Compliance Programs for Startups

Compliance and Cybersecurity Program and Support for Crypto and Blockchain Assets Lender and Custodian

Setup and outsourced compliance operations for thousands of users and millions of dollars in assets

Background/Opportunity

• A global innovator in the use of blockchain and cryptocurrency holdings needed support to ensure two core elements of its business. First, as both a lender and a custodian of assets, it needed to meet the compliance requirements of the many national and local jurisdictions where it operates. Second, it required a cybersecurity approach to meet global financial standards.

Challenge/s

• Operating in the world of cryptocurrencies creates potentially higher degrees of risk in the prevention of money laundering.
• The client’s business model and global scope required a complex regulatory structure across countries and, in the U.S., individual states.
• Operating globally also entails adopting and complying with data protection and data security best practices.
• The client works with a wide range of affiliates and distribution partners as well as customers of its white label solution.

InnReg's Solution

• InnReg completed a full risk assessment of the client’s business.
• InnReg designed an end-to-end outsourced compliance and cybersecurity program, including:
  • Regulatory filings and updates
  • Anti-Money Laundering and Suspicious Activity Reporting
  • Management and protection of client and transaction data
  • Vendor and partner management
  • Marketing and advertising compliance

Client Results

• The client has the ability to manage thousands of end users and millions of dollars in assets in a compliant manner where it does business.
• The client has successfully avoided the risks inherent to their business model.
• The client has saved extensively by using dedicated, outsourced compliance professionals rather than building an in-house team.

Testimonial

“Francesco and his team helped us build and scale a global crypto company, navigate the many complex legal and regulatory challenges, and design a product that helped us satisfy our many constituents – customers, partners, local, national and international regulators. The team also provided critical guidance in the areas of risk management, security, HR, and strategic roadmap considerations.  They have become a full extension of our team and we would not be in the same place today without their endless guidance, support, and great judgement.”

-- Client CEO

InnReg helps innovators succeed in regulated markets. We do not publicly disclose client names in order to protect their confidentiality and their unique business models. We rigorously guard our clients’ intellectual property and competitive advantages. However, we can make references available to prospective clients by request.

Fractional Shares Trading by the “Most Disruptive Company of the Year”

Successful launch of a revolutionary “Product of the Year” stock trading platform

Objective: Launch a revolutionary new equity stock trading platform for retail investors.

Background/Opportunity

• The client wanted to create a trading platform that would be fun, easy, and affordable. The platform needed to deliver their mission to help new investors learn about stock trading in a low risk and low-cost environment. Their goal was to make Wall Street accessible to a wider Main Street audience. The product design included online brokerage accounts, plus gifts of stocks delivered via gift cards and e-cards.

Challenge/s

• In pursuit of their mission, the client had to build a platform attracting younger and lower net worth investors to equity trading but at the same time avoid raising regulatory red flags or generating negative press. Given their business model and plans for growth, they had to create a cost-efficient operational system, but with a complex product design including custodial accounts for minors, shares of stock in the form of gift cards and e-cards, fractional trading, and other areas that required a clear regulatory strategy.

InnReg's Solution

• Designed and deployed a compliance platform that supported accurate transactions at high speed and with a high level of information security.
• Advised on the negotiation of profitable vendor contracts, including a multi-year clearing agreement.

Client Results

• Raised $15 million in Series A funding after their successful launch and positive press.
• Stock shares delivered via gift cards contributed an incremental $50 million in revenue from sales at partnering national retail outlets such as Target, Safeway, and Staples.
• Won numerous awards in fintech trade publications including Product of the Year and Most Disruptive Company.

Testimonial

“Francesco has been the driving force in establishing our compliance, legal, and risk management functions. His experience and profound knowledge of the industry have been instrumental in protecting our brand during high-growth periods, as well as through challenging times. A clear communicator, Francesco has established strong relationships with industry regulators. In addition to his experience and knowledge of business, law, and regulations, Francesco has an extremely organized approach to problem-solving. I have been very happy to work with Francesco and look forward to doing so again in the future.”

-- Client President and COO

InnReg helps innovators succeed in regulated markets. We do not publicly disclose client names in order to protect their confidentiality and their unique business models. We rigorously guard our clients’ intellectual property and competitive advantages. However, we can make references available to prospective clients by request.

