How to Launch a Regulated Product - Pt. 3

How to Launch a Regulated Product - Pt. 3

September 21, 2021

Compliance for Fintechs: Build Your Compliance Team

In Part I of this series, we went through the main differences between working with a bank and being regulated yourself. In Part II, we outlined how to meet examiners’ expectations.

To conclude this series, we’ll talk about building a compliance team. Knowing what types of personnel you need and where to find compliance advice outside of your company are integral to cultivating a strong culture of compliance.

Compliance Contractors vs. Employees

The first decision you’ll need to consider is whether to start with compliance contractors or to make full time employee hires. For many fintech startups, a compliance contractor may be the right way to get started. The compliance needs of early-stage startups are fairly straightforward, and probably won’t amount to full-time workload for an employee.

Furthermore, you may want the help of an experienced compliance expert to establish the program and risk assessment, and a consultant may be a better way to access that expertise. There are several consulting firms that specialize in helping early stage fintech startups with compliance (disclosure: we provide compliance advisory services and staffing at Hummingbird, or can refer you to trusted partners).

As fintechs grow and reach product-market fit, the operational components of the compliance program start to require more management. At this point, it makes more sense to bring your compliance team in-house.

What Types of Personnel Will I Need?

A well-staffed compliance program requires a number of different team skillsets: strategic leadership, operational expertise, technical proficiency, and strong analytics. The exact team composition will vary a bit depending on the specific needs of the organization, but some of the common responsibilities to consider include:

  • Ownership of the compliance program: including risk assessments, policy updates, training programs, and staffing.
  • Program implementation & management: operational management that ensures investigations, reporting, and other execution-oriented tasks are scaling appropriately.
  • Technology & analytics: compliance is increasingly a technical practice area, and we recommend that teams have their own technology and analytics staff. These teams can work on systems administration, customer onboarding, monitoring, and other analytical needs.

In the early days of building a compliance team, we recommend seeking out strong generalists: folks that draw on compliance experience from prior roles and have the drive to execute and manage the program. As the team scales, the compliance team can increase in structure to support more specialized team members.

Finding the Right Compliance Leader

Hiring the right Chief Compliance Officer is one of the most important things you can do for your startup. The ideal compliance officer in a startup has an understanding of the regulatory world, is tech-forward and innovative, and can translate between engineers, designers, and regulators. Most importantly, a compliance officer in a startup needs to understand the regulatory risks of your business and how to design a compliance program that is capable of evolving quickly as your company grows and your risks change.

The banking industry is a common source of compliance job candidates, and many banks are increasingly tech savvy organizations. If you are a fintech startup that is considering a candidate from the banking industry, ensure that you consider their experience with bringing new products to market and willingness to work in a startup environment. The skills and mindset required to be an effective compliance officer in a bank don’t always crossover into a fintech environment.

A tech-forward compliance officer will design a program that grows with your company by investing in both talent and tech. We won’t sugarcoat it—hiring a compliance team can be expensive, but much less so than being found noncompliant.

Technical Skills in Compliance

Consider dedicating engineering and data sciences resources to your compliance and risk teams. Doing so helps you avoid significant headcount growth in the compliance team, and the tools they build help you better understand who your good customers are. It’s worth investing in tech that supports this—the better you are at finding and understanding your good customers, the faster you’ll grow. And the right vendors, like Hummingbird, can augment your

internal engineering teams by providing out-of-the-box tooling. For more information on building an effective compliance program, read our 5-part series.

Where Can I Find Other Compliance Advice from outside my Company?

There are a few specialist compliance consulting firms that can offer services for a wide variety of needs. Some are run by former industry operators, and they deeply understand the compliance needs of fintechs.

There are also law firms and larger management consulting companies that provide services in financial regulation. In our experience, they are mostly focused on the banking industry, not on fintech. If you aren’t running a bank, the advice you receive may be a bit overkill. Ask other fintech companies in your space who they’ve been working with.

A quick plug: Hummingbird can help if you have questions or would like recommendations specific to your business case. Book a spot on our calendar for a free, 30-minute advisory session with compliance experts. Our team includes former regulators, compliance program operators, and policy makers; and we’ve helped everyone from pre-launch fintechs to large institutions.

Finally, there are a growing number of online communities, meetup groups, and other informal channels where fintech compliance teams can compare notes. We host a Slack community and regular events ourselves, so please feel free to reach out if you’re interested.

Read Part I: Start Here

Read Part II: Know What Examiners Expect