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by InnReg

Compliance Consulting: An Attorney’s Guide

Categories: Compliance Consulting

Attorneys and other legal professionals play an instrumental role for financial innovators who are subject to regulation.

Regulations often require a degree of interpretation and careful analysis to determine exactly how they apply to the business model of an innovator such as a digital broker dealer or an online lender. Legal professionals bring essential expertise to the table because they have a deep understanding of rules and regulations, knowledge of proposed rules and rule changes, and experience guiding their clients through investigations and enforcement actions.

Like any reputable professional service provider, they also want to ensure that their clients succeed and avoid risk. With respect to regulation, success or failure hinges on having a robust compliance program in place. At InnReg we work closely and collaboratively with our clients’ legal teams (internal and external) to plan, build, and run compliance programs that meet regulatory requirements seamlessly and effectively. In fact, attorneys often refer us because they want to help clients operate in conformance to the way they have interpreted regulations on their behalf. We work with some of the most reputable regulatory legal firms in the world.

For attorneys advising financial innovators on next steps when it comes to the practical requirements of implementing compliance programs, here are five considerations to keep in mind:

  • Compliance consulting is a wide and varied market. It includes subject-matter experts who can respond to a very specific need (such as GDPR or other personal data and privacy rules), as well as what we at InnReg would call “full-stack” service providers (which describes our own model). The full-stack consulting approach  guides your clients through the details of strategic and technical partnerships, integrating technologies and setting up workflows, building a compliance function, and embedding compliance staff into their operations. A full-stack provider can even provide executive-level professionals to serve as your client’s Chief Compliance Officer.
  • Your clients may not have an inherent passion for regulation and compliance. They understand their importance, but what motivates them is launching, growing, and improving profitability for their business. They would rather focus on what is core to their business. In other words, they are eagerly looking for this support.
  • Your clients typically will not build all of the capabilities needed to run their business from a blank slate. In today’s world, they establish strategic fintech partnerships with one or more banks, clearing firms, providers of transactional infrastructure, etc. This entails tight integration of technologies between partners through transfers of data and APIs. There is a strong regulatory and compliance component to selecting, negotiating, and finally implementing these partnerships. Your clients can avoid many pitfalls by working with an experienced advisor to partnerships and integration.
  • There needs to be a virtuous cycle between product definition and compliance needs. Once your client has a baseline interpretation of regulations for its business concept, that concept must be translated into specific features and functionality for user onboarding , transaction processing, transfer of funds, reporting, and other activities that will ultimately be subject to regulation. Decisions made at the level of features and their regulatory implications are made iteratively in conjunction with product design. Insights from a full-stack compliance provider make a huge difference in a given product’s exposure to regulatory risk.
  • Effective compliance starts with optimized workflows before program implementation. Your clients need to establish detailed workflows for account opening, back-office operations, suspicious activity monitoring, and sales and marketing. A full-stack provider can help your clients design compliance into every step of their workflows with the experience to know what works well and what does not. This approach helps close the gap between what, who, and how.

Ultimately, the difference between your clients’ success or failure hinges on day-to-day execution of compliance processes. This difference becomes especially critical if regulators challenge your clients’ business models or plans for how they intend to comply with the rules. They need partners both on the legal and on the compliance side to navigate such challenges.

If you have any questions about how we can help your clients with compliance planning, implementation, or execution, please be in touch to start the conversation.