Y-Combinator-Launched Equities Gifting Solution

Positioned an equities solution for a strong exit via acquisition by a competitor

Objective: Launch a new service that makes it easy to give stocks and index funds as gifts.

Background/Opportunity

• The client was a start-up supported by the Y Combinator incubator program. Their mission was to design a new service for people who wanted to give the unique gift of equity stocks, using an easy and fun platform. Their product strategy blended retro and fintech because it hearkened back to the days when parents and grandparents gave bonds to children to seed their college fund.

Challenge/s

• The client needed to manage numerous compliance regulations spanning the brokerage/investment advisory environment to support stored-value gift cards and the trading environment to support online investing, including custodial accounts for minors.

InnReg's Solution

• Established a manageable set of regulatory requirements.
• Advised on the adoption of the most efficient regulatory structure to accommodate the desired business and revenue model.

Client Results

• The company was acquired by a competitor based on their successful product launch with substantial positive press, and their potential to become a viable competitor in their own right.
  
  

InnReg helps innovators succeed in regulated markets. We do not publicly disclose client names in order to protect their confidentiality and their unique business models. We rigorously guard our clients’ intellectual property and competitive advantages. However, we can make references available to prospective clients by request.

Robo Advisor

Helped a robo advisor launch a compliant MVP that attracted additional rounds of funding.

Objective: Launch a micro-investing app designed to increase portfolio growth potential compared to conventional savings and investment accounts.

Background/Opportunity

• The client believes every single person would benefit from an investment approach that includes small, daily contributions. However, decades of experience as investment advisors had taught them this level of discipline is rare even with seasoned investors. Their platform solves this problem by rounding up a client’s credit and debit card purchases to the next dollar, and then automatically depositing this “small change” into a passively managed investment account.

Challenge/s

• The client needed guidance on how to identify and address potential regulatory compliance issues related to targeting international users. They also asked for support in identifying the best vendors to support the international launch of an innovative investment program and product in a regulated environment.

InnReg's Solution

• Conducted a comprehensive gap analysis. 
• Ensured that the compliance program was implemented in accordance with all SEC requirements for a Registered Investment Advisor.
• Addressed all compliance issues related to targeting and managing international accounts.
• Sourced and introduced regulated vendors who could support international clients.

Client Results

• The client was successfully launched in 2016 on a strong compliance foundation.
• They closed their first round of VC seed funding soon after launch and have moved on to securing Series A funding.

Testimonial

“InnReg understands fintech, online brokers and robo-advisors like no other compliance consultants we approached. They keyed in immediately on all the potential regulatory issues that could affect our business when targeting international users. Their CEO Francesco Matteini has built a substantial network of third-party providers. He helped us evaluate and select the right vendors to meet our needs within our budget and timeline."

-- Client Founder and President

InnReg helps innovators succeed in regulated markets. We do not publicly disclose client names in order to protect their confidentiality and their unique business models. We rigorously guard our clients’ intellectual property and competitive advantages. However, we can make references available to prospective clients by request.

How InnReg Helped a Global Crypto Unicorn with Blockchain Compliance

Objective: To support a non-U.S. blockchain innovator through complex operational planning to apply and obtain state and federal money transmitter licenses.

Background/Opportunity

A leading global digital gaming company with attractive offerings such as downloads, sports memorabilia, and NFTs pursued a business expansion strategy in the U.S. They understood the difficulty of this process and approached InnReg for help in managing the compliance requirements involved with obtaining state licenses and federal registrations for money transmission activities.

The company’s key differentiator is to make it as easy as possible for customers to make payments for digital products through their platform while maintaining privacy.

Engaging in this business model requires operating as a money transmitter, acquiring separate licenses in 50 jurisdictions, and meeting appropriate compliance, operational and staffing requirements according to each jurisdiction’s specifications.

Challenges

As a non-U.S. based company, the client requires guidance in successfully navigating the rules and requirements of both state and federal regulators. FinCEN registration and state licensing requirements differ widely in the number of rules to follow, their type, and complexity.

Licensure-related costs and processing times can differ significantly from state to state, and acquisition of each license may take from several months to two years.

