Arcady Lapiro

Sarah Beth Felix asks the same question I have ... On July 16, 2024 FinCEN, OFAC, and the FBI issued a joint notice titled “Timeshare Fraud Associated with Mexican-based Transnational Criminal Organizations” - https://lnkd.in/ePaZK3Ga The Notice included this: “Given the transnational nature of illicit activity related to timeshare fraud in Mexico, FinCEN also encourages U.S. financial institutions to continue to use, and potentially expand, their existing processes to collect and share information with foreign financial institutions in furtherance of investigations that involve cross-border activity.” That excerpt included a citation, Footnote 40: See, e.g., FinCEN, “Prepared Remarks of FinCEN Director Andrea Gacki During the SIFMA AML Conference” (May 6, 2024) at https://lnkd.in/gYAk7EYk I am not aware of any authority – law or regulation – that allows US-based and regulated financial institutions to share information with foreign financial institutions in furtherance of investigations that involve cross-border activity. And I’ve read Director Gacki’s May 6, 2024 speech: there is nothing in it that refers to US-based and regulated financial institutions being allowed to share information with foreign financial institutions in furtherance of investigations that involve cross-border activity.

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Financial Crimes Enforcement Network, US Treasury published a notice for FIs to operationalize threats related to timeshare #fraud and Mexico-based TCOs like CJNG. This was issued jointly with #OFAC and the #FBI. I certainly didn't have a 14 page document re: timeshare fraud and Mexican drug cartels on my 2024 BINGO card, but here we are. See the third point for 6 things you can do right now to act on this Notice. Here are the highlights, more comments in the attached pdf - 1) This notice will primarily be impactful if all #banks, credit unions, #trust companies, investors, brokers, and fiduciaries provide customer education. Pgs. 3-5 offer great keywords to use in your outreach. 2) After customer education, the typologies are pretty limited in operationalability (not a word, I know). This is where I will say again - if your #AML system does not allow you to operationalize advisories and notices from FinCEN, get a new one! 3) It is time to take a temp check of your transactional threat landscape as it relates to this notice - look at the following: a) age of the customer (elderly) and repetitive wires to Mexico; b) wires to Mexico with the terms "fees" and "taxes" in description; c) wires to Mexico going to the same/similar beneficiary but from different 60+ aged customers; d) search beneficiaries of wires to Mexico with the terms "travel", "real estate", "closing", "title", "realty", and "broker" (English & Spanish); e) wires from trust or #retirement accounts to Mexico; and f) internal transfers from trust/retirement accounts to checking then wires to Mexico. 4) Once that exercise is done, you will know how much exposure you have. 5) If there are any positive matches to # 3 above, do additional research on the businesses to see if they are newly formed. 6) Remember to use 314b info sharing with other US FIs! 7) If your #communitybank or CU is based in a large retirement community, you have a duty to at least brief your customers on this risk. Some things I'm confused by - pg. 9 states "U.S. financial institutions to continue to use, and potentially expand, their existing processes to collect and share information with foreign financial institutions in furtherance of investigations that involve cross-border activity"... what?? The reference is a footnote from Gacki's speech in May. But I am not aware of any legal mechanism by which US FIs (not the Tier1s) can share with info with a non-US FI? Please someone tell me I'm wrong. #ifollowdirtymoney

