When a bank’s president says that executives are “talking internally about having a refresh on our due diligence protocols,” it’s not necessarily cause for concern. Maybe they just want to shake it up a bit. Given the current economic climate, improved due diligence is probably a good idea.
But, in some cases, a “refresh” seems to be long overdue.
Since 2017, Coastal Community Bank has drunk itself silly on the fintech Kool-Aid, quadrupling its total assets in the process.
Now, one by one, the partnerships are falling.
This could just be a sign of the times: fintechs are reeling from the sudden drop in investor interest. Indeed, some of Coastal’s fintech partners have simply failed.
But, as a report from The Information lays out, other partnerships that Coastal entered now seem far from ideal.
A particular focus is MovoCash, which Coastal picked up after it was dropped by Metropolitan Commercial Bank. Metropolitan was recently fined by state regulators for involvement with MovoCash. Apparently, “illegal actors” had funneled $300 million in fraudulent benefit payouts throughout 2020, and the firm had a number of red flags and questionable employment decisions. It is unclear whether any of these were resolved before Coastal came on the scene.
MovoCash is, as of March, another of Coastal’s fintech partnership casualties.
CEO Eric Sprink, of course, says the bank conducts “robust due diligence” when entering partnerships. With a compliance workforce that’s 150 people strong, now, that seems pretty likely. But, back in 2018, when their fintech partnership bonanza was well underway, there were only four. It’s hard to know how “robust” it really could have been.
Yes, they grew quickly in the fintech FOMO party period, but now, they may be facing one hell of a cleanup.
FEATURED
By Michael Roddan
When Washington state–based Coastal Community Bank struck its first fintech partnership with Aspiration, a startup backed by Leonardo DiCaprio and Orlando Bloom, it ushered in a new era for the sleepy Snohomish County bank.
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