The client requires support to understand and address the many obstacles of this complex process. They needed a multi-pronged, multi-jurisdictional approach requiring diligent program management, governance support, and in-depth experience with the nuances of money transmitter regulations as they apply to blockchain platforms—a need which InnReg was well-positioned to address.

InnReg's Solution

InnReg has provided project management and compliance expertise to fulfill the client’s regulatory and licensing requirements necessary to engage in money transmission payment activities across all relevant U.S. jurisdictions.

This role encompasses business planning, compliance advisory and project management services to support the execution of the tasks associated with the acquisition of money transmitter licenses, while serving as a centralized point of contact with the Client’s leadership team to maintain alignment with Client’s strategic goals. InnReg has also helped the client ramp up their compliance function with best-in-class advisory, processes, and procedures.

The scope of our services over the course of the engagement has included the following key components:

• Compliance and operational expertise, including policy development and regulatory advice
• Project management and governance
• Resource assignment and management
• Centralized communication
• Executive reporting

Why InnReg?

InnReg has supported the launch and growth of disruptive fintech companies operating under the MSB/Money Transmitter regulatory framework since 2013, and developed expertise in understanding its clients’ business requirements while mitigating risks and managing the impact of regulations.

Our competitive advantage and unique experience provide us with the ability to manage a project on behalf of a client operating in a gray and rapidly evolving area for both regulators and businesses.

Finally, our experience with crypto and digital assets since 2014 and with the challenges of successful money transmitter license applications allows us to guide this complex project to success.

Project Duration

In progress

Client Results

The client is making significant progress in an unfamiliar area of regulation and compliance, and in this process, InnReg is providing key know-how to build the internal resources needed for successful licensing application at both federal and state levels.

In addition, InnReg is contributing expertise and know-how around key compliance requirements such as information security, reporting, and vendor management.

Behind the Scenes

With limited exceptions, any business that accepts and transmits funds, including cryptocurrencies, such as bitcoin, will be considered an MSB and require an MTL in each U.S. state where the business operates. Money transmitters are a part of a specific category of MSBs.

Money transmitter regulations can be a complex challenge for fintechs that wish to operate at the national level within the U.S. Each state has its own requirements. While there are many similarities from state to state, there is no “one size fits all” approach.

Even more complicated for leading-edge businesses operating in crypto or Decentralized Finance (DeFi), the application process was designed for traditional finance businesses rather than online fintechs dealing with digital assets.

At the same time, businesses must be able to comply with other related regulations, most importantly those issued by FinCEN, a department of the U.S. Treasury that oversees the prevention of money laundering and other financial crimes.

The application process itself requires gathering significant amounts of documentation. In addition, businesses must be ready for the interactive review of their applications, which typically involves in-depth regulatory scrutiny and several rounds of questions.

Readiness involves having appropriate staff and processes in place so that regulators can confirm key facts about the business.

In the application process, the applicant is required to submit documents including business plans, financial statements, financial records of officers, directors, board members, and owners, and proof of compliance policies, procedures, and controls. To make the process go smoothly, all of these must be in place with a clear understanding of the factors that lead to the approval of an application.

Applicant companies should also consider building a compliance and risk management foundational framework prior to engaging in the license application process, so as to minimize regulatory questions and scrutiny at a later stage.

Given the above, money transmitter licensing projects not only require rigorous program management, but also differ from other projects because the most important tasks go beyond the application process. It takes experienced compliance expertise to understand the process and resources companies need to put in place before a single application can be filed.

Team members who can meld their understanding of the operational requirements with the operational and governance elements needed to secure the licenses needed to operate legally.

In InnReg’s experience, all of these components combined tend to challenge the capacity of the client’s in-house compliance leadership and staff, who are already handling day-to-day business activities. Bringing dedicated resources to the table allows clients to stay focused on business priorities even while they plan and execute their strategic evolution with the support of additional compliance experts.

