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Are you the CEO or founder of a new fintech startup? Is your firm growing fast and facing increasing regulatory challenges and scrutiny? Are you considering hiring a Chief Compliance Officer (CCO) for the first time? Need to find an urgent replacement?
This article provides valuable insights and practical tips on hiring a Chief Compliance Officer derived from our extensive expertise as an outsourced CCO provider.
Top Questions On How to Hire a Chief Compliance Officer
What does the CCO of a fintech do?
Why hire a CCO?
Does every fintech have to have one?
How to hire a CCO for your fintech for the first time?
What is a typical salary and executive compensation package?
What is an Outsourced CCO?
Subject-matter experts with decades of experience wrote this analysis, not freelance copywriters, third-party agencies, or ChatGPT. Our compliance advisors work with fintech founders at different growth stages.
See also:
What Does the CCO of a Fintech Do?
The CCO is one of the most important stakeholders of your fintech. They are responsible for establishing and implementing procedures to comply with all relevant laws, regulations, and industry standards. CCO's main role is to build a compliance program that is robust and effective in identifying, preventing, and remediating any compliance deficiencies.
Who Does the CCO Report to?
The CCO position is typically a full-time senior executive-level, or C-suite position that reports directly to the company's CEO. They also provide reports directly to the company’s board of directors. The CCO collaborates closely with the chief financial officer (CFO), the chief risk officer (CRO), and the Head of Legal.
Does Every Fintech Have a CCO?
If you already registered or are licensed as a regulated entity, then the answer is yes, your fintech should have a CCO. Succeeding as a regulated entity requires deep expertise in the constantly changing regulatory landscape. Yet, just 3% of small fintechs hire a full-time CCO. Most outsource the CCO role until they grow to a certain size.
Why Hire a CCO?
Hiring a Chief Compliance Officer (CCO) is essential for fintech startups due to the highly regulated nature of the financial services industry. If your fintech has encountered regulatory scrutiny or compliance difficulties, onboarding a CCO is critical to becoming and remaining compliant.
In some cases hiring a CCO is mandatory. SEC Rule 206(4)-7 under the Investment Advisers Act requires a registered investment adviser (RIA) firm to designate an individual with working knowledge of compliance regulations as the firm's CCO.
Like having a well-crafted business plan and a strong product offering, hiring a CCO is paramount for growth and risk reduction.
Top 5 Reasons Why Hire a CCO
To maintain high levels of compliance
To efficiently manage financial and non-financial risks
To build strong customer trust
To maintain a strong reputation
To support the commercial success of the company
In a nutshell, fintechs rely on their reputation to attract customers and investors. A robust reputation largely depends on a strong compliance program. Compliance violations can damage the company’s reputation in irreversible ways – sometimes even leading to the company’s failure.
Thus, hiring the right expert to manage your compliance activities is an essential step to establishing yourself as a trustworthy and reliable player in the financial industry.
What are the key Responsibilities of a Fintech Chief Compliance Officer?
Here is an outline of a fintech CCO’s key responsibilities:
1. Developing Compliance Programs and Controls
Develop and implement compliance programs, policies, and controls that meet regulatory requirements and industry standards. These may include:
Anti-money Laundering (AML)Know-Your-Customer (KYC)Customer Due Diligence (CDD)Data Protection, Unfair, Deceptive, or Abusive Acts or Practices (UDAAPs), andother compliance-related topics.
2. Developing the Annual Compliance Work Plan
Draft, implement, and set deadlines for the annual compliance work plan. The plan typically focuses on topics like:
Annual Review of Compliance Charters,
Annual Training,
Complaints Management,
Risk Analysis,
Staff and Resources, etc.
3. Monitoring Regulatory Changes
Stay current with all regulatory changes and update the company's compliance programs and policies accordingly. The regulatory landscape in the financial industry is fluid and constantly evolving.
4. Conducting Training
Deliver necessary compliance training to employees.
5. Reporting & Accountability
Prepare reports on company compliance activities and provide regular updates to the board of directors and senior management.
6. Interacting with Regulators
Act as the first point of contact for regulators and ensures the company is well-prepared for regulatory exams.
To meet these responsibilities, the candidate must have deep expertise in the regulatory landscape and communicate this expertise effectively with all internal and external stakeholders.
Tips on Hiring a Chief Compliance Officer with Global Regulations Knowledge
The table below outlines the main regulatory bodies and regulations in the US, the EU and the UK. Before hiring your first global CCO for one of these jurisdictions, you should make sure that they have sufficient expertise with the underlying regulatory frameworks.
