Thread Bank, a financial institution based in Rogersville, Tennessee, has been issued a consent order by the Federal Deposit Insurance Corporation (FDIC).
This action mandates comprehensive reforms in the bank’s operations, particularly focusing on its information technology (IT) practices, anti-money laundering (AML) measures, and overall risk management framework.
Thread Bank is one of the largest banking-as-a-service partner banks, behind Evolve (which has been mired in issues) and Blue Ridge Bank.
Some of the popular FinTech apps that Thread Bank serves includes Relay, Baselane, Cleo, and others.
The consent order, effective May 21, 2024, outlines multiple areas where Thread Bank must take immediate corrective actions.
These include enhancing board oversight, updating strategic plans, refining enterprise risk management, and improving policies and procedures to comply with regulatory standards. Additionally, the bank is required to bolster its AML and countering the funding of terrorism (CFT) program to ensure robust compliance with federal laws.
It also places a lot of emphasis on oversight of their banking-as-a-service and lending-as-a-service offerings.
Here are the key requirements of the consent order:
The FDIC’s consent order highlights the increasing regulatory scrutiny faced by banks involved with FinTech partnerships. Thread Bank, known for its collaborations with various fintech companies, must now improve regulatory compliance with a large focus on oversight of its FinTech Partnerships.
This regulatory action underscores the increased scrutiny banks that are involved with FinTechs are facing in light of the Yotta and Synapse issues, along with what happened recently with Evolve Bank. All banks offering banking and lending-as-a-service should be “on notice” that they are just as responsible for their FinTech partner’s customers and their funds.
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