial step right will enable better oversight of fintechs and will ultimately determine the overall joint success of the partnership.

Download the financial crime diligence checklists here!

* indicates required

Learn more about bank-fintech relationships:

How to avoid compliance pitfalls in bank-fintech relationships
A recent survey found that 40% of all bank partnerships fail, despite the rapid growth and increased focus on bank-fintech partnership strategies. In fact, the survey results showed that the vast majority of banks struggle significantly with managing their fintech relationships:
Bank-Fintech Relationships: Key Regulatory Developments
Bank-fintech relationships and the Banking-as-a-Service (BaaS) landscape have become major regulatory focuses in the last two years and it’s essential to follow the latest compliance developments. We’re tracking and updating this page for key regulatory guidance, events, and discussions on bank-fint…

Looking for technology solutions to make fintech diligence and onboarding faster and better? Get in touch today to learn how Cable can help!

Powered by Ghost