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Compliance Program Essentials for Fintechs: A Comprehensive Approach

As fintech companies continue to innovate and disrupt traditional financial services, ensuring compliance with regulatory requirements has become a top priority. A robust compliance program is essential to mitigate risk, maintain customer trust, and stay ahead of the competition.

Key Components of an Intensive Compliance Program

  • Foundational compliance policies
  • Risk assessment methodologies and matrices
  • Independent testing plans and workflows
  • Compliance training content and assessments
  • Various compliance procedures and controls
  • Ongoing “state of compliance” reporting
  • Compliance issue program management

The Importance of Subject Matter Expertise

To ensure the success of a fintech’s compliance program, it is essential to evaluate:

  • Subject matter expertise
  • Reporting capabilities
  • Program policies
  • Issues and risk management
  • Internal training curriculum

We recommend that fintechs speak with a compliance professional and a lawyer to fully understand what they need to do to make their program viable.

Working with Third-Party Advisors

In addition to managing compliance in-house, fintechs can consider hiring external compliance consultants to design policies, review materials, and test user flows. However, this approach comes with significant costs and may not provide the level of expertise required to effectively marry regulatory requirements with a fintech’s specific product.

Banking-as-a-Service (BaaS) Solutions

A BaaS provider can offer both product excellence and compliance expertise, reducing the complexity and cost associated with building a comprehensive compliance program. A reputable BaaS solution provides:

  • Full suite of embedded finance needs
  • Infrastructure for financial partnerships
  • Compliance expertise

Evaluating a BaaS Provider for Compliance

When evaluating a BaaS provider, fintechs should consider the following criteria:

  • Relationships with multiple banking partners to ensure reliable solutions with redundancy measures
  • Demonstrated ability to enforce compliance requirements
  • Level of detail needed in use case supportability and onboarding
  • Number of full-time employees working on compliance and years of experience
  • Ability to provide seamless onboarding experiences for customers

Stripe’s Compliance Program

Stripe, a leading BaaS provider, has developed an in-house compliance program refined by team members who regularly meet with banks. The company offers:

  • Guided checklists and discussions to confirm the program has all the right processes, disclosures, reporting, and controls in place for final bank review and approval

APIs for Compliance-Focused Card Programs

Stripe’s card program allows fintechs to instantly create virtual and physical cards with their own branding. The company helps with:

  • KYC
  • AML
  • OFAC
  • Sanction screenings
  • Seamless onboarding experience for customers

Bank Account Replacements

Stripe Treasury’s APIs create FDIC insurance-eligible accounts for customers that can send ACH and domestic wire transfers. The company handles up-front negotiations with a network of banks, embeds KYC within the product, and advises on remaining compliance requirements.

Conclusion

Building a comprehensive compliance program is essential for fintech companies to maintain regulatory compliance, customer trust, and market competitiveness. By evaluating subject matter expertise, reporting capabilities, and partnering with reputable BaaS providers, fintechs can ensure the success of their compliance program.