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In our last posting, part 1 of a 4-part series, we mentioned that FinCEN’s Proposed Rule to Strengthen and Modernize Financial Institution AML/CFT Programs from (June 2024) will likely result in BSA Officers having to proactively evidence the effectiveness of the design of their AML/CFT program, and evidence then the effectiveness of the controls in place to address the AML #Priorities and the remaining elements of the Proposed Rule from June 2024. A road map for this is discussed below, and will continue in part 3 and 4 of this series of postings. Policies/Procedures: Update policies/procedures with descriptive language to address the new #compliance requirements in order to evidence the design of the Program. Those policies and procedures will need to incorporate the National Priorities, should call for mandatory risk assessment that also incorporates the National Priorities, call for Training that addresses program updates, and call for more robust reporting to executives and the Board as they exercise their oversight of the Program. #AML systems and the associated Model Validation may be affected as well, and will require procedure updates. BSA/AML/CFT Risk Assessment: Under the Proposed Rule, the risk assessment will become a required element of a program. The risk assessment should address the most current AML National Priorities at the time, and any other illicit finance activity risks based on the financial institution’s business activities. The results should directly drive the training program, the nature and scope of monitoring, and AML Model rules and parameters. A best practice is to present this risk assessment to an internal risk committee and either the Board of Directors or one of its risk committees. While it’s great that the #FinCrimes department understands the institution’s BSA/AML/CFT risks, it’s even more important that the rest of the institution understands them. In part 3 of this series of postings, we’ll discuss Training, AML Monitoring Systems, and Board Oversight. #riskassessment #nationalpriorities #AMLtraining #modelvalidation

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Faster fraud; fact or fallacy? FRB is contending with member FIs reluctance to FedNow because FIs see faster payments as cause for fear to faster fraud. With innovation comes the need to increase knowledge about the new innovation and to apply known knowledge about risks to contemplate if the risk would exist in the new environment or how will the new environment facilitate known risks to morph and become new risks. The task at hand for generalist bankers is to find ways to learn and learn fast about the new environmental risks FedNow presents. Therefore, the FRB's move to add more fraud tools, must also include knowledge training about the fraud tools to their member FI's. #fednow #fraudcontrol #riskmitigation #instantpayments

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Consumer Financial Protection Bureau (CFPB) subjecting large payment apps to the same supervision and regulation as banks, what specific areas will the CFPB monitor, and how might payment apps respond to these new regulations? Areas the CFPB Will Monitor: Privacy and Surveillance: The CFPB will ensure that large payment apps comply with regulations  regarding data collection and sharing. Consumers must be able to opt-out of certain data practices and be informed about how their data is used. Errors and Fraud: The CFPB will monitor how payment apps handle transaction disputes and fraud. Apps must manage disputes internally rather than shifting them to banks or credit card companies. Debanking: The CFPB will oversee how payment apps handle account closures and freezes. Ensuring that consumers do not face unexpected disruptions in their ability to make or receive payments is a priority. How Payment Apps Might Respond: Compliance Enhancements: Payment apps will have to pul their socks and invest in improving their compliance frameworks to meet the new regulatory requirements. This includes better data privacy measures, robust fraud detection systems, and efficient dispute resolution processes. Operational Adjustments: Companies may need to adjust their operational procedures to handle disputes internally and avoid relying on external financial institutions. This could involve upgrading their customer service capabilities and dispute management systems. Lobbying and Legal Challenges: Big Tech companies might lobby against the new regulations, arguing that they are overly burdensome or unnecessary. Legal challenges could also arise, potentially delaying the implementation of the rules. In my opinion this approach can be implemented by the regional and local regulatory bodies such as #Central #banks The regional  and local regulators could adapt similar regulatory measures to oversee large payment apps in the region. Establishing a Regulatory Framework: Developing a comprehensive regulatory framework specifically for payment apps. Defining clear guidelines and standards for data security, consumer protection, and compliance. Creating a Dedicated Oversight Body: Establishing a dedicated department within the governing body to monitor and regulate payment apps. Implementing Compliance Requirements: Requiring payment apps to adhere to AML, KYC, and other financial regulations. Mandating regular audits and reporting to ensure compliance. Promoting Transparency and Consumer Rights: Ensuring payment apps provide transparent information to consumers about their services. Protecting consumer rights by enforcing fair practices and efficient dispute resolution mechanisms. By adopting these measures, the local regulator can ensure that payment apps operate in a secure, transparent, and consumer-friendly manner, similar to the objectives of the CFPB. #CFPB Central Bank of Oman Mala'a #payments #privacy #Surveillance #Debanking #Compliance