New and updated regulations go into effect continuously, so you will ultimately need to either hire a full-time CCO or outsource your CCO role to a professional consultancy firm.
United States
US Department of Treasury’s Financial Crimes Enforcement Network (FinCEN)
State financial regulator’ requirements
Bank Secrecy Act (BSA)
Gramm-Leach-Bliley Act (GLBA)
European Union
EU Member States’ local regulators
United Kingdom
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Candid Answers to Your Sensitive Questions
You might have already asked yourself some of the common questions that we often receive from our clients thinking about hiring a Chief Compliance Officer:
Should we hire a CCO?
Can the CCO role be assigned to someone else within the company?
Can we outsource the role to a professional consultancy firm?
These are all valid questions and the answers depend to an extent on the size, nature, and complexity of your business.
Option to Assign CCO Responsibilities to Other Employees
We generally do not recommend assigning the CCO responsibilities to existing roles within the company. Often, we see fintech startups that combine the Legal and Compliance roles into one joint function. While combining these roles might seem appealing, especially for early-stage startups, potential conflicts of interest in these roles might make this decision sub-optimal.
You can read more about Compliance vs. Legal in a separate analysis.
Combining the CCO role with an existing company function might be an option only if your fintech meets the registration or licensing exemption criteria. However, choosing not to become regulated, can significantly limit your business size and model.
That said, before hiring for a separate role, you will also need to carefully consider the following key questions:
Can your business absorb the cost of a new hire?
Would outsourcing to a compliance consultant actually save you money?
We examine these questions and share our practical knowledge on the matter.
What is a Chief Compliance Officer’s Salary?
As of January 31, 2024, the average base salary of a CCO in the United States is $245,901 (up from $239,701 in 2023) $239,701. A full package national average (salary + bonus + benefits) is closer to $332,042 per Robert Half.
Of course, this amount depends on many factors like relevant experience, education, certifications, the size and nature of your business, etc. Depending on the benefits package or the location, this number can increase significantly. Our experience and studies show that many fintech startups also grant equity. According to a recent study, 30% of CCOs employed at RIA firms are equity owners.
Benefits are an essential component of the overall employee experience. They not only help attract and retain top talent but also contribute to employee satisfaction, resulting in a more productive and successful workforce. As per the same study mentioned above, 74% of RIA firms offer remote work, as part of their nontraditional benefits package.
Most CCOs will likely create a compliance department (Manager, Analyst or two, or a three-people team), which brings the total cost of compliance to $872,372* per year, as a national average.
*Average savings InnReg clients realize over in-house compliance team costs are in the 30%-50% range.
Who Makes More – CFO or CCO?
Some fintech CCOs rank alongside CFOs and CROs or slightly higher in terms of pay. As of January 31, 2024, the average base salary of a CFO in US is $437,800, while the average base salary of a CCO in the United States is $245,901.
How to Hire a Chief Compliance Officer for Your Fintech for the First Time?
As with every important business decision, return on investment should be one of your deciding factors before hiring a Chief Compliance Officer. Can your business absorb such a hire at this stage?
If you reach the stage where you can afford to hire a full-time CCO, we recommend the following strategic approach to hire the right candidate the first time.
Step-by-Step Process When Hiring Your CCO
1. Define Your Needs and Expectations
Start by clearly identifying your needs and expectations.
Answer the following questions:
what regulators and regulatory requirements are you subject to?
are you planning to have your CCO build and subsequently manage a compliance team?
are you planning to support your CCO by outsourcing some of the compliance activities to a professional compliance consultancy firm?
2. Define the CCO Role
Based on your identified needs, list the role’s duties and responsibilities, as well as the perfect candidate’s qualifications.
Your perfect candidate must have relevant experience in the field your fintech is operating (e.g., RIA, Broker-Dealer, MSB compliance) and a deep understanding of the underlying regulatory requirements.
Our tip is to consider candidates with a background in law, finance, or compliance, preferably with experience managing compliance programs and teams.
3. Create a Detailed Job Description (JD)
Your job description should outline the comprehensive qualifications and responsibilities. This ensures all stakeholders involved in the hiring process have the same understanding of the hiring needs.
A good job description will also help attract suitable candidates.
4. Conduct Background Checks
The performance of background checks on your candidates is not only advisable but in certain cases, it is mandatory.
As this role is responsible for ensuring compliance with laws, regulations, and internal policies, conducting a thorough background check is crucial to minimize potential risks for the organization.
