Compliance Automation for Fintechs and Neobanks

Fintechs and neobanks hit a wall around 50,000 accounts. The compliance work that one person handled with spreadsheets and calendar reminders breaks down. SAR filing timelines slip. Dispute response deadlines get missed. Training records live in three different systems. The answer isn't hiring a second compliance officer - it's automating the work that doesn't require human judgment so your team can focus on the work that does.

Key Takeaways:

• Fintechs face the same regulatory obligations as banks but with 10-20x fewer compliance staff
• Automation targets fall into three categories: evidence capture, deadline enforcement, and regulatory monitoring
• BSA/AML, FCRA, and state licensing generate the highest volume of recurring compliance tasks
• The ROI case is straightforward: one missed SAR deadline costs more than a year of tooling

Why Compliance Doesn't Scale Linearly

A neobank with 10,000 accounts and one with 500,000 accounts face the same regulations. The difference is volume: more customers means more SARs to investigate, more disputes to handle, more training to track, more vendor assessments to complete. But the regulatory requirements don't simplify at scale - they compound.

Here's the math. A fintech with 200,000 accounts might generate:

One compliance officer can't handle this manually. Two can't either. The bottleneck isn't knowledge - it's throughput. Manual processes create missed deadlines, incomplete documentation, and the kind of gaps that regulators find during examinations.

Fintech compliance automation addresses throughput by removing manual steps from workflows that don't require human judgment while preserving the decision points that do.

What to Automate (and What Not To)

Not everything should be automated. The distinction matters: automate the process, keep humans on the judgment.

Automate: Evidence Capture

Every compliance activity generates evidence. Training was completed. A vendor assessment was reviewed. A SAR decision was made. In manual workflows, this evidence lives in email threads, shared drives, and people's memories. Automating evidence capture means proof is created as a byproduct of work, not reconstructed after the fact.

Specific automation targets:

• Task completion timestamps - When someone completes a compliance task, the system records who, when, and what was produced
• Approval chains - Routing documents through review and approval with recorded sign-offs
• Attestation tracking - Recording policy acknowledgments, training certifications, and periodic confirmations
• Document versioning - Tracking policy changes with before/after comparison and approval records

Automate: Deadline Enforcement

Regulatory deadlines are non-negotiable. SARs must be filed within 30 days of detection (31 CFR § 1020.320). FCRA disputes must be investigated within 30 days (15 USC § 1681s-2). CTRs are due within 15 calendar days. Missing these deadlines creates examination findings regardless of the quality of your underlying work.

Automation handles:

• Deadline calculation - From trigger event (alert generated, dispute received) to compliance deadline
• Escalation workflows - Automatic reminders at 7 days, 3 days, 1 day before deadline, with escalation to management on overdue items
• Status dashboards - Real-time view of open items, approaching deadlines, and overdue tasks
• Assignment routing - Directing new tasks to available team members based on capacity and expertise

Automate: Regulatory Monitoring

New rules, guidance updates, enforcement actions, and examination priorities change constantly. Manual monitoring - someone reading the Federal Register and agency websites - creates gaps. A single missed update can mean operating out of compliance for months before discovery.

Track regulatory changes from identification through implementation →

Keep Manual: Judgment Calls

Certain decisions require human analysis and should not be automated:

• SAR filing decisions - Whether activity is actually suspicious requires investigative judgment
• Risk rating assignments - Customer risk profiles require contextual evaluation
• Applicability assessments - Whether a new regulation affects your specific products and services
• Examination response - Responding to regulatory findings and crafting remediation plans
• Policy exceptions - Deciding when to deviate from standard procedures

The goal of automation isn't to remove humans from compliance. It's to free humans from process administration so they can spend time on the judgment calls that actually protect the institution.

BSA/AML Automation for Fintechs

BSA/AML generates the highest volume of recurring compliance work for fintechs, particularly those with payment, lending, or deposit products. The Bank Secrecy Act (31 U.S.C. § 5311 et seq.) requirements apply regardless of charter type.