InnReg Money Transmitter Services

InnReg’s core services for businesses involved in money transmission include:

• Compliance policies development and management, including federal (BSA/AML, UDAAP, etc.) and state regulations
• Federal and state regulator compliance facilitation including licensing, filings, exams and audits, consumer complaints, and regulator responses
• Fully and partially outsourced compliance leadership, management, and staffing
• Monitoring for regulatory changes
• Marketing, advertising, and content compliance (UDAAP, social media, endorsements, etc.)
• Employee onboarding (including background checks) and training
• Risk assessment and quality control
• Electronic books and records management
• Information security and data protection procedures
• Technology and vendor review
• Suspicious activity detection, monitoring, and reporting

Interested in learning more? We have developed a detailed guide for crypto fintech founders and leaders.

Cryptocurrency Laws and State Money Transmitter Regulation
for Fintech Leaders

Contact InnReg for more information about managing complex money transmitter license requirements.

Seamless implementation of a Compliance and Licensing Maintenance Program

Objective: Implemented a Compliance and Licensing Maintenance Program across all US jurisdictions for a Global P2P Crypto Company.

Background/Opportunity

Our client was a prominent early-stage company offering the first global peer-to-peer payments app and a bitcoin-native financial experience, widely reported as one of the most significant crypto developments in 2021.

This crypto transfer company supports fiat transfers, conversions into bitcoin, fiat-to-fiat, and crypto-to-crypto transactions for a large and global user base based on a high-volume transactions model that exposes it to relevant compliance risks, including money laundering and fraud. The company also needed to build its new U.S. compliance program from the ground up.

Challenges

Crypto exchanges are regulated entities subject to multiple regulators, spanning many compliance areas including AML, cybersecurity, fraud, KYC, and business continuity. Because regulatory risk frameworks and requirements differ across each regulator, monitoring and reporting is complex.

Moreover, it is challenging to design and implement large-scope solutions in a nascent industry. There are few established industry best practices or clearly leading tools. Therefore, current and unique knowledge is needed to select tools and apply new forms of compliance expertise.

In addition, for this growing organization, the sheer number of transactions and complexity of compliance created cost and scale challenges.

InnReg's Solution

InnReg was hired to establish the company’s custom compliance program to meet all ongoing requirements by both state and federal regulators – including AML processes, suspicious activity monitoring, vendor management, employee compliance, license maintenance and reporting requirements. 

InnReg’s automated tools and outsourced compliance team enabled the client to effectively manage all escalations and provided experienced critical operational personnel to review suspicious transactions.

Specifically, InnReg:

• Implemented a custom compliance program
• Provided additional expert perspectives and advice
• Created ad-hoc procedures based on merchant (B2B) and customer (B2C) risk profiles 
• Created a customized algorithm for suspicious activities that is now used by the client
• Customized a proprietary dashboard to track requirements for license maintenance

Client Results

As it grew, the client built an internal team for ongoing operations. InnReg transitioned the responsibilities and knowledge so that the company could manage its custom-built technology and processes.

Specifically, InnReg:

• Collaborated with the internal team to transfer program ownership and regtech management; 
• Contributed expertise and know-how from exposure to similar situations and successfully leveraged it for the client's benefit; and 
• Enabled the client to launch a global mobile payment crypto capability, widely reported as one of the most significant crypto developments in 2021.

Project Duration

9 months

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Crypto Consulting Services

If your crypto business is facing similar challenges, do not hesitate to get in touch.

Seamless Implementation of a Compliance Program for SEC-regulated Company

Objective: Implement a Compliance Program for an early-stage RIA regulated by the SEC.

Background/Opportunity

Our client is a prominent early-stage company offering an online marketplace that leverages advanced technology solutions to allow individual investors to identify sources of investment advice quickly and seamlessly. In particular, their platform allows users to filter financial advisors by customizable criteria based on their degree of user relevance, such as geographic location, services provided, or credentials.

Challenges

The company’s business strategy is to fill a market niche by building a technology-driven solution to fulfill consumer expectations in a highly regulated industry.

Furthermore, it is challenging to design and implement targeted compliance solutions for an innovative offering with limited precedent regulatory guidance or established industry best practices. Therefore, current and specialized knowledge is needed to select tools and apply new forms of compliance expertise.

InnReg's Solution

InnReg assisted Finsie with the SEC registration process and helped regulators understand Finsie's offering because it was new and innovative. Specifically, InnReg helped Finsie design the offering in a way that satisfied the regulatory requirements while, at the same time, enabling Finsie to develop something unique.

