Objective: Prepare a new alternative lender with a strong compliance foundation and no regulatory issues from Day One.
“Francesco Matteini and his team at InnReg are doing an outstanding job as our compliance gurus. It is like having an in-house regulatory department. They came in, listened, understood our needs, and built our compliance systems from the ground up. They make it easy for me to focus on launching my company and building my customer base because I know the regulatory issues are in safe hands. They are creative in their problem-solving approach. Their work is on-time and on-budget. I trust their input completely, and I highly recommend InnReg to any fintech company that wants outsourced compliance for all or part of their compliance function.”
-- Client CEO
Compliance and Cybersecurity Program and Support for Crypto and Blockchain Assets Lender and Custodian
“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
Fractional Shares Trading
Objective: Launch a revolutionary new equity stock trading platform for retail investors.
“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
Equities Gifting Solution
Objective: Launch a new service that makes it easy to give stocks and index funds as gifts.
Objective: Launch a micro-investing app designed to increase portfolio growth potential compared to conventional savings and investment accounts.
“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
Objective: To support a non-U.S. blockchain innovator through complex operational planning to apply and obtain state and federal money transmitter licenses.
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.
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 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:
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.
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:
Interested in learning more? We have developed a detailed guide for crypto fintech founders and leaders.