Independent Banker - December 2024 - 17

they obtained that consent.
However, nowhere in the underlying
rule does it say that banks are required
to get that affirmative consent in
writing. " If a bank is asked to produce
proof of affirmative consent and
they're not able to, according to the
circular, this would be a violation of
the Electronic Fund Transfer Act and
Regulation E, " Whitley says.
Moreover, the underlying rule has a
two-year record retention requirement
and does not specify which types of
records must be retained, so regulators
should amend their rules if they wish to
impose expectations that exceed current
regulations, Whitley says. ICBA and
other groups have called on the CFPB to
withdraw the circular.
3
FDIC's proposed rule for
FBO accounts in bankfintech
partnerships
The FDIC in September said that it was
seeking public comments for a proposed
rule to strengthen banks' recordkeeping
of custodial deposit accounts with
transactional features, also known as " for
benefit of " (FBO) accounts, particularly
within bank-fintech partnerships.
Regulators became increasingly
concerned with this issue after the
bankruptcy of Synapse Financial
Technologies Inc., a company that
provided middleware software
connecting fintech solutions and
banks. The downfall of Synapse
subsequently affected consumers'
ability to access funds placed at
participating banks for a number of
months, according to the FDIC.
" Following the bankruptcy, Synapse's
banking partners encountered
significant difficulties in obtaining,
reviewing and reconciling Synapse's
records and have raised concerns
about the accuracy of the records, "
the FDIC wrote. " These events also
created risks for consumers, including
confusion regarding the applicability
" [Customer care is] always our
focus, as well as making sure
the bank is doing things in an
appropriate fashion. "
-DAVID LONG, BRYANT BANK
and availability of deposit insurance to
protect their money from loss. "
In a June Synapse bankruptcy filing,
trustee and former FDIC chair Jelena
McWilliams wrote that while the banks
involved had roughly $265 million in
these consumer accounts, the fintechs'
records showed they only had about
$180 million on hand.
Under the FDIC's proposed rule,
banks in partnerships with fintechs and
other third parties would be required
to maintain account records using a
specific file format provided by the
rule. Banks would also be required
to implement internal controls to
ensure that account balances are
accurate, including reconciliations no
less frequently than as of the close of
business daily.
The rule would permit records to
be maintained through a third party
if certain specific requirements are
satisfied, including, among other
things, that the bank would have direct,
continuous and unrestricted access to
the records of the beneficial owners,
including in the event of the business
interruption, insolvency or bankruptcy
of the third party.
" All five FDIC board members-
Democrats and Republicans-agreed
that this rule should be proposed,
which is fairly uncommon, " says
Michael Emancipator, ICBA's senior
vice president and senior regulatory
counsel. " The idea is if you reconcile
it at the end of the day and the records
between a bank and a fintech don't
match up, that will at least trigger an
effort to figure out where the discrepancy
is arising. Hopefully that gets reconciled
before some external event triggers an
outflow of deposits. "
The September proposal is the latest
regulatory announcement regarding
bank-fintech partnerships. In July, the
three federal bank regulatory agencies
issued a joint statement reminding
banks of potential risks associated with
third-party arrangements to deliver bank
deposit products and services.
Separately, the agencies requested
additional information on a broad
range of bank-fintech arrangements,
including with respect to deposit,
payments, and lending products and
services. The agencies are seeking input
on the nature and implications of bankfintech
arrangements and effective risk
management practices.
" I anticipate that there [will be] more
proposed rules specific to managing
bank-fintech partnerships-not just those
providing banking-as-a-service solutions
but any way a bank works with fintechs, "
says Emancipator.
4
CISA's additional cyber
incident reporting rules
In April, the Department of
Homeland Security's Cyber Security
and Infrastructure Security Agency
(CISA) proposed new reporting
independentbanker.org // 17
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Independent Banker - December 2024

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