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3 AML Killers: Key Lessons from TD Bank and Others for a Stronger AML Defense. #FinCEN fined #TDBank $1.2 billion for violating the #BSA, the primary U.S. #AML law. The largest penalty against a depository institution in U.S. Treasury and FinCEN history. This isn't the first or the last, just this week #MetroBank was fined by the #FCA. Its automated transaction monitoring system did not work as intended & had serious deficiencies. You might be at risk too if you do not: ✅Invest in tech ✅Empower people ✅Monitor & improve and here’s why. TD Bank failed to limit or report suspicious transactions including criminal activity properly. The filing cited issues with the #transactionmonitoring program: 1. Program remained effectively #static, and did not adapt to address known and emerging money laundering risks 2. AML projects were postponed and cancelled #prioritising a “flat cost paradigm” and the “customer experience.” 3. Unmonitored #transactions & failure to report left 92% of total transaction volume unmonitored from 2018 to 2024. This is a stark reminder of the need for robust monitoring processes and technological infrastructure in the financial sector. It shows inadequate systems and processes lead to severe consequences regulatory penalties and reputational damage. So, here are the 3 killers: ❌Out of date compliance tech ❌Underpowered teams ❌Static processes To address these killers you must: 1️⃣ Prioritise your tech stack. 👍 ⋆ Ensure your AML and KYC systems are up-to-date and effective. ⋆ Integrate data and systems to flag suspicious activities across all channels. 2️⃣ Empower your compliance teams👍 ⋆ Train and equip your teams with the knowledge and tools. ⋆ Show them how to monitor and report effectively. ⋆ Establish the right escalation procedures. 3️⃣ Improve continuously 👍 ⋆ Regularly assess and upgrade your technology. ⋆ Stay ahead of evolving products and financial crimes. ⋆ Investigate incidents and escalation procedures thoroughly. Remember to invest in people and technology not just to avoid fines. Instead: build trust (in people & systems) ensure compliance 🛡️& safeguard future 🏦 Message me if you want to learn more about how DLT Apps can help address these killers using Qkvin. 🔁 Helpful? [ 𝗿𝗲𝗽𝗼𝘀𝘁 ] 👋 Nice story [ 𝗹𝗶𝗸𝗲 ] 🔔 Follow [ Mahesh Patil ] 💬 Anything else, please comment below #FinTech #ComplianceTech #BankingInnovation #AML #InvestInTech #RegTech #TransactionMonitoring #FinancialServices #ContinuousImprovement

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Why payments need to be borne as 'public goods'? This Federal Reserve Board Governor Waller's speech put it simpler (in 2 complementary ways): 1. Identifying the need and timing for technical standards, incorporating a breadth of industry perspectives, and aligning on implementation approaches requires 'coordination', and central banks play a key role as neutral conveners to harmonise efforts from all relevant stakeholders. 2. Leading by example, central banks' operated payment platforms provide expertise in the adoption of standards and best practices. RTGS systems remain as the backbone of the financial system, they serve as rails for safe and efficient settlement in central bank money #RTGS #payments #ISO20022 #standards #innovation

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Lineage Bank yesterday filed objections to the emergency sale of Synapse's assets to TabaPay & to Synapse's settlement with Evolve Bank & Trust: Lineage clarifies it isn't seeking to prevent or delay the proposed asset sale, but is seeking to preserve its rights to the extent the proposed sale agreement is contrary to applicable law, may violate the rights and/or interests of Lineage and/or end users under the law or Lineage's agreement with Synapse, or is inconsistent with Lineage's bank regulatory requirements, including its recent consent order. Some notable claims Lineage makes in its filing: -Synapse added ACH/wire originators without telling Lineage in advance, overloading it with unexpected volumes of transactions -- causing Lineage's federal reserve account to become overdrawn -Lineage is terminating all ACH & wire processing for Synapse effective tomorrow, 5/9 -- with payment processing moving back to Evolve -Lineage's filing claims Synapse moved $60m from an account titled to Synapse at Evolve to a Reserve account at Lineage, but that these were actually customer funds, not Synapse's -Lineage disputes Synapse's proposed cure amount of about $276,000, saying Synapse owes it about $755,000 -Lineage objects to the proposed settlement between Synapse and Evolve, saying inadequate information has been disclosed to evaluate if the $2 million payment is fair

