In its Fall 2023 Semiannual Risk Perspective, published on December 7, the Office of the Comptroller of the Currency (“OCC”) reported on key issues facing the federal banking system. In evaluating the overall soundness of the federal banking system, the OCC emphasized the need for banks to maintain prudent risk management practices. The key risk themes that the OCC underscored in the report included credit, market, operational, and compliance risks.
Of particular note was the discussion on the Bank Secrecy Act (“BSA”)/Anti-Money Laundering (“AML”) compliance risks with respect to fintech relationships. We also will discuss briefly certain other compliance and operational risks highlighted by the OCC.
Fintech Partnerships
The OCC cautioned banks that are adopting or considering fintech relationships to scrutinize each third-party relationship. The OCC stressed that banks need to understand the risks associated with each third-party relationship, and enter into effective contracts to address the potential for default and termination. It also emphasized the identification of nested relationships, in which fintech firm may be providing services to other fintech firms…