Transaction monitoring is where most fintechs start automating. Rule-based alert generation is standard, but the downstream investigation workflow is where manual processes break down. Each alert requires:

1. Alert triage and assignment
2. Investigation (account review, transaction analysis, customer history)
3. SAR decision with documented rationale
4. Filing within 30 days of detection if warranted
5. Continuing monitoring and 90-day SAR updates

At 500+ alerts per month, tracking this manually in spreadsheets guarantees missed deadlines. Automated case management assigns alerts, tracks investigation progress, enforces the 30-day clock, and captures decision documentation.

CDD and beneficial ownership create ongoing obligations beyond account opening. Customer information must be updated based on risk-based triggers. Beneficial ownership changes must be captured for legal entity accounts under 31 CFR § 1010.230. Automated workflows flag accounts due for periodic review and track completion.

See how BSA/AML compliance execution works in practice →

Neobank Regulatory Requirements Beyond BSA/AML

Neobanks face a specific regulatory challenge: they often operate through bank partnerships (BaaS models) where compliance responsibilities split between the bank and the fintech. The OCC, FDIC, and state regulators have increased scrutiny of these arrangements, particularly after enforcement actions against several BaaS banks in 2023-2024.

Partner bank compliance obligations that neobanks must demonstrate:

• Consumer compliance - TILA/Reg Z disclosures, ECOA/Reg B fair lending, UDAAP risk management. Even when the partner bank holds the charter, the CFPB holds fintechs directly accountable for consumer-facing practices.
• Privacy - GLBA/Reg P privacy notices and opt-out requirements. If you control the customer interface, you own the privacy compliance.
• Marketing - UDAAP applies to marketing claims. Regulators have pursued enforcement actions against fintechs for misleading deposit insurance claims (FDIC § 328 sign and advertising requirements).
• State licensing - Money transmission licensing varies by state. Even neobanks operating through bank partners may need state licenses depending on activity type.

The compliance gap in BaaS arrangements: Your partner bank's compliance program covers the bank's obligations. It does not cover yours. When the CFPB examines the bank and finds issues with your customer-facing practices, both entities face consequences. Neobanks need their own compliance evidence, not just reliance on the bank's program.

State Licensing and Multi-State Compliance

Fintechs operating across state lines face a multiplication problem. Each state has its own:

• Licensing requirements (money transmission, lending, collection)
• Examination cycles and reporting obligations
• Specific compliance requirements beyond federal minimums
• Regulatory change timelines

A fintech with money transmission licenses in 40 states might face 40 different examination schedules, 40 different annual reporting requirements, and 40 different sets of state-specific rules.

Automation targets for multi-state compliance:

• License renewal tracking - Deadlines vary by state, some annual, some biennial
• Reporting calendar - State-specific report due dates with automated reminders
• Regulatory change monitoring - State-level updates from 50+ regulatory bodies
• Examination preparation - State-specific document packages with evidence of compliance

Building the Business Case for Compliance Automation

The ROI calculation for fintech compliance automation is straightforward when you quantify the cost of the alternative.

Cost of manual compliance at scale:

FinCEN civil money penalties for BSA violations can reach $100,000+ per violation per day for institutions. The CFPB has imposed multi-million dollar penalties on fintechs for FCRA and UDAAP violations. A single examination finding costs more in remediation than most compliance tools cost annually.

What automation actually reduces:

• Time spent chasing people for task completion: 60-80% reduction
• Exam preparation time: 70-80% reduction (from weeks to days)
• Missed regulatory deadlines: near elimination with proper escalation workflows
• Evidence reconstruction effort: eliminated (evidence captured at completion)

How Modern Fintech Compliance Teams Operate

The shift from manual to automated compliance follows a pattern. Teams that make it work focus on three capabilities:

Workflow execution - Every recurring compliance obligation becomes a workflow with assigned owners, deadlines, and evidence requirements. Policy reviews, vendor assessments, training cycles, and monitoring tasks all run on schedule without manual tracking.

Evidence capture - Proof of compliance is a byproