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