Compliance
Paying many independent people is a compliance problem before it is a payments problem. DiscoFi handles it in three places: verifying the business before it can send, screening every payment as it goes out, and carrying each recipient’s annual total so the reporting question is answered continuously rather than reconstructed in January.
Banking services provided by FinWise Bank, Member FDIC. Skyward Labs, Inc. is a financial technology company, not a bank.
The business is verified before its first payout.
An organization completes know-your-business onboarding before its account can move money. Six steps, in this order, and a person reviews the file at the end of them.
- CompanyLegal entity, formation documents and EIN.
- AddressThe registered business address on file.
- OwnershipBeneficial owners at the thresholds that require disclosure.
- RepresentativeThe person authorised to act for the business.
- IdentityIdentity verification for the representative and the owners named.
- ReviewA person reviews the file before the account can send money.
Bank accounts are linked through Plaid rather than by typing account and routing numbers into a form, so the credential for the account never becomes a value sitting in a payout system.
Review takes one to two business days. That is worth saying plainly: the account is not live the moment the last form is submitted, and a provider that promises otherwise for a money-movement account is describing something other than a review.
Screening runs on every payment, inside the send flow.
Sanctions screening and transaction monitoring run inside the path a payment already takes, rather than as a report someone reads afterwards. A payment that raises a flag is held rather than sent, which is the only version of screening that means anything: a check that runs after settlement is a record, not a control.
Screening mass payouts has its own failure modes, mostly around name matching against a list of common names at volume. Those are written up in OFAC screening for mass payouts.
Reporting is a running total, not a January project.
Whether a recipient needs a form depends on what they received across the whole year, not on any single payment. So tax information is collected against the recipient record and every payout rolls into a running annual total behind it.
For payments made in 2026, the federal Form 1099-NEC threshold for qualifying nonemployee compensation is $2,000. For third-party settlement organizations the Form 1099-K rule is generally more than $20,000 and more than 200 transactions. Which framework applies is a question about the relationship rather than the amount, and it is the question most programs get wrong: 1099-K vs 1099-NEC.
The operational side, collecting W-9 information before the first payout and keeping recipient history intact for corrections, is covered in 1099 compliance for mass payouts.
Underneath all of it, a chartered bank holds the money.
Payout funds are held and payments are executed through FinWise Bank, Member FDIC. The regulatory perimeter around the money belongs to an institution that is examined for it. What that relationship is, and what it does and does not mean for you, is worth understanding before you sign anything: what a sponsor bank is.
Every payout writes double-entry ledger entries and an audit trail, so what was calculated, approved, sent and returned is one record rather than four systems reconciled to each other. How the system is protected, as opposed to how it is regulated, is on the security page.
Common questions.
How long does onboarding take?
Approval is not instant. A file typically sits in review for one to two business days, and you can leave and come back to it. Any provider promising same-minute approval for a money-movement account is describing something other than a review.
Do I need to collect W-9s before I pay someone?
You need the information before the calendar year closes, and collecting it before the first payout is far easier than chasing a recipient in January. DiscoFi keeps tax information on the recipient record so the annual total and the form are already connected.
What is the 1099 threshold for payments made in 2026?
For qualifying nonemployee compensation the federal Form 1099-NEC threshold is $2,000. For third-party settlement organizations the Form 1099-K rule is generally more than $20,000 and more than 200 transactions. Which one applies depends on the relationship, not on the amount alone.
Who is the regulated party here?
Banking services are provided by FinWise Bank, Member FDIC. Skyward Labs, Inc. is a financial technology company, not a bank, and does not hold deposits itself.
Reviewing DiscoFi for a compliance team?
Send the questions to hello@trydiscofi.com and they will reach someone who can answer them properly.
This page is general information about how DiscoFi works, not tax or legal advice. Thresholds and obligations change; confirm current figures on IRS.gov and review your program with your own tax professional and counsel.