SPONSOR BANKS: MAKE PERIODIC, UNANNOUNCED VISITS TO YOUR FINTECH PARTNERS TO AUDIT THE ACTUAL EFFECTIVENESS OF THEIR COMPLIANCE DEPARTMENTS

We have recently been covering a number of important aspects of the duty off sponsor banks to insure that their fintech clients are maintaining effective AML/CFT compliance departments, even suggesting that, if necessary, they donate the necessary programs in customer identification and transaction monitoring, to get the job done. Remember, the compliance shortcomings of your fintechs can cause you major problems with regulators if they surface during a criminal investigation of targets exploiting them.

While your fintechs may have all the compliance bells & whistles necessary to run a clean shop, how can you be assured that they are actually employing them consistently, day after day? How do you know they don't just add staff to their compliance function, on the days you show up to check on them?

The solution is to have an experienced, trained member of your own staff make repeated, but unannounced, visits to each of your fintechs, to audit their compliance programs in action. That individual should know what the red flags of an ineffective or half-hearted compliance program look like, and file a written report to your bank management after each visit, so that demands for remedial action, if needed, will be swift, with subsequent checks for actual implementation.

I cannot emphasize enough the strict liability that regulators have assigned to the obligation of sponsor banks of seeing that their fintechs maintain a sufficient compliance regime to reduce the risks that money launderers will penetrate their client base, and be allowed to move the proceeds of crime through your bank. The compliance sins of your fintechs will be deemed to be your responsibility; audits are a method of catching them early on, and taking action to eliminate them, before you are called on the carpet by regulators.