What to Know About the FDIC Fintech and Third Parties Guide

Podcast Transcript

Hi – my name is Abbe with Venminder.

In this podcast, you’re going to learn a few tips for fintechs navigating the regulatory requirements unique to banking.

Every day our team of experts assists organizations of all sizes and industries with third-party risk management. We stay abreast of all the changes and evolvement. 

The Federal Deposit Insurance Corporation, referred to as the FDIC, which serves as the primary regulator for more than 3,400 banks in the U.S., has firm expectations on third-party risk, codified in their financial institution letters, FILs, 44-2008 and 3-2012, for example.  

Now, they’ve gone a step further and told third parties what to expect to participate in today’s financial services world. The guidance is instructive both to bank management as well as the third-party management team.

Here are the highlights: 

1. First, know that bank management requests to a third party may include information on background, initiatives and ownership information, policies, procedures and infrastructure, financial information and marketing materials.
   
   
2. Second, there are four basic risk management elements a third-party vendor should be aware of when conducting business with a bank. These elements are:

• • Risk assessment around the activity being conducted
  • Proper due diligence around third party selection
  • Structuring and reviewing contracts at appropriate bank levels
  • Ongoing oversight and management of third-party relationships

3. Additionally, if you want to provide a service to, or partner with a bank, you must:

• • Understand a bank’s framework of compliant laws and regulations
  • Provide proof of a well-managed and strong business
  • Execute thorough preparation for bank questions
  • Maintain appropriate monitoring systems

Additional resources that I recommend to review to assist with the process includes FIL-26-2004: Unfair or Deceptive Acts and Practices Under Section 5 of the Federal Trade Commission Act, as well as FIL-44-2008: Guidance for Managing Third-Party Risk, and FIL-3-2012: Third Party Payment Processor Relationships Guidance. 

We hope you found this informative. Thanks for tuning in; catch you next time!