Community banks chasing growth through FinTech partnerships are facing a stark warning from regulators. In May 2026, the Office of the Comptroller of the Currency published an April consent order against a Northeast-based federal savings association over shortcomings in its Bank Secrecy Act and anti-money laundering compliance programme.
The action forms part of a widening pattern of enforcement aimed at smaller institutions that have raced into payments and FinTech-adjacent businesses without building compliance operations to match, claimed AscentAI.
AscentAI recently took the time to discuss how to overcome risk in community bank and FinTech partnerships.
The partnership model itself is now standard practice across the industry, but it carries mounting risk in an unsettled regulatory environment. No rules currently define who owns which compliance obligations within a bank-FinTech relationship.
Earlier open banking guidance that placed responsibility squarely on banks has been withdrawn, and replacement guidance still being drafted may or may not shift more of the burden onto FinTechs.
That uncertainty offers no shelter. State regulators apply their own standards to these partnerships, and federal enforcement continues, with smaller banks increasingly exposed.
Coalition for Financial Ecosystem Standards (CFES) co-founder Sima Gandhi said, “For many community banks around the country, partnering with fintechs is the way forward.” She added, “For a smaller bank a consent order could kill the program and end viability financially.”
The legal reality is unambiguous: FDIC-insured sponsor banks supply the charter, licences and deposit infrastructure, and they carry the compliance obligations that come with them. Under the Bank Secrecy Act, responsibility sits with the financial institution rather than its FinTech partners, meaning the bank must ensure partners carry out customer due diligence and transaction monitoring.
The same logic applies to data protection and cybersecurity, where banks need ongoing assurance that partners meet security requirements. Banks routinely push these duties onto FinTechs contractually, but without clear regulatory segregation of responsibilities, confusion can take hold where obligations overlap or where a bank lacks visibility into a partner’s compliance profile.
One remedy is embedding compliance and risk requirements directly into vendor contracts, covering KYC, AML, cybersecurity and data integrity, backed by penalties including termination. But CFES has developed a potentially more seamless option for community banks: the Standardized Assessment for Risk Management & Compliance (STARC).
STARC uses independent audits to certify a FinTech’s compliance maturity across six core areas — BSA/AML, compliance management systems, third-party risk management, complaint handling, operational risk, and marketing and product compliance.
Each area is scored against programme elements such as governance, risk assessment, training, policies, monitoring, issue management, reporting and change management, on a five-level maturity scale running from Level 5 (Rudimentary) to Level 1 (Optimized).
According to the American Fintech Council, the framework and its initial standards emerged from extensive consultation with banks, FinTechs, regulators and consumer advocates. With regulatory clarity unlikely in the near term and scrutiny of partnerships intensifying, STARC could give smaller banks the structure and confidence to select reliable, compliant FinTech partners to power their growth strategies.
Want to read the full AscentAI post? Find it here.
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