On a recent American Banker podcast, Sima Gandhi, Co-Founder of the Coalition for Financial Ecosystem Standards (CFES), argued that fintechs must take greater responsibility for compliance and risk management.
"The reality is that fintechs need to be doing more," Gandhi said, emphasizing that banks should not bear the sole burden of regulatory adherence. CFES — which includes members like Stripe, Brex, and Mercury — is launching a framework to establish industry-wide standards in such areas as anti-money laundering (AML), compliance management, and third-party risk.
The framework categorizes fintechs into five compliance levels, from rudimentary to optimized. For instance, in AML oversight, a level-five officer lacks clear authority and resources, while a level-one officer holds documented authority with direct board access.
Chris Black, CEO of Thread Bank, a community bank based in Tennessee, welcomed the initiative, asserting that fintechs, banks, and regulators must collaborate. "The essence of leadership isn't sitting back and waiting," Black told the American Banker, stressing the need for common ground.
CFES plans to implement a certification process where independent experts will verify fintech operations, Gandhi said. Regulators have been clear that they will hold banks accountable for fintech risks. Standardization will allow banks to assess fintechs more effectively, putting them "in the risk management driver seat," Gandhi argued.
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