Skip to main content
Menu Icon

InfoBytes Blog

Financial Services Law Insights and Observations

OCC orders bank to improve oversight of fintech partnerships

Bank Regulatory Federal Issues Fintech OCC Third-Party Risk Management Bank Secrecy Act Anti-Money Laundering SARs Financial Crimes Customer Due Diligence

Recently, a national bank disclosed an agreement reached with the OCC that requires the bank to improve its oversight and management of third-party fintech partnerships. According to an SEC filing, the OCC found unsafe or unsound practices related to the bank’s third-party risk management, Bank Secrecy Act (BSA)/anti-money laundering risk management, suspicious activity reporting, and information technology control and risk governance. Under the terms of the agreement, the bank must, within 10 days of the agreement, appoint a compliance committee comprised mostly of members from outside the bank to meet at least quarterly and provide progress reports outlining the results and status of the mandated corrective actions. Within 60 days of the agreement, the bank must also adopt and implement guidelines for assessing risks posed by third-party fintech partnerships and address how the bank “identifies and assesses the inherent risks of the products, services, and activities performed by the third-parties, including but not limited to BSA, compliance, operational, liquidity, counterparty and credit risk as applicable.” Additionally, the bank must establish criteria for their board of directors' review and approval of third-party fintech relationship partners, as well as how it will assess “BSA risk for each third-party fintech relationship partner, including risk associated with money laundering, terrorist financing, and sanctions risk as well as the third-party’s processes for mitigating such risks and complying with applicable laws and regulations.” The agreement also requires due diligence, monitoring, and contingency plan measures.

The agreement further stipulates that the bank’s board and management shall, within 90 days, (i) set up written BSA risk assessment guidelines; (ii) adopt an independent audit program; (iii) implement expanded risk-based policies, procedures, and processes to obtain and analyze appropriate customer due diligence, enhanced due diligence, and beneficial ownership information, including for fintech businesses; (iv) develop and adhere to a set of standards to ensure timely suspicious activity monitoring and reporting; and (v) establish a program to assess and manage the bank’s information technology activities, including those conducted by third-party partners. The bank must also conduct a suspicious activity review lookback within 30 days.