In addition, InnReg was hired to establish the company’s custom compliance program to meet all ongoing requirements by both state and federal regulators – including AML processes, information security, vendor management, employee compliance, registration maintenance, and reporting requirements.

Specifically, InnReg:

• Implemented a custom compliance program leveraging automated tools and outsourced compliance solutions;
• Provided additional expert perspectives and advice;
• Developed a platform workflow process to ensure compliance with regulatory requirements (e.g., client disclosures, processing of advisory agreements, use of data, etc.);
• Customized a proprietary compliance dashboard to track tasks and reviews (e.g., advertising and social media reviews, vendor management, continuing education, etc.);
• Assisted in the overall SEC registration process.

Client Results

Successful launch of an innovative digital marketplace where financial advisors and investors can work together, while abiding by the letter and spirit of new regulations and guidance pertaining to advisor marketing and digital advice.

The partnership with InnReg allowed Finsie to build an effective and scalable compliance program that mitigates regulatory risk and builds the necessary infrastructure to promote the business’ fast growth and scalability.

Project Duration

Ongoing since December 2020.

Testimonial

"Unlike some generalist compliance organizations with a corporate hierarchy and an army of entry-level analysts, InnReg is a network and a team of deep experts with many different specializations. InnReg consultants mesh organically into the business, and we have a lot of confidence in folding InnReg’s approval into our process.
InnReg provided support in documentation tracking as they have a library of samples most suitable for startups.

In a nutshell, we loved InnReg’s ability to match the right professional with the right business and that their solutions are targeted at startups, are customized to our niche and vision vs. being generic, thereby restricting innovation."
Founder and CEO

Contact Us

Fintech Consulting Services

InnReg is a team of licensed compliance experts who minimize regulatory risk while helping you launch your creative fintech startups. We solve complex regulatory scenarios and build sustainable operational and compliance platforms to support groundbreaking technologies and business models. If your business is facing similar challenges, do not hesitate to get in touch.

Seamless Implementation of a Compliance Program for an Early Stage, Cross-border Neobank

You can read our International Neobank Launch Case Study in Spanish!

¡Usted puede leer nuestro estudio de caso sobre lanzamiento de nuestro cliente neobanco transnacional en español!

Objective: Implement a fully outsourced Compliance Program for an early-stage, cross-border neobank. 

Background/Opportunity

Our Client is a prominent, early-stage company offering a cloud and mobile-based financial platform supporting a wide range of products and services across multiple jurisdictions and geographies. Since its founding in 2018, our Client has formed over 20 strategic partnerships with industry-leading banks, lending operators, and payment processors.

Our Client’s core business model consists of international money remittances through a prepaid/debit card-based program made available to both U.S. and international clients through a bank sponsorship with a U.S.-based, community-focused banking institution.

The program’s offering, live since February 2023, leverages reloadable prepaid cards, a cardless wallet associated with a bank account and native mobile applications. Services made available to clients include saving and deposit accounts, withdrawals, transfers, P2P payments, and international remittances based on a multi-channel digital strategy.

As a purpose-driven, Hispanic-owned and operated financial services company, the Client’s key differentiator is to improve the financial health of the Hispanic community in the U.S. and Latin America (including México, Guatemala, El Salvador, Honduras, Nicaragua, Dominican Republic, Haití, Perú, Ecuador, Bolivia, and Chile) through fair and inclusive financial services.

Challenges

Due to the financial nature of the business combined with technology, the Client is exposed to several risks across various compliance areas, including AML, cybersecurity, fraud, KYC, and business continuity.

In particular, the company is exposed to a number of critical AML risks, including the following:

• Anonymity: prepaid cards can be purchased without the same customer due diligence identification and verification measures associated with other payment cards.
• Global reach: many open prepaid cards can be used on global payment networks, possibly enabling money laundering across borders by facilitating funding in one country and cash withdrawals in another.
• Portability and transport: prepaid cards physically resemble standard credit cards and can be transported discreetly in many environments as an alternative to cash.
• Funding methods: the origin of funds loaded onto prepaid cards and their transaction history can be obscured.
• Service complexity: the large number of service providers involved in the prepaid card industry makes AML/CFT efforts administratively challenging.

