Launching a Fintech startup is a challenging endeavor. In a competitive landscape, startups must create a secure, scalable, and user-friendly platform, secure funding, and attract and retain customers. However, once these hurdles are overcome, founders tend to overlook operational matters like compliance governance until it is too late. Establishing a strong compliance culture is crucial for adhering to regulatory standards and maintaining trust with customers and stakeholders.
In the Fintech space, lack of governance can be a critical factor in regulatory actions, although such cases may not be as widely publicized as those involving traditional financial institutions. Here are some examples where governance issues within Fintech organizations have contributed to costly enforcement actions:
- In 2015, a digital currency company was fined $700,000 by the Financial Crimes Enforcement Network (FinCEN) for allegedly failing to comply with anti-money laundering laws. This enforcement action emphasized the necessity for Fintech companies dealing with digital currencies to have solid compliance programs.
- In 2018, a lending platform paid an $18 million settlement with the Federal Trade Commission (FTC) for allegedly misleading consumers about hidden fees and unauthorized charges. The case highlighted governance and transparency issues within the Fintech company, underscoring the importance of clear and honest communication with consumers.
- In 2020, a German payment processor scandal served as a significant example of governance failure in the Fintech sector. The company collapsed after it was revealed that €1.9 billion was missing from its accounts, exposing severe deficiencies in corporate governance, including inadequate oversight by the board and failures in internal controls.
- In 2021, a trading platform was fined $70 million by FINRA due to alleged governance failures. The regulatory body cited systemic supervisory lapses and inadequate oversight mechanisms that failed to protect customers, especially during platform outages and high-volatility trading periods. These issues highlighted the need for robust governance structures to manage operational risks effectively.
- In 2025, a coordinated enforcement action by 48 state financial regulators imposed an $80 million fine on a mobile payment service for alleged violations of the Bank Secrecy Act (BSA) and anti-money laundering (AML) laws. The service was found non-compliant with certain regulatory requirements, potentially enabling illicit activities such as money laundering. These examples illustrate the increasing regulatory focus on Fintech companies and the importance of strong governance and compliance practices in the Fintech sector.
Challenges in Compliance for Fintech Startups
As Fintech startups revolutionize the financial landscape, they face the challenge of balancing rapid growth with complex regulatory compliance, often lacking the necessary expertise and risking strategic misalignment. The drive to secure funding can overshadow the importance of embedding compliance into business strategies, potentially leading to significant long-term repercussions. To thrive amid evolving legal landscapes, these startups must integrate compliance into their innovation processes, ensuring it serves as a competitive advantage while maintaining trust and avoiding legal pitfalls.
- Balancing Growth, Funding, and Compliance: Founders often struggle to balance rapid growth with compliance, as the pressure to deliver quick results can lead to overlooking or underfunding compliance, which can cause strategic misalignment if not integrated from the start. While securing funding is crucial, prioritizing short-term growth metrics over compliance strategies can result in significant long-term repercussions. By embedding compliance into their operational framework, startups can mitigate risks and build trust with customers, investors, and partners, which demonstrates a commitment to ethical practices. This approach not only enhances investor confidence but also supports sustainable growth and provides a competitive advantage. Ultimately, integrating compliance into growth strategies from the outset is essential for long-term success.
- Lack of Expertise in Regulatory Compliance: Many founders come from technology or finance backgrounds and may lack the requisite regulatory expertise needed to effectively manage compliance within their organization. This can lead to underestimating the importance and complexity of regulatory requirements and result in delayed compliance measures until regulatory scrutiny or penalties arise. To mitigate these risks, founders should acknowledge the gaps in their compliance expertise and seek necessary qualified staff, resources, and support.
- Innovation-First Mindset: Fintech startups thrive on innovation, often focusing on cutting-edge technologies that differentiate them in the market. This mindset can result in compliance being viewed as a secondary concern or as an impediment to progress. To successfully balance innovation with compliance, Fintech startups must understand that such advancements will not be sustainable without integrating regulatory compliance into the innovation processes.
