Fintech Leaders Unite for Compliance Guidelines After Synapse Disaster

In the wake of recent fintech challenges, including the collapse of Synapse, Sima Gandhi, a former startup CEO and Treasury official, has initiated the Coalition for Financial Ecosystem Standards (CFES) to establish voluntary compliance guidelines for fintech companies. This effort aims to help startups and their banking partners navigate regulatory complexities and avoid past mistakes that have led to significant consumer losses and increased regulatory scrutiny. Partnering with compliance consulting firm FS Vector, Gandhi is developing guidelines focused on critical areas such as anti-money laundering and compliance management. The CFES seeks to create a transparent framework that benefits both fintechs and their banking partners, encouraging accountability and improved customer service. Gandhi emphasizes the importance of early compliance planning for startups, recommending that they consider hiring dedicated compliance staff before launching. The guidelines are intended to be adopted voluntarily, similar to the widely accepted SOC2 cybersecurity standards. As the guidelines are finalized, Gandhi plans to implement a scoring system for fintechs, assessing their compliance on a scale of one to five. This annual assessment will foster ongoing improvement and accountability within the industry. The initiative is particularly timely, as research indicates that banks with fintech partnerships have experienced deposit growth, contrasting with declines faced by smaller banks without such collaborations. Overall, the CFES represents a proactive approach to enhancing compliance standards in the fintech sector, aiming to create a safer and more reliable financial ecosystem for consumers and businesses alike.