As regulatory scrutiny intensifies and fintech partnerships grow, LendKey’s Director of Regulatory Compliance, Lauren Sartwell, provides essential insights on managing third-party oversight and maintaining robust compliance practices.

Think of regulatory compliance as the rulebook for financial institutions. It ensures everyone plays fair and keeps the financial system safe and sound. And while it might not sound thrilling, for credit unions and financial institutions, regulatory compliance ensures legal adherence, financial stability, consumer protection, plus effective reputation and management.

At LendKey, Lauren Sartwell leads a dynamic team dedicated to this mission. “Our team of four manages everything from policies and procedures to monitoring, testing, and training,” Sartwell explains. This comprehensive approach means LendKey and its partners are always ready for state examinations and any industry changes.

Trends and Challenges in Third-Party Oversight

One hot topic in the compliance world is third-party oversight. Financial institutions often team up with fintech companies to offer more services and handle liquidity. But these partnerships need careful monitoring. Sartwell points out that many partner banks have faced enforcement actions for not keeping a close eye on their fintech partners. “LendKey works closely with partner lenders to maintain a strong compliance function,” she says. This means going above and beyond what regulators require.

A big part of third-party oversight is making sure financial institutions can explain their partnerships to regulators clearly. “They need to explain what we do, how we do it, and how they ensure we’re meeting our obligations,” Sartwell emphasizes. Transparency and detailed oversight are crucial to avoid enforcement actions.

Many banks rushed into fintech partnerships without fully developing the necessary oversight processes and now need to catch up to demonstrate their due diligence. Recent guidance from banking regulators highlights the need for regular reviews and updates of compliance practices. This includes thorough risk assessments, continuous monitoring, and ensuring that all processes are well-documented and transparent.

LendKey’s Compliance Leadership

LendKey prides itself on running a top-notch compliance program. “We run our program the way a fintech partner should, with confidence backed by audit and exam results,” Sartwell states. LendKey aims to be transparent and supportive, helping financial institutions understand and meet their regulatory obligations. Sartwell highlights several key areas of focus for LendKey, noting these should be top priority for credit unions and other lenders too:

  • Third-Party Risk: Ensuring comprehensive oversight of fintech partners to meet regulatory expectations.
  • BSA/AML and OFAC Compliance: Maintaining rigorous standards to mitigate risks associated with money laundering and sanctions.
  • UDAP Concerns: Addressing potential unfair, deceptive, or abusive acts or practices to avoid regulatory scrutiny.

Looking Forward: Ensuring Compliance and Stability

Staying on top of compliance challenges is crucial as regulations continue to evolve. Sartwell advises regular risk assessments and staying informed about recent enforcement actions and regulatory updates.

Staying ahead of compliance challenges also isn’t just about meeting regulatory requirements—it’s about ensuring long-term stability and growth. For credit unions and lenders, navigating regulatory compliance requires a commitment to transparency, robust processes, and continuous improvement. By leveraging the expertise and support of partners like LendKey, institutions can confidently meet their regulatory obligations and focus on serving their members.