KYC Banks vs Fintechs in the US: Requirements Compared

Banks and fintechs in the United States are subject to overlapping anti-money laundering laws, but operate under different chartering and licensing regimes that shape how those obligations are met in practice. The Bank Secrecy Act (BSA), 31 U.S.C. § 5311 et seq. applies to all financial institutions — federally chartered banks, state-chartered banks, credit unions, money services businesses (MSBs), and fintech companies operating as bank partners or licensed money transmitters. FinCEN (Financial Crimes Enforcement Network) administers BSA compliance, while prudential supervision is split across the OCC, FDIC, Federal Reserve, and state regulators depending on the institution's charter. This article provides a detailed comparison of KYC requirements for traditional banks and fintechs operating in the US, covering licensing, due diligence, reporting, technology, and upcoming regulatory changes.

This article is for informational purposes only and does not constitute legal, financial, or regulatory advice. Consult a qualified compliance attorney for guidance specific to your situation.

Licensing and regulatory framework

The US distinguishes between several types of financial institution authorization, each carrying BSA/AML obligations but differing in the activities permitted and the prudential requirements imposed.

A traditional bank such as JPMorgan Chase, Bank of America, or Wells Fargo holds a federal or state bank charter authorizing it to accept deposits, make loans, and provide a full range of financial services. Federal bank charters are issued by the Office of the Comptroller of the Currency (OCC), while state charters are granted by individual state banking departments. These charters carry the highest capital requirements and subject the institution to comprehensive supervision by federal prudential regulators.

A fintech like Chime, SoFi, or Cash App may operate through a bank partnership model (using a sponsor bank's charter), hold its own bank charter, or be licensed as a money transmitter at the state level. SoFi obtained a national bank charter in 2022, which means its AML obligations are identical to those of established banks. Chime operates through partnerships with Stride Bank and Bancorp Bank, while Block's Cash App is registered as an MSB with FinCEN and holds state money transmitter licenses in all 50 states. The boundary between banks and fintechs is increasingly blurred.

State money transmitter licensing

Unlike the UK's centralized FCA supervision model, the US requires non-bank fintechs that transmit money to obtain licenses in each state where they operate — up to 49 separate licenses plus the District of Columbia. The Conference of State Bank Supervisors (CSBS) has developed the Nationwide Multistate Licensing System (NMLS) to streamline this process, but compliance costs remain substantial. Every state money transmitter license carries its own AML program requirements, and FinCEN registration as an MSB is mandatory on top of state licensing.

Dodd-Frank and the CFPB

The Dodd-Frank Wall Street Reform Act established the Consumer Financial Protection Bureau (CFPB), which supervises certain non-bank financial companies for consumer protection. While the CFPB's focus is consumer protection rather than AML, its supervisory authority over fintechs offering consumer financial products adds another layer of regulatory oversight that traditional banks already face from their primary regulators.

Detailed comparison: banks vs fintechs

The table below compares the operational KYC requirements for traditional banks and fintechs in the US.

For a comprehensive overview of document verification processes, see our document verification guide.

Onboarding processes: digital vs traditional

Traditional bank onboarding

Opening an account at a traditional US bank has historically required visiting a branch. The customer presents a government-issued photo ID (driver's license, state ID, or US passport), provides their Social Security Number, and for business accounts, Articles of Incorporation, an EIN confirmation letter from the IRS, and details of beneficial owners. The bank officer conducts a visual document check, enters the data into the core banking system, and triggers compliance workflows.

Major US banks have invested heavily in digital onboarding since 2020. JPMorgan Chase and Bank of America now offer fully remote account opening for personal checking and savings accounts, using document scanning and electronic identity verification. However, business account onboarding — particularly for LLCs and corporations with complex ownership structures — typically requires longer processing times and often additional documentation.

Fintech onboarding

Chime, SoFi, and Cash App built their customer journeys around mobile-first onboarding. The customer photographs their ID document, provides their SSN, and an identity verification algorithm matches the document photo against electronic database records in real time. Document data is extracted automatically via OCR and fed directly into the KYC system. OFAC sanctions screening runs via API in seconds.

This speed does not equate to weaker controls. FinCEN has made clear in its 2024 Priorities that all covered financial institutions, regardless of size or business model, must maintain effective AML programs. Several fintechs and their sponsor banks have faced enforcement actions for BSA deficiencies. In 2023, the OCC issued consent orders against multiple banks serving as fintech partners, citing inadequate oversight of the fintech's customer onboarding and transaction monitoring practices.

Reporting obligations

Suspicious Activity Reports (SARs)

Both banks and fintechs must file SARs with FinCEN when they know or suspect that a transaction involves the proceeds of crime, terrorist financing, or other suspicious activity exceeding $5,000 (or $2,000 for MSBs). FinCEN received over 4.6 million SARs in 2023, a record volume. Banks remain the largest source of SARs by volume, but filings from MSBs and fintech-connected institutions are rising rapidly.

Each covered institution must designate a BSA/AML Compliance Officer who is responsible for the SAR filing process and the overall AML program. This officer must have sufficient authority and resources to implement and maintain effective controls.

