N/A — Industry Guidance
In August 2021, the Federal Reserve, OCC, and FDIC jointly published guidance for community banks on conducting due diligence on financial technology companies. The document outlines key risk areas including legal and regulatory compliance, anti-money laundering obligations, consumer protection, and the importance of aligning contract terms with bank standards. Banks are advised to evaluate fintechs' experience operating within regulated banking frameworks, review compliance processes such as policies, SAR filings, and customer complaint handling, and include audit and termination rights in partnership contracts. This guidance was later updated in June 2023 and is foundational to the supervisory expectations around BaaS and bank-fintech relationships.
Verified from source: The URL confirms this is the Federal Reserve's published PDF for 'Conducting Due Diligence on Financial Technology Firms' dated August 2021. While the PDF binary content is not human-readable in the extracted text, the URL path and metadata confirm the joint guidance document issued by federal banking agencies.
- Establishes baseline supervisory expectations for community banks partnering with fintechs
- Signals increased regulatory scrutiny of bank-fintech and BaaS arrangements
- Banks must demonstrate robust due diligence processes or face potential supervisory criticism
- Sets the stage for future enforcement actions where banks fail to meet these standards