Federal authorities take action against Synapse's associate, Evolve, through enforcement measures

Evolve Bank & Trust has been instructed by the Federal Reserve to improve its anti-money laundering (AML), risk management, and consumer compliance programs. This enforcement action comes as part of a growing trend of orders demanding better policing of fintech partnerships among banking-as-a-service providers.

The order, issued by the Federal Reserve, requires Evolve Bank & Trust to take several steps to bolster its compliance programs. These include enhancing its Bank Secrecy Act/AML (BSA/AML) compliance programs, strengthening its customer due diligence program, and improving its lending and credit risk management policies related to fintech partnerships.

The bank must also ensure that its staff have sufficient expertise and independence, and that staffing levels are adequate. Evolve is required to correct IT and information security deficiencies, and enhance its interest rate risk management practices.

In addition, the bank must submit a plan to enhance its risk management framework around its fintech partnership division. This plan should include policies and procedures to identify risks associated with partners and programs. Evolve Bank & Trust was also hit with an order to improve its liquidity risk management in relation to fintech partner activities and significant funding concentrations.

The bank must design a written plan to improve its capital risk management, considering its fintech partnerships and activities. This plan must evaluate the adequacy of the bank's capital and include measures to improve the bank's capital planning framework, accounting for its "elevated risk profile" and fintech partners.

The order requires Evolve to strengthen its procedures around record-keeping and consumer compliance programs. The bank's internal audit program needs to be bolstered, and the bank must implement measures to ensure the bank's board gives approval in writing before taking on new fintech partners or adding products or programs with those partners.

The bank's board is also required to draft a plan to strengthen board oversight of the bank's management and operations and its compliance with BSA/AML requirements and Office of Foreign Assets Control regulations. An independent third party must review Evolve's fintech partner program for compliance with consumer laws and regulations.

The frequency of consent orders over relationships has accelerated this year, as shown by the cases of Lineage Bank, Piermont Bank, and Sutton Bank. Regulators have been pushing for stricter oversight of fintech partnerships, as demonstrated by the penalties faced by these banks over the past two years.

It is worth noting that the independent third party requested by Evolve Bank & Trust to review the compliance behavior of their fintech partner program is not explicitly named in the available search results.

The Federal Reserve's enforcement action is independent of Synapse's bankruptcy proceedings. The order comes as part of a broader effort to ensure that banks are effectively managing their fintech partnerships and are in compliance with relevant laws and regulations.

Federal authorities take action against Synapse's associate, Evolve, through enforcement measures