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A brilliant assessment by Suzanne Marie Smalley of the newest #dataprivacy CFPB rule for financial institutions. Of noting......"The rule will require that banks and other institutions only use personal financial data for purposes consumers request, CFPB said. It also blocks third parties from using consumer data to benefit themselves." This is a common trend that we are seeing, which is that any personal data CAN ONLY be used for the transaction for which is was needed, at the time needed, and NOTHING else. Isn't that a reasonable expectation? I give you my personal data for a transaction....after the transaction is complete, you have no right to use my personal data for anything else. This will rebuild #trust in how our personal data is utilized. All that said, in the event a financial institution wants to help you say lower your interest rate, etc, what if they asked for your consent to use your personal data to do so, and further you could monitor who was using your data, when and for what? Again....a trusted, valued relationship. Enjoy this great assessment by Suzanne. #dataprivacy #trust #ethicaldatause

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Still getting through FinCEN's proposed rule to Strengthen & Modernize Financial Institutions' AML/CFT Programs (it is 178 pages). Of note, the requirement for institutions to ensure that their program is not only risk-based and reasonably designed, but also effective and in-line with national AML/CFT priorities will be new for some. The word "effective*" is used 181 times in the document. And for innovative software providers like us and those looking to adopt/pilot new approaches, "innovation" is used 34 times (and is strongly supported throughout!). Also, performing risk assessments becomes a strict regulatory requirement (though you should already be doing it); with the requirement as part of your risk assessments to consider FinCEN's national priorities and to apply resources accordingly. And in their own words: "FinCEN, in consultation with the appropriate Federal functional regulators, intends for these updates to: (1) reinforce the risk-based approach for AML/CFT programs; (2) make AML/CFT programs more dynamic and responsive to evolving ML/TF risks; (3) ultimately render AML/CFT programs more effective in achieving the purposes of the BSA; and (4) reinforce the focus of AML/CFT programs toward a more risk-based, innovative, and outcomes-oriented approach to combating illicit finance activity risks and safeguarding national security, as opposed to public perceptions that such programs are focused on mere technical compliance with the requirements of the BSA." https://lnkd.in/eab-3PqY

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BASEL REQUESTS COMMENT ON CCR DOC Deadline: August 28, 2024. “The guidelines will replace the Committee's Sound practices for banks' interactions with highly leveraged institutions published in January 1999.” The guidelines are designed to be broadly applicable to manage banks' CCR exposures to all types of counterparties. However, the greatest potential benefits are expected to be in cases where banks have high-risk exposures to counterparties, including NBFIs. Banks and supervisors are encouraged to take a risk-based and proportional approach in the application of the guidelines, taking into account the degree of CCR generated by banks' lines of business, their trading and financing activities and the complexity of such CCR exposures.” Bank for International Settlements – BIS #ccr #counterpartycredit #guidelines #nbfi #banks.

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📢 📝 July 1, 2024. #Wolfsberg Group published a Statement on Effective Monitoring for Suspicious Activity (MSA) advocating that the inclusion of customer behavior and customer attributes with the transaction details can provide a broader insight into potentially suspicious activity. Key points of the statement: ▶️ Application of risk-based approach over prescriptive rules for higher-value outputs. ▶️ Integration of new technology and innovation to enhance MSA effectiveness. ▶️ Feedback on SARs/STRs by authorities to increase SARs/STRs quality going forward. ▶️ Combination of customers behavior, their attributes and transactions are vital for effective monitoring. 🤷‍♂️ The So What? The Financial institutions should: ✅ Adopt a risk-based monitoring approach for SEPA instant payments. ✅ Integrate customer behavior analysis into monitoring systems. ✅ Consider use of advanced technology-driven tools for detection improvements. ✅ Learn from previous quality SARs/STRs to improve the quality of future SARs/STRs. ✅ Initiate or enhance collaboration (directly or via local associations) with local authorities for feedback and improvement. 📩 Do you have any questions? Feel free to ask in DMs :) #AdamanoConsulting #AML | #compliance | #monitoring | #transaction | #europeanunion | #SAR | #STR

