How do you work in fintech compliance?

Navigating the regulatory environment of financial technology requires a specific blend of technical knowledge, operational rigor, and proactive strategy. For anyone working in fintech compliance, the day-to-day task involves much more than simply reacting to new rules; it demands embedding protective measures into the very DNA of the business while ensuring the pace of innovation remains uninterrupted. ^[7] The stakes are incredibly high, as failure can result in severe monetary penalties, loss of licenses, and irreparable reputational damage. ^[2]

# Regulatory Groundwork

Understanding how to work in this field begins with mastering the governing laws and regulations specific to the technology and services offered. ^[9] Fintech is broad, spanning payments, lending, digital assets, and wealth management, and each vertical is governed by different bodies and requirements. ^[10] A core component of work in US fintech compliance, for instance, often centers on Anti-Money Laundering (AML) and Know Your Customer (KYC) obligations. ^[3] These are non-negotiable starting points for most companies handling client funds or sensitive data. ^[3]

The complexity arises because fintech companies frequently operate across state lines or internationally, meaning they must adhere to a patchwork of overlapping regulations. ^[10] For example, a company might need to comply with state money transmitter licenses, federal Bank Secrecy Act (BSA) rules, and various consumer protection statutes simultaneously. ^[3] Furthermore, compliance professionals must keep abreast of evolving technology, such as how decentralized finance (DeFi) or embedded finance models shift the regulatory focus. ^[2] It is essential to know not just what the rule is, but why it exists—usually to protect the financial system from illicit activity or protect the consumer from unfair practices. ^[3]

# Mapping the Requirements

The initial phase of any compliance role involves mapping out the necessary requirements. This is often visualized as defining the scope of necessary actions before execution begins. ^[4] A strong foundational approach involves segmenting compliance needs into distinct categories. While regulations vary, common buckets include:

• Consumer Protection: Ensuring fair lending, clear disclosures, and data privacy. ^[3]
• Financial Crime: Implementing effective KYC/AML programs, sanctions screening, and suspicious activity reporting (SAR) processes. ^[3]
• Licensing and Chartering: Determining which permits are required based on the specific services being offered, which can be a multi-state or federal endeavor. ^[3]
• Data Security and Privacy: Adhering to standards like SOC 2 or other data handling mandates relevant to sensitive financial information. ^[6]

When dealing with emerging technologies, the compliance professional must often look at existing regulations and interpret how they apply to novel product features, which requires deep analytical skill beyond simple checklist adherence. ^[7]

# Building Compliance

Working in fintech compliance means constructing a functioning system designed to manage risk continuously, not just passing an initial audit. ^[6] One helpful way to visualize this construction process is through a sequential roadmap, although in reality, many steps run concurrently. ^[4] A suggested roadmap involves several key phases:

1. Risk Assessment: The foundation of the program is a thorough assessment identifying where the company is most vulnerable to regulatory breaches, fraud, or security incidents. ^[4] This assessment dictates the priority of subsequent controls.
2. Policy Development: Documenting the how—creating written policies and procedures that clearly articulate the company’s stance and operational steps for managing the identified risks. ^[4]
3. Control Implementation: Putting the policies into action, which includes deploying necessary software (like transaction monitoring tools) and establishing internal workflows. ^[4]
4. Training and Communication: Ensuring every employee understands their role in maintaining compliance, which needs to be ongoing, not a one-time event. ^[1]
5. Testing and Monitoring: Regularly checking that the implemented controls are operating as intended and detecting potential failures early. ^[6]

A crucial area for new compliance functions is establishing an audit trail. Regulators expect to see evidence that decisions were made based on documented risk appetite and that processes were followed diligently. ^[9] A practical tip for setting up initial documentation is to treat every significant business decision—like launching a new payment rail or integrating a third-party vendor—as a mini-risk assessment exercise, documenting the conclusion and the mitigating controls before the feature goes live. ^[1] This prevents the accumulation of undocumented risks that become nightmares during later audits.