Moreover, the Client operates in a nascent industry with related challenges in designing and implementing large-scope solutions. There are few established industry best practices or leading tools; therefore, current and unique knowledge is needed to select tools and apply new forms of compliance expertise.

InnReg's Solution

InnReg LLC was hired as an outsourced provider to establish the company’s custom compliance program to meet all requirements imposed by its bank partner.

Specifically, the scope of InnReg’s services includes the following compliance and operational expertise, including policy development and regulatory advice across a broad spectrum of compliance areas:

• BSA
• Consumer disclosures
• Information security
• Marketing and communications
• Personnel, reporting
• Suspicious activity monitoring and escalation, and
• Vendor management
• Project management and governance
• Independent testing and auditing
• Gap analysis to update policies to the recent rules and regulations
• Centralized communication
• Executive reporting

Overall, InnReg’s role encompasses business planning, compliance advisory, and project management services, while serving as a centralized point of contact with the Client’s leadership team to maintain alignment with the Client’s strategic goals. 

Why InnReg?

InnReg LLC has supported the launch and growth of disruptive fintech companies since 2013, and developed expertise in understanding its clients’ business requirements while mitigating risks and managing the impact of regulations.

Our competitive advantage and unique experience enable us to manage a project on behalf of a client operating in a gray and rapidly evolving area for both regulators and businesses.

In addition, InnReg is a leading provider of outsourced compliance services for fintech startups, including through the appointment of CCOs who are fully responsible for regulatory compliance of your fintech. We help our clients identify and manage key compliance risks and meet all  their regulatory requirements with increased efficiency and cost savings, freeing them to focus on their core business goals.

Client Results

The partnership with InnReg has allowed the Client to build an effective and scalable compliance program that mitigates regulatory risk.

It has produced the necessary infrastructure to promote the Client’s goal to generate revenues through value-driven fees, interchange, and third-party commissions.

Specifically, the Client:

• Developed a BSA/AML/OFAC Enterprise Risk Assessment program designed to mitigate key compliance risks associated with the business’s geographies, customers, products and services, and the nature of its banking operations
• Implemented and maintained a system of internal controls (i.e., complaint management, suspicious activity, and transaction monitoring)
• Assigned designated individuals responsible for monitoring day-to-day compliance
• The Company has developed and maintains an ongoing Training Program for all employees, designed to reinforce and assist in the implementation of written policies, procedures and processes 
  risk. 

Client Testimonial

“Having a Compliance Officer backed by a team with the right knowledge and a compliance practice with the appropriate artifacts and methodology is a huge help. InnReg has enabled us to operate with confidence and focus on execution. We initially hired InnReg to provide temporary support, but they have become an intrinsic part of our business.”
Client’s Founder and CEO

Project Duration

In progress and ongoing since February 2022

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InnReg Neobank Compliance Services

• InnReg’s core services for neobanks include, but are not limited to:
• Compliance policies development and management
• Compliance program setup and launch
• Federal and state regulatory compliance facilitation (licensing, filings, exams and audits, consumer complaints, and regulator responses)
• Fully and partially outsourced compliance leadership, management, and staffing
• Regulatory change monitoring  
• Marketing, advertising, and content compliance (UDAAP, social media, endorsements)
• Employee onboarding (including background checks) and training 
• Risk assessment and quality control
• Electronic books and records management
• Information security and data protection procedures
• Technology and vendor review
• Suspicious activity detection, monitoring, and reporting
• Mid- and back-office operations

InnReg Outsourced CCO Services

InnReg’s outsourced CCO services include but are not limited to:  

• AML and fraud prevention
• Know Your Customer/Customer Due Diligence
• Information security
• Vendor management
• Regulatory monitoring
• Suspicious activity monitoring
• Third-party onboarding and due diligence
• Marketing and advertising compliance
• Personnel training and monitoring
• Day-to-day compliance management  
• Organizational and workflow design

About InnReg

InnReg is a team of licensed compliance experts who minimize regulatory risk while helping you launch your creative fintech startups. We solve complex regulatory scenarios and build sustainable operational and compliance platforms to support groundbreaking technologies and business models. If your business is facing similar challenges, do not hesitate to get in touch.

Fintech Consulting Services

Fintech Compliance Outsourcing and CCO Services