- Complex and Evolving Legal Landscape: The legal landscape for Fintech is complex and dynamic, where new regulations and updates or amendments to existing regulations can occur frequently. Founders who wear many hats may struggle to keep up with these changes while managing business operations. This can be especially challenging when operating across multiple jurisdictions where different regulatory requirements apply. Fintech founders need to ensure that proactive and strategic processes and controls are in place to ensure the organization is capable of identifying applicable regulatory changes and implementing adequate plans to address those changes in a timely, effective, and sustainable manner.
Building a Culture of Compliance
Commitment from senior management is crucial in cultivating a culture of compliance within any organization, especially in highly regulated industries like Fintech. The tone set by leadership significantly influences the organization's approach to compliance and its integration into everyday business operations. In order to build a strong compliance culture, senior management should lead by example and demonstrate a strong commitment to compliance by allocating resources and prioritizing compliance initiatives. Clear communication channels must also be established to ensure all employees understand the importance of compliance within the context of their roles within the organization and are held accountable for upholding the company’s compliance standards. This commitment not only mitigates risks but can also enhance the organization's reputation and trustworthiness, ultimately contributing to its long-term success.
Resource Allocation and Prioritization: One of the most tangible ways senior management can demonstrate a commitment to compliance is by providing the means to support and implement compliance initiatives. This includes investing budget funds to tools and technologies, as well as dedicating human resources to build a strong and qualified compliance team. By prioritizing these allocations, management ensures that compliance is not an afterthought but a fundamental component of the business strategy. Moreover, this investment signals to the entire organization that compliance is significant and essential for achieving long-term success and sustainability.
Leadership by Example: Senior management should set the standard by visibly engaging in compliance activities and adhering to the same compliance expectations of all employees. When leadership models these behaviors, it encourages everyone to take compliance seriously and reinforces the message that compliance is a shared responsibility and not just the domain of the compliance department.
Clear Communication Channels: Effective communication is critical in ensuring that all employees grasp the importance of compliance and understand their specific roles in maintaining it. Senior management should establish clear and open communication channels to effectively disseminate compliance-related information. This can be achieved through various methods, such as updates on regulatory changes via newsletters or intranet postings, training sessions tailored to different departments, and interactive forums or town hall meetings for discussing compliance challenges and solutions. Additionally, creating a centralized compliance portal where employees can access resources, FAQs, and submit compliance questions can enhance accessibility and engagement. By maintaining transparency and openness, management can foster an environment where employees feel informed, supported, and empowered to uphold compliance standards confidently.
Training and Education Programs: To support compliance initiatives, senior management should implement comprehensive training and education programs tailored to address all relevant compliance requirements affecting the business based on its products, services, and customers served, and equip employees with the knowledge and skills necessary to meet those requirements. Training programs should also be designed to be job-specific and provide the necessary information for all employees to understand how compliance impacts their specific functions. Providing regular training also helps to keep compliance top-of-mind throughout the organization and ensures that employees are up-to-date with the latest regulatory developments.
Encouraging a Culture of Accountability: Senior management should promote a culture where accountability is valued, and employees are encouraged to speak up about compliance concerns without fear of retaliation. This can be achieved by establishing clear reporting mechanisms and whistleblower protections that allow employees to report potential compliance violations safely and confidentially. By fostering a supportive environment, management can ensure that compliance issues are identified and addressed promptly, which in turn can minimize risks to the organization.
The Strategic Edge of Compliance in Fintech Growth
Establishing a strong culture of compliance is not just necessary for regulatory adherence but also serves as a strategic advantage for Fintech startups. By prioritizing compliance and establishing a strong compliance culture, Fintechs can achieve sustainable growth and maintain stakeholder trust amid complex and evolving regulations. A commitment from senior management to integrate compliance into the core business strategy signals dedication to ethical practices and can mitigate risks like fines and reputational damage. Moreover, this focus can enhance investor confidence and foster trust with customers and partners, which in turn offers a competitive edge. Ultimately, startups that embrace compliance are better positioned to adapt to new regulations and market demands, supporting long-term success and innovation in the Fintech landscape.
The Ankura Risk Advisory team specializes in helping financial institutions enhance their compliance frameworks and risk management programs. Our experts provide customized risk assessments, regulatory compliance strategies, and training programs to identify vulnerabilities and strengthen defenses against financial crime. For more information, please email Omar at omar.magana@ankura.com.
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© Copyright 2025. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
