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U.S. banking regulators have raised risk and compliance concerns about Goldman’s partnerships with fintech firms, according to people familiar with the talks, the latest operational headache for the New York investment bank.

A unit of the bank’s transaction banking (TxB) has stopped signing up riskier fintech clients following a warning from the Federal Reserve earlier this year, according to two people familiar with the matter. The issues raised by the Fed included inadequate due diligence and monitoring processes when accepting high-risk nonbank customers, they said.

The team targeted by the regulator provides banking infrastructure for fintech clients, including payments startups Stripe and Wise. TxB’s other operations, which provide cash payment services, have not been criticized.

The rebuke comes as some TxB employees are warning internally of a trend to minimize risk, the people said. The bank has launched an investigation into an internal complaint by an employee at the unit, one of the people said.

The Fed’s criticism is another setback for Goldman’s efforts to expand new businesses under Chief Executive David Solomon.

Transaction banking was one of several growth initiatives he identified at his 2020 investor day. He said at the time that the business “is an opportunity to leverage our exceptional corporate franchise, world-class risk management and innovation culture to build a modern digital offering and in the process diversify our revenue and financing portfolio. ”

Another growth area Solomon highlighted was retail banking, which the bank has since decided to cut. On Monday, the company said it had agreed to spin off its mass-market-focused personal financial management unit.

TxB, part of Goldman Sachs’ platform solutions unit, helps corporate clients move funds and provides banking infrastructure to fintech companies that don’t have U.S. banking licenses. The business is still relatively small for the Wall Street bank, which aims to generate about $750 million in revenue from the space by 2024. Goldman Sachs reported total revenue of $47 billion last year.

The Fed’s probe into Goldman’s TxB operations comes amid a broader regulatory scrutiny of non-bank financial players.

In April, New Jersey-based Cross River Bank, one of the largest of a handful of U.S. lenders to fintech companies, was hit by the FDIC for “unsafe and unsound banking practices.” criticize.Another regulator, the Office of the Comptroller of the Currency, has highlighted similar problems in Virginia-based Blue Ridge Bank last year.

“We are not authorized to comment on any regulatory matters related to our regulator,” Goldman Sachs said. The bank declined further comment. The Fed declined to comment.

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