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Compliance folks: what are your three bullets? I’m often asked how I got into fighting financial crime. My journey into the compliance world, in three bullets: 1️⃣ My first exposure to compliance was at Square. Jesse Reiss, Ryan Gerard and I were working on Square Market (now “Online Stores”), Square’s first ecommerce product that helped merchants sell their products online. I was the product manager on the product, and learned a great deal about how ecommerce marketplaces can be used to launder money from my compliance colleagues, Ryan Jones, David Grodsky, and Amelia Childress. They were excellent partners to the product org, and helped us get the Market launch out the door on-time! 2️⃣ After Square, I joined crypto innovator Circle as VP Product. I spent my first year there working on typical product management initiatives, and realized how important a top-tier risk function is for financial innovators. I transitioned into the VP Risk & Data Science role, built out Circle’s transaction monitoring team and initiatives, and met Matthew Van Buskirk, my counterpart in compliance. As an operator in anti-fraud, I really burned out on looking at the substance of the crimes all day by the end of my tenure. There’s so much exploitation in the world. The experience taught me deep empathy and appreciation for the folks that fight it. 🛫 ~Two year interlude where I traveled around Europe, ran some conferences, and consulted with IDEO on some really cool financial health initiatives for a large financial institution… hey, not every journey is direct! Mine certainly isn’t. 3️⃣ In late 2016 / early 2017, I knew I wanted to start a company, but wasn’t sure what. I reconnected with Matt and Jo Ann Barefoot at SXSW, and Jesse, Ryan, and I had been tinkering with some ideas around that time. We fell in love with the idea of a mission-driven startup focused on fighting financial crime, but one fundamentally oriented to be on the offense, building awesome tools for the good folks: Hummingbird! We’ve stayed true to that mission through good times and bad, using it as a north star to navigate. I find people’s journeys into compliance work to be fascinating. There are so many paths into this important work, and compliance folks are the unsung heros of the financial industry. We’ve created an internal series called Hummingbird Profiles where we explore these journeys, and the team encouraged me to share mine here. Please share yours to help people understand the work and different paths you can take to get into the industry. (cc Kabir Kumar and Satya Patel, who were major enablers and mentors for part 3!)

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PSA: FYI, there's another BSA AML CFT acronym - NSFI. On October 29, 2024, the Treasury Department released the first National Strategy for Financial Inclusion (NSFI ... yay! Another acronym!). The first things I thought of were (i) awesome! As everybody knows, section 6101 of the Anti-Money Laundering Act of 2020 reminded the Treasury Secretary that, when she was cooking up any new AML-related regulations, she had to consider one of the key policy goals of the United States, which was "extending financial services to the underbanked"; and (ii) the Financial Action Task Force has recently pivoted from an "AML/CTF" approach to an "AML/CTF oh and let's not forget about the underbanked" approach. Like a 6-year old waking up to Christmas morning, I breathlessly unwrapped Treasury's press release and 35-page NSFI, desperately hoping for any reference to my beloved section 6101 and FATF blatherings. I was disappointed. At page 11 of the NSFI was this: "... financial institutions should review their customer communication protocols and consider opportunities to increase customer support related to account denials or closures in a manner that is compliant with applicable laws and regulations." Leaving aside that this sentence compels absolutely nothing ("should" and "consider" are suggestions, not mandates), the footnote sort-of-explained what Treasury's lawyers want you to think what they had written. The footnote provided: "For example, financial institutions must comply with Suspicious Activity Reports (SARs) confidentiality requirements. See 31 U.S. Code 5318(g); 31 CFR 1020.320(e); FIN-2010-A014, Maintaining the Confidentiality of Suspicious Activity Reports (November 2010), https://lnkd.in/gj754AeB." To translate, you end up with this: "... financial institutions should review their customer communication protocols and consider opportunities to increase customer support related to account denials or closures in a manner that is compliant with applicable laws and regulations. But forget about supporting a customer if you've filed a SAR on that customer; instead, if they call and can get through your 'press one if you're a mammal, press two if you're an amphibian' automated AI chatbot phone maze, you should do the usual rope-a-dope dodge and say nothing at all, because you can't." Obviously, I'm frustrated with these National Strategies on _______, which look good from far but are invariably far from good. https://lnkd.in/gJ7xv_ug

