Evolve Bancorp in West Memphis, Ark., which is embroiled in legal wrangling tied to the bankruptcy of Banking-as-a-Service middleware firm Synapse, is now dealing with an enforcement action from the Federal Reserve.
The Fed said in a press release that the cease-and-desist order addresses deficiencies in the $1.6 billion-asset bank’s anti-money laundering, risk management and consumer compliance programs.
The action came after a 2023 exam determined that the bank engaged in unsafe and unsound banking practices by lacking an effective risk management framework for fintech partnerships. The Fed also claimed the Evolve did not maintain an effective risk management program or controls sufficient to comply with AML and consumer protection laws.
The bank was ordered to improve its policies and programs. It must strengthen its risk management practices to address potential risks tied to its fintech partnerships, including compliance and fraud risks. Evolve must implement oversight and monitoring of its fintech relationships, including enhanced procedures for recordkeeping and consumer compliance programs.