Currency Transaction Reports (CTRs)

Banks and MSBs must file CTRs for cash transactions exceeding $10,000, or multiple related transactions that aggregate above that threshold. This requirement, unique to the US regulatory framework, does not apply to most fintech-only platforms since they typically do not handle physical cash. However, fintechs offering cash deposit or withdrawal services through partner networks (such as ATMs or retail cash-in points) must ensure CTR filing through their banking partners.

Ongoing monitoring

Continuous transaction monitoring is required under the BSA and FinCEN's AML/CFT Program Rule (2024). Traditional banks typically run batch-based monitoring systems that analyze transactions against predefined scenarios — unusual amounts, high-risk jurisdictions, rapid movements, and structuring patterns. Fintechs tend to use real-time monitoring systems that flag transactions as they occur, with machine learning models increasingly supplementing rule-based approaches.

The review frequency for KYC records follows a risk-based approach for both types of institution: annual or more frequent for high-risk clients, every two to three years for standard-risk relationships. Our due diligence checklist by sector details these review cycles.

Upcoming regulatory changes

The US regulatory landscape is evolving rapidly. The Anti-Money Laundering Act of 2020 (AMLA), passed as part of the National Defense Authorization Act, is the most significant overhaul of US AML law since the PATRIOT Act. AMLA directed FinCEN to undertake multiple rulemakings that are still being implemented.

Key developments through 2026 include:

• Corporate Transparency Act (CTA): Effective January 1, 2024, the CTA requires most US companies to report their beneficial ownership information to FinCEN. This creates a federal beneficial ownership registry — a resource that banks and fintechs will use during CDD to verify corporate ownership structures, similar to how UK firms use Companies House.
• FinCEN AML/CFT Program Rule: Finalized in September 2024, this rule requires all covered institutions to adopt risk-based AML programs with government-identified national priorities integrated into their risk assessments.
• Real estate reporting: FinCEN is finalizing rules to bring all-cash real estate transactions under BSA reporting requirements, expanding the scope of covered institutions.

At the international level, the FATF Mutual Evaluation of the United States continues to influence domestic policy, particularly around beneficial ownership transparency and virtual asset regulation. US firms with EU operations must also track the EU's AMLD6 and AMLR frameworks for compliance with both regimes.

Technology and automation

Fintechs hold a structural advantage in KYC automation. Their systems were built from inception around APIs, cloud infrastructure, and automated decision-making. A fintech can integrate a new identity verification provider or sanctions screening tool in days, while a legacy bank may take months to update its core systems.

That said, the gap is narrowing. JPMorgan Chase, Bank of America, and Wells Fargo have each invested billions of dollars in digital transformation programs. JPMorgan's partnership with identity verification providers for digital account opening and Bank of America's deployment of AI-powered transaction monitoring demonstrate the direction of travel across the industry.

For both banks and fintechs, the challenge is identical: automate without compromising control quality. A tool like CheckFile.ai enables automated verification of identity documents, proof of address, and corporate documents regardless of institution size or charter type. For a comprehensive guide to KYC obligations, see our complete KYC guide for businesses.

Our platform processes over 180,000 documents per month with 98.7% OCR accuracy and an average verification time of 4.2 seconds, delivering a 67% cost reduction for both banks and fintechs. For a comprehensive overview, see our document verification complete guide.

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Frequently Asked Questions

Are fintechs subject to the same KYC rules as banks in the United States?

Yes. The Bank Secrecy Act applies to all financial institutions as defined by FinCEN, regardless of charter type. A money services business, a bank partner fintech, and a federally chartered bank all face the same core BSA/AML obligations, including CIP, CDD, beneficial ownership identification, SAR filing, and ongoing monitoring. The specific supervisory agency differs, but the substantive requirements are equivalent.

Why is fintech onboarding faster than at a traditional bank?

Fintechs designed their infrastructure around digital-first processes. Identity verification, OFAC screening, and document collection are automated from the outset. Traditional banks are retrofitting digital capabilities onto systems originally built for branch-based operations, often dealing with decades-old core banking platforms that require complex integration work.

Does FinCEN scrutinize fintechs less than banks?

No. FinCEN has increased its supervisory intensity on MSBs and fintech-connected institutions since 2023. The OCC has issued consent orders against sponsor banks for inadequate oversight of fintech partners, and FinCEN has brought enforcement actions against MSBs for BSA deficiencies. State regulators are also stepping up examinations of money transmitter license holders.

Can a fintech outsource its KYC processes?

Yes, provided it retains ultimate responsibility for the adequacy of its AML controls. FinCEN guidance and federal banking regulators' third-party risk management guidance allow outsourcing of CDD functions, but the covered institution remains liable for any failures. The OCC's Bulletin 2023-17 on Third-Party Relationships and the Federal Reserve's analogous guidance require robust vendor oversight programs.

What happens when a fintech obtains a bank charter?

Its BSA/AML obligations do not change materially, since the BSA already applied when it operated as an MSB or through a bank partner. However, it becomes subject to direct prudential supervision by the OCC (for a national bank charter) or its state regulator and the FDIC (for a state charter), along with additional capital, liquidity, and safety-and-soundness requirements. The AML framework itself remains the same.

Streamline KYC compliance for banks and fintechs

Whether you operate under a federal bank charter or a state money transmitter license, BSA/AML obligations are substantively the same. The difference lies in execution speed and quality. CheckFile.ai automates identity document verification, proof of address checks, and corporate document validation for banks and fintechs alike. Start your free trial or review our pricing to see how it works.