The news: The FBI arrested the CEO of Evolve Bank & Trust on child pornography charges, per Banking Dive, amid the bank’s deep compliance crisis.

Bob Hartheimer was appointed CEO in August after fallout from recordkeeping lapses and the collapse of a fintech partner that was key to the bank’s business. A spokesperson told Banking Dive that Hartheimer’s role has been terminated.

More on this: Evolve was a virtually unknown community bank until it repositioned itself to provide banking as a service capabilities to fintechs. The bank extensively marketed itself as a partner for fintech platforms seeking access to a bank charter, deposit insurance, and regulatory compliance scaffolding

Evolve scaled dramatically as a partner bank for fintechs with this need: Evolve reportedly held billions of dollars in deposits on behalf of fintechs during its growth phase, according to the Wall Street Journal. But when a partner Evolve depended on for its fintech banking services collapsed, subsequently trapping customers' funds, the downhill spiral began. Regulators rebuked Evolve for poor controls, and fintech clients announced that they would drop the bank as a partner.

Our take: Evolve’s precarious situation, made more so by the sudden departure of its CEO, underscores how weak internal controls and poor partner oversight can ripple through the business. One lesson is clear: Reforming internal culture, board oversight, and fintech-integration strategies are foundational to banks that want to offer these services.

The appeal of the banking as a service market has fallen as a result of Evolve’s risk and compliance issues. Partnering with fintechs in the way that Evolve has is still a business opportunity for banks. But it requires extensive preparation, measured growth, and a careful touch with regulatory matters.