From Consent Orders to Compliance: How Small Banks Can Stay Ahead
Learn how small banks can avoid enforcement actions by strengthening compliance frameworks, managing fintech partnerships, and enhancing BSA/AML programs amid evolving regulatory scrutiny.
The message from regulators is loud and clear: financial institutions engaged in BaaS and third-party fintech partnerships must adopt robust compliance frameworks and adhere to compliance standards. Failure to do so will continue to result in significant enforcement actions, substantial financial penalties, and operational restrictions.
Since late 2023, the regulatory landscape has shifted dramatically. The explosive growth of fintech partnerships has increased complexity, and with it, regulatory pressure. Just take a look:
| Institution Name | Primary Regulator(s) | Date of Action | Primary Violations Cited |
|---|---|---|---|
| The Bancorp Bank | FDIC, Delaware OSBC | May 2020 (Terminated 2014 Order) | BSA/AML, Sanctions |
| Anchorage Digital Bank | OCC | April 2022 | BSA/AML |
| United Bank Limited | FRB | July 2018 | AML, Risk Management |
| AllNations Bank | FRB, Oklahoma SBD | October 2018 | BSA/AML, CDD, SAR |
| Vast Bank | OCC | October 2023 | Capital, Strategic Planning, Liquidity Risk, IT Controls, Risk Management for New Products |
| First Fed Bank | FDIC | November 2023 | Fair Lending, Third-Party Risk Management |
| Choice Financial Group | FDIC, North Dakota DFI | December 2023 | BSA/AML, Third-Party Risk Management, CIP, CDD, SAR |
| Lineage Bank | FDIC | January 2024 | Risk Management, Capital, Third-Party Risk Management |
| Blue Ridge Bank N.A. | OCC | January 2024 (Follow-up to 2022 Written Agreement) | BSA/AML, Internal Controls, Independent Testing, BSA Staffing, Third-Party Risk Management |
| Piermont Bank | FDIC | February 2024 | Unsafe/Unsound Practices, Internal Controls, Information Systems, BSA/AML, EFTA, TISA |
| Sutton Bank | FDIC | February 2024 | Unsafe/Unsound Practices, BSA, AML/CFT |
| Evolve Bank & Trust | FRB | June 2024 | Compliance, Risk Management, BSA/AML, OFAC, Consumer Compliance, Capital, Liquidity, Credit |
| Green Dot | FRB | July 2024 | Deceptive Practices, Deficient Consumer Compliance Risk Management, BSA/AML |
| Axiom Bank, N.A. | OCC | October 2024 | BSA/AML, Internal Controls, BSA Officer |
| Hatch Bank | FDIC, California DFPI | April 2025 (FDIC), May 2025 (DFPI) | Unsafe/Unsound Practices, BSA/AML, Third-Party Oversight |
| Quaint Oak Bank | FDIC | May 2025 | Unsafe/Unsound Practices, BSA, AML/CFT |
The Key Themes in these Orders
Third-Party Risk Management (TPRM):
Financial institutions must establish structured and robust processes for conducting due diligence during the onboarding of third-party fintech partners. Equally important is the need for ongoing monitoring of fintech activities throughout the partnership lifecycle, along with formalized offboarding procedures to mitigate residual risks.
Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) Enhancements:
Banks must strengthen their compliance frameworks by addressing internal control gaps, ensuring independent testing, and maintaining adequate staffing levels. Suspicious activity must be identified promptly, and timely, accurate reporting is critical to maintaining regulatory compliance.
Senior Management Oversight and Strategic Planning:
Boards and senior management must be actively involved in the oversight of fintech and BaaS programs. This includes establishing formal governance structures and aligning fintech strategies with institutional risk appetite. Several recent enforcement actions, such as Lineage’s, have introduced capital planning requirements, including asset growth restrictions and mandatory capital buffers.
Fintech partnerships are powerful, they offer innovation, new revenue channels, and expanded reach. But they also create compliance risks, particularly for small banks and credit unions with limited staff, budgets and the know-how to handle them. Regulatory penalties are painful, but reputational damage is even more enduring.
How Across Helps
At Across, we provide end-to-end risk management tailored for small banks and credit unions. Whether you’re evaluating a new fintech partner, monitoring transaction activity, or preparing for an exam, our AI-powered platform and expert analysts help you stay compliant without stretching your internal resources.
Our services include:
- Third-party fintech risk assessments during onboarding
- Real-time and post-transaction monitoring including investigations of suspicious cases
- Periodic risk evaluation
- AML backtesting
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