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# Monitoring Cycles

Compliance is not a project with an end date; it is a permanent operational state. ^[6] This ongoing nature defines the daily work for many in the field. If the building phase establishes the structure, the monitoring phase ensures the foundation remains sound under stress. ^[6]

A major part of this work involves testing. While a high-level audit checks the design of a control, ongoing testing verifies its operation. ^[1] For instance, in an AML program, this means periodically running a batch of high-risk customer profiles through the screening system manually to ensure the automated flags were triggered correctly and appropriately actioned. ^[1] Thomson Reuters suggests that proactive monitoring systems that look for deviations from expected behavior are far more effective than reactive checks. ^[1]

A common pitfall in fast-growing fintechs is scaling the monitoring capability slower than the business scales its customer base or transaction volume. If a company doubles its user base in six months, but the compliance team's capacity for manual review only increases by 10%, the operational risk exposure has dramatically widened. ^[7] The compliance professional must advocate for tooling and staffing that scales ahead of growth, not merely in response to it. This often means aggressively budgeting for automated solutions early on, even if the immediate cost seems high, because the cost of a post-breach remediation is exponentially higher. ^[7]

# Culture Integration

The finest policies and most advanced software are ineffective if the company culture views compliance as a speed bump rather than a guardrail. ^[8] Working effectively in this area requires influencing the organization’s mindset. Building a culture of compliance means integrating accountability across all departments, moving away from the idea that compliance is only the compliance team’s problem. ^[8]

This cultural shift is often championed by senior leadership, but it is executed by embedding compliance thinking into daily work streams. ^[8] For example, product managers should be trained to ask, "What regulatory implications does this new API endpoint have?" during the initial design phase, rather than waiting for the compliance team to veto the design later. ^[8] The compliance team’s role shifts from being the department of "no" to being a strategic partner that helps the business achieve its goals within the established risk boundaries. ^[8]

The roles within a compliance function itself need careful definition, especially in complex arrangements like bank-fintech partnerships. ^[5] While the partnership agreement dictates which entity holds primary responsibility for specific compliance tasks—such as BSA/AML filing or customer due diligence—the fintech often manages the front-end onboarding and data flow. ^[5] Clarity here is paramount: defining who owns the data quality versus who owns the regulatory filing prevents critical steps from falling into organizational gaps. ^[5]

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# Partner Dynamics

Many modern fintechs do not operate in a regulatory vacuum; they often partner with established, chartered banks to access the banking rails and hold deposits. ^[5] Working within these partnerships introduces a unique compliance layer based on shared responsibility and regulatory oversight, often known as "Bankers to the Fintech". ^[5]

In these relationships, the partner bank is typically the primary regulated entity and holds the ultimate responsibility to regulators for the fintech’s activities. ^[5] This means the fintech compliance team must operate with extreme transparency and diligence, essentially undergoing continuous due diligence by their banking partner. ^[5] The fintech compliance function must master vendor management, ensuring that their own internal controls meet or exceed the standards demanded by the bank, which are often derived from OCC or FDIC expectations. ^[5]

A practical consideration here is establishing a clear communication channel for regulatory changes. When a new rule drops that affects both entities, an efficient process—a pre-agreed escalation matrix or dedicated joint working group—is far more valuable than an email chain attempting to interpret the change in isolation. ^[5] This collaborative approach to interpretation helps maintain operational trust, which is essential for the longevity of the partnership. ^[5]

# Continuous Improvement

The final essential element in working in fintech compliance is the commitment to continuous improvement, which marries the roadmap steps with the daily monitoring activities. ^[6] Regulators do not look for perfection; they look for evidence of a mature process designed to catch and correct errors promptly. ^[9]

A process improvement focus means regularly reviewing control effectiveness and seeking ways to gain efficiency through technology. For instance, if manual transaction reviews take up 60% of a specialist’s time, the compliance professional should be tasked with evaluating AI/ML-based anomaly detection tools to reduce that manual burden by half within the next fiscal quarter. ^[7] This forward-looking perspective differentiates a functional compliance team from a high-performing one. The aim is to move from simple adherence to genuine, data-driven risk optimization. ^[6] This involves regularly challenging legacy processes: just because a certain report was required by the founding CEO three years ago does not mean it still provides material risk insight today, and time spent generating obsolete reports is time taken away from monitoring emerging threats. ^[1]

Working in this dynamic field demands adaptability. As new regulations emerge—perhaps specific to digital asset custody or cross-border data localization—the compliance worker must quickly shift focus, assess the impact on existing controls, and deploy new procedures, all while maintaining the stability of the established financial operations. ^[2][10] It is a role defined by perpetual learning and the strategic balancing act between commercial speed and regulatory security.