Community Banks: OCC Issues New Due Diligence Guidance For FinTech Partnerships

Ever felt like David in a world of Goliaths? In the ever-evolving financial services sector, staying ahead of the curve with tech innovations can be a tall order, especially for community banks. That’s where FinTech partnerships come in, offering a leg-up to keep pace in this tech-savvy era.

But hold your horses! Jumping into bed with FinTechs isn’t as straightforward as it sounds. Community banks need to tread carefully, ensuring these partnerships align with their risk appetite and legal requirements. Here’s where the Office of the Comptroller of the Currency (OCC) steps in with a helping hand.

Due Diligence on FinTech Partners – A Must for Community Banks

Choosing the right FinTech partner is like finding the perfect dance partner – it’s all about harmony and rhythm. FinTechs can jazz up your services, but they come with their own set of tunes. That’s why due diligence is crucial.

Community banks need to ensure these FinTech partners can groove safely within the regulatory dance floor without stepping on any toes. But how do you size up a FinTech’s moves when they’re not always dancing to the same regulatory beat as banks?

Enter the OCC’s Handy Guide

Federal agencies, including the OCC, Federal Reserve, and FDIC, get it. They’ve collaborated to create a guide, helping community banks conduct thorough due diligence on FinTech firms. This guide isn’t a one-size-fits-all, but it’s a great start.

Think of it as a road map through the complex terrain of FinTech partnerships. It’s a voluntary guide, packed with insights on how to assess and manage risks when certain information is missing.

Due Diligence Guidance: Breaking it Down

The guide covers six critical areas:

  • Business Experience and Qualifications: Look at a FinTech’s track record, strategic plans, and any legal shenanigans they might have been involved in. Don’t just take their word for it – dig deep!
  • Financial Condition: Are they making ends meet through profits, loans, or venture capital? A shaky financial foundation could spell trouble.
  • Legal and Regulatory Compliance: Do they know their legal ABCs? A FinTech that’s clueless about compliance is a no-go.
  • Risk Management Controls: How do they handle risks? Their policies and procedures can give you a sneak peek into their risk management prowess.
  • Information Security: Can they keep secrets? In the digital age, a FinTech’s info security measures are non-negotiable.
  • Operational Resilience: What’s their plan when things go south? Their business continuity and disaster recovery plans can tell you a lot about their ability to bounce back.

This guide isn’t exhaustive, but it’s a great starting point. Don’t forget, though, every FinTech dance is different, and you might need to improvise along the way.

FinTechs and Compliance – Do They Tango Well?

While FinTechs are nimble and innovative, their compliance rhythm can sometimes be off. That’s why community banks need to lead the dance, ensuring every step is in line with regulatory tunes.

B.I.G. – Your Cannabis Payments Partner

Are you a financial institution eyeing the cannabis sector? Wondering how to navigate BSA/AML compliance? Bankcard International Group (BIG) is here to guide you through. With our team of ETA Certified and CAMS professionals, we’ll help you groove through the complex world of cannabis payments.

So, if you’re ready to jazz up your cannabis payment solutions, give us a shout. We’re here to help you step up your game with compliant and effective payment strategies. After all, in the world of financial services, it’s all about keeping in step with innovation while staying true to the regulatory rhythm!

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