Top 3 Compliance Insights from Activate at Money 20/20

Important tips from regulators, banks, and transaction monitoring experts at Treasury Prime’s first conference.
November 3, 2022
Activate conference

Fraud and compliance are crucial aspects of running a fintech and were hot topics during Money 20/20. Treasury Prime hosted its inaugural user conference Activate on site and hosted expert panels on the topic, speaking with Alloy CEO Tommy Nicholas, Grasshopper Bank BSA Analyst Alena Robertson, and former FDIC Chairman Jelena McWilliams.

Watch the full sessions:

Here are the top three insights from our panelists: 

1. Keep your regulators close

Fintechs may default to seeing regulators as hurdles to avoid when building their products — but treating regulators as partners will actually smooth your path to success. Former FDIC Chairman Jelena McWilliams recommends getting in touch with regulators to get their feedback and to gain insight into regulatory expectations. 

While regulators aren’t likely to “give you a greenlight,” they can tell you what pitfalls could cause problems for your product with regulators later, she said. 

She recommends seeking out FDIC office hours if available. You can also reach out to state regulators for input. 

“You can never spend too much time studying compliance,” said McWilliams. “The truth of the matter is: just ignoring (compliance) is going to catch up with you sooner or later.”

She said to “comply early, comply often” or risk becoming a pariah to bank partners. 

To read our ultimate guide to embedded finance products for B2B SaaS companies, download it here.

2. Own your compliance program

Fintechs need to tailor their own compliance programs to their specific needs because there is no one-size-fits-all solution to keeping bad actors out of your platform, said Tommy Nicholas, CEO of identity decisioning platform Alloy, which Treasury Prime leverages for KYC verification. 

“The way somebody will use a product to commit money laundering or fraud is not static, is not generalizable,” he said. 

Different bad actors will take different approaches to achieve different goals, while different platforms will have greater vulnerabilities in different areas. 

Owning your own compliance program does not mean you have to reinvent the wheel. Fortunately, tools like Alloy allow fintechs that partner with Treasury Prime to integrate with multiple vendors through one API. That means you only have to go through one implementation process, and can customize within that one process. 

“The technical integration can be completely generalizable — everyone goes through the same implementation. But then, what you actually own on the other end in terms of outcomes, and how you actually set it up, what vendors you use, etc, can be customized to the partner,” he said. 

3. Work with your bank to get compliance right

Banks are ultimately responsible for compliance outcomes. If a fintech messes up, their partner bank suffers. This puts a strain on the relationship, which can lead to a fintech losing a bank partner and alienating other potential bank partners.

That’s why it’s important to have a strong relationship with your partner bank. 

“Fintechs and banks really need to work together. The communication needs to be open. If the fintechs are on our rails, or using our charter, doing the BaaS relationship, you have to have open communication,” said Alena Robertson, Banking Secrecy Act (BSA) analyst with Treasury Prime partner Grasshopper Bank. 

She said that without open communication, Grasshopper can’t help fintechs identify fraud or money laundering vulnerabilities, or ensure that fintechs have the right risk policies

Your banking as a service (BaaS) provider will play a determining role in how close your relationship with a bank can be. A lot of BaaS providers out there will act as the intermediary between you and the bank, which can slow down communication and reduce transparency, ultimately undermining compliance.

BaaS provider Treasury Prime facilitates direct relationships between banks and fintechs. We ensure communication is open, so that fintechs and banks can work fast on customer service and compliance issues together. 

The right partners, guidance, and tools will make the difference for companies that are looking to maximize impact while staying within their means. 

To learn more about how Treasury Prime can help you build a strong relationship with the best bank partner and stand up a solid compliance program for your needs, contact our team

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