The nature and extent of the background check may vary depending on the company's specific needs and the industry in which it operates.
However, if you don’t have the bandwidth for this process or the cost of a full-time hire is prohibitive, consider outsourcing your compliance activities to a professional compliance consultancy firm.
What Is an Outsourced CCO?
An outsourced CCO is a professional consultant, such as InnReg, who provides part-time or project-based compliance services to companies. The role of the outsourced CCO in the early stage of fintech development is to build and handle the entire compliance function.
Engaging an outsourced CCO can bring many advantages to your fintech, to name a few:
extensive varied experience
flexibility
assurance, and
significant cost savings
The SEC allows regulated companies to appoint an external resource to the CCO role. In 2015, however, the SEC explicitly stated that companies must not “set it and forget it” when outsourcing compliance functions. In practice, such guidance means outside officers cannot operate in the dark without detailed visibility into a firm's practices and clear governance that allows them to act if risks emerge or violations occur.
A typical practice of early-stage fintechs that cannot afford a full-time hire is first to hire an outsourced CCO and later switch to a full-time one.
See also:
Transition From Outsourced CCO to Full-time Employee
In the early stages of growth, this leadership role may only require a part-time resource. A fully-loaded salary for an executive-level team member can be hard to justify.
CCO responsibility requires seasonal executives with broad expertise: an outstanding knowledge of compliance and regulations while thoroughly understanding your business.
When you decide to hire your first full-time compliance employee, a seasoned outsourced CCO will assist you in the hiring process and ensure a smooth transition. The outsourced CCO must work closely with the new hire, providing comprehensive training on the established compliance workflows while ensuring the firm's ongoing compliance and operational effectiveness.
To shed more light on CCO outsourcing, we have published a dedicated opinion article covering insights about outsourced CCO services.
What is the difference between a chief compliance officer and a compliance officer?
The main difference between a Chief Compliance Officer (CCO) and a Compliance Officer lies in their level of responsibility and scope of duties within an organization.
While both roles are crucial for the organization's compliance efforts, the CCO holds a more strategic and leadership-oriented position. The Compliance Officer focuses on the operational aspects of compliance implementation.
In practical terms, the CCO is mainly responsible for:
ensuring regulatory compliance;
identifying potential compliance risks and mitigating them;
reporting to the board of directors and relevant stakeholders; and
communicating with regulators, auditors, and legal counsel.
The Compliance Officer, on the other hand, focuses on the day-to-day implementation and execution of the compliance program within the organization by:
keeping compliance policies, procedures, and controls up to date;
delivering compliance training to employees;
conducting vendor assessments, and
supporting the CCO in all other operational aspects of the compliance program.
Have you just lost your CCO and need to find one urgently?
In today’s dynamic and highly competitive financial services industry, retaining your CCO for the long term requires a combination of various strategies to ensure job satisfaction and professional growth.
Even if you have done your best to provide good working conditions and opportunities, it might turn out that your CCO does not align with your firm’s goals and values.
Through our extensive experience as an outsourced CCO provider, we have seen many cases in which a fintech lost its Chief Compliance Officer. To be left without a CCO, especially in a phase of aggressive growth, is the last thing your fintech needs. In such cases, you will have to find an interim solution urgently.
Finding the right candidate may require a lengthy and costly search and often takes many months.
Whether your need for outsourced Chief Compliance Officer services is interim or permanent, InnReg can provide the tools to immediately and effectively navigate your compliance obligations.
Our experienced compliance specialists are trained to react accordingly in every case scenario - a new or an interim project. Their experience in multiple roles and industries can bring fresh perspectives and best practices to the fintech. We have successfully supported clients in short-notice CCO replacements where our leadership and know-how played a vital role in providing the best interim customized solutions.
Tips On Hiring a Chief Compliance Officer – a Conclusion
As a fintech CEO or founder, you already know that compliance in the financial services industry is not optional. Ensuring compliance with all regulatory requirements that go into effect constantly requires you to outsource the role to a professional consultancy firm or hire a full-time Chief Compliance Officer.
The decision ultimately depends on your current stage of development and whether your business can absorb the cost of a senior-level hire. Remember that hiring your first compliance executive can be a complex, time-consuming, and expensive process to find the right candidate.
For these reasons, many early-stage fintechs prefer to first engage an outsourced CCO and later transition to a full-time hire.
In any case, investing in an experienced CCO or outsourcing your compliance program to a professional consultant will certainly pay dividends in peace of mind and guarantee confidence in audit scenarios.
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