Davis Polk partner Dan Stipano shared his thoughts with MoneyLaundering.com on the updated federal guidance from the OCC and FDIC on bank-fintech partnerships. The new guidance urges banks to identify and mitigate their vulnerabilities to illicit funds and other financial crime risks stemming from their relationships with third parties such as fintech companies.

“Bank-fintech partnerships have proliferated since the initial guidance was issued, and they [banks] have unbundled certain core banking activities like deposits, lending and payments, and made them available to consumers through fintech platforms,” Dan explained.

He also added that banks should include provisions in their contracts that enable them to carry out an audit or review of the fintech’s responsibilities to make sure they are being conducted properly.

Dan noted that previous enforcement actions from the OCC covered third-party risk generally. “There have been other enforcement actions that have touched on this, as well as supervisory actions that are not made public,” he said.

“For Banks, New Guidance Means Reviewing, Reconsidering Fintech Partnerships,” MoneyLaundering.com (June 9, 2023) (subscription required)

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