How to Create an Effective Compliance Program

Operating a business in any country, economy, or environment involves following certain rules and regulations. For every industry, there are a defined set of rules which help organisations to stay compliant in their company policies and regulations. Today, compliance practices have distanced themselves from the old-school approaches of physical documentation and are adopting technology solutions to manage KYC and AML procedures. This is where fintech businesses step in, offering these tech solutions.

Fintech has had a significant impact on society by spearheading the work of automating many manual processes like ID and age verification, consequently enhancing security. However, in order to offer a top-notch product, fintech companies must make every effort to ensure they meticulously comply with regulations pertaining to their industry, as well as that of their customers. Crafting an effective compliance program may perhaps be one of the most challenging tasks for fintech businesses. 

A compliance program is a set of processes and procedures that outline the necessary prerequisites to adhere to AML and compliance regulations. It defines the rules and regulations relevant to the particular industry in which the business operates and sheds light on how to comply with them. Below we will explore the core elements needed to create an effective compliance program in a fintech business.

What Five Pillars Should a Compliance Program Include?

The five key pillars of a compliance program that allows a business to run smoothly are:

• Appointing a Compliance Officer
• Conducting a Risk Assessment
• Implementing Internal Standards & Procedures
• Planning Independent Audits Regularly
• Providing Internal AML Training

These five pillars ensure that compliance is top of mind for the business. If issues around risk management arise, these compliance pillars include the plans and procedures to deal with them. For instance, if your customer due diligence process is lacking an important step and a PEP is onboarded incorrectly, your compliance program will have a procedure in place to identify this person and a process to offboard them as quickly as possible.

How to Create an Effective Compliance Program

When creating a comprehensive compliance program, we should be thoroughly familiar with the fintech business model and the legal requirements that must be met. For instance, fintech businesses must possess a wealth of knowledge regarding the industry their target market operates in as well as the industry to which they belong. This is to ensure that, for example, no private data is shared inappropriately while in their hands. Fintechs will have more complex requirements when compared to conventional financial businesses. Assessing your business model and addressing regulatory requirements are always the key ingredients to creating an effective compliance program. 

Who are the Stakeholders in a Compliance Program?

This brings us to the important question, who are the stakeholders? Besides the compliance officer, there are a select few people with experience in their field who could add more value and be part of creating an effective compliance program. 

• Founder/CEO: The business owner typically has extensive knowledge of the business processes that a compliance officer won’t have.
• Operations: Alternatively, the operations team will have in-depth knowledge of the onboarding processes which will instruct the program.
• Sales: Business development can give insight into the industries and the demands of customers.
• Finance: Payroll and invoicing staff holds vital information about private data that can hinder regulation compliance.
• Marketing: Digital customer onboarding can be a precious area in marketing as A/B testing sign-up steps can be the difference between 50 or 100 new signs-up, but compliance issues may be overlooked in the process.

Essential Elements of a Compliance Program 

Apart from the five pillars of a compliance program portrayed above, four additional core elements exist. These are integral to the success of the program from within the business. The four important elements are:

• Creation of a compliance committee
• Execution and enforcement of standards
• Open, consistent, and transparent communication efforts
• Uncomplicated compliance metrics to report on program effectiveness

Fintech businesses are more complex than other styles of businesses. Because of this there are more considerations to take into account when looking at compliance and AML. Depending on your product, you may have to invite more stakeholders into your compliance meetings. Keeping in mind the five pillars of compliance and advocating for everything to be perfect will ensure that you can create an effective compliance program in your fintech business.