SPONSOR BANKS WOULD DO WELL TO SEE THAT REGULAR ADVERSE MEDIA SCREENING OF THEIR FINTECH PARTNERS IS CONDUCTED, AS PART OF A PRUDENT RISK REDUCTION PROGRAM

While we have been focused of late in concentrating upon the need for sponsor banks to insure, through a variety of ways, that their fintech partners create and maintain an effective program of AML compliance, there is another area that requires attention: regular adverse media screening of all fintech clients. It is in the sponsor bank's vested interest to periodically troll for adverse media, including social media, to watch for retail customer complaints, civil litigation, regulatory issues, employee or leadership disputes, and other negative news that might indicate legal, regulatory, personnel, or public perception problems.

Sponsor banks must be able to anticipate operational, financial, consumer and legal problems that may befall their fintechs, as they could directly affect account traffic, and even sponsor bank reputation, due to the fact that they are linked in a number of ways to their fintechs. Consumer complaints, and issues with fintech product reliability, could be directed at the sponsor bank where payments were processed, irrespective of fault or blame.

There are a number of outstanding adverse media screening programs and tools commercially available; some go beyond what had been described as straightforeward screening to providing context behind potential risks. Whatever program you choose, do so after careful consideration, so that you can analyze risk to your bank early on, before rapidly moving events overtake your ability to take corrective steps.

Of course, as a retired and reformed career money launderer, I am concerned with the possibility that fintech misconduct could constitute a predicate act supporting a money laundering charge against not only the fintech, but involving the sponsor bank as well.

If you, as a sponsor bank, aren't using an adverse media screening platform, prudent risk management dictates that you acquire one, and monitor any emerging fintech controversies that appear.