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Next generation correspondent banking. Key takeaways • Existing correspondent banking processes have struggled to adapt to new regulatory and supervisory requirements, posing questions on the future of the correspondent banking model. • The tokenization of correspondent banking, as embodied in Project Agorá (BIS (2024b)), could unlock streamlined pre-screening and atomic settlement, and pave the way for superior customer verification and anti-money laundering (AML) procedures. • Tokenization could substantially reduce duplication and miscoordination, thereby revitalizing cross border payments by fostering a robust network of correspondents and corridors. Bank for International Settlements – BIS Bulletin - https://lnkd.in/gj7bC7qw #payments #tokenisation #rln #banking #financialservices

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When a US Bank fails repeatedly on its anti #Moneylaundering program, violating BSA and even AMLA, surely will ( must ) face strong enforcement by The SEC, US Treasury Units ( OCC-FEDRESERVE Fincen ) and DOJ. Some other US Bank Global Bank could have misleaded investors and own regulators, thorough its persisted press release and statements by CEO-CFO on Investors Day events when was questioned by analysts or media reporters about its financial health or if was complying with OCC-FEDRESERVE consent orders, even announcing failed transformation plans, foreign units exit-sales, or simply stating that " regulatory requests have been complying in full when really was false " The 10K filled to SEC in Feb 2024 ( and others 10K filled before ) by other US Bank must be reviewed now by the SEC enforcement staff, if show clear misleading to investors fulling false information to confuse shareholders. If Any US Global Bank with long standing Moneylaundering violations, DOJ NPA and consent orders uncomplied, must see now How Agencies will enforce them. The Securities and Exchange Commission today charged Silvergate Capital Corporation, its former CEO Alan Lane, and former Chief Risk Officer (CRO) Kathleen Fraher with misleading investors about the strength of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program..." SEC full order downloadable on this link: https://lnkd.in/e7QZWHAb "According to the SEC’s complaint, from November 2022 to January 2023, Silvergate, Lane, and Fraher misled investors in stating that Silvergate had an effective BSA/AML compliance program and conducted ongoing monitoring of its high-risk crypto customers..." “At all times, but especially during moments of crises, public companies and their officers must speak truthfully to the investing public. Here, we allege that Silvergate, Lane and Fraher fell not only woefully, but also fraudulently, short in that regard,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement. “Rather than coming clean to investors about serious deficiencies in its compliance programs in the wake of the collapse of FTX, one of Silvergate’s largest banking customers, they doubled down in a way that misled investors about the soundness of the programs." "The SEC charged Martino with violating certain of the antifraud and books-and-records provisions of the federal securities laws, and with aiding and abetting certain of Silvergate’s violations." "In parallel actions, FRB and DFPI today announced settled charges against Silvergate."

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It’s no wonder consumers caught up in the Synapse mess are confused and outraged right now. As the diagram 👇 shows, the U.S. financial regulatory system is complex and siloed. Consumers dealing with the Synapse fallout and unable to access their funds may need to turn to one or more of each of the following regulators: ▪ CFPB ▪ FTC ▪ State financial agencies ▪ Federal Reserve ▪ SEC ▪ FDIC ▪ SIPC Which agency should you turn to? The answer can depend on: ▪ The financial product (savings acccount or sweep account) in question; and/or ▪ The license of the entity involved (e.g. nonbank, chartered bank, or broker-dealer); and/or ▪ The solvency of the bank or brokerage involved. Makes sense? Not much, right? I’m an experienced regulatory lawyer, and it took me years to learn how this all works. I sympathize with consumers trying to figure it out in real time and while their financial health hangs in the balance. It shouldn’t be this hard. #Synapse #BaaS #Banking #Bankingregulation

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