Following the collapse of fintech company Synapse, a US regulator has unveiled plans to tighten record-keeping requirements for bank deposits received from third-party companies on behalf of their customers.
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Earlier this year, BaaS company Synapse collapsed due to a dispute with banking partner Evolve Bank & Trust. As a result, customers of several Synapse customers – including Copper and Yotta – were unable to access their funds.
This is because Synapse and other non-banking companies generally do not invest their customers’ funds in individual bank accounts. Instead, these funds are deposited together into a single custodial account that can store the funds of many thousands of consumers and businesses.
This may result in the bank being unable to easily and quickly identify or determine the individual owners of the funds in this deposit account.
Under the Federal Deposit Insurance Corporation’s (FDIC) new proposed rule, banks holding certain deposit accounts would be required to take steps to ensure that accurate account records are maintained to determine the individual owner of the funds, including a requirement to reconcile each account individual owner daily.
In addition, the top federal bank regulator would have oversight of compliance with this rule and enforcement authority.
Martin Gruenberg, FDIC chairman, says the plan “is an important step to ensure that banks know the true owner of deposits deposited with a bank by third parties such as Synapse, whether the deposits were actually deposited with the banks, and whether the …”Banks can make their funds available to the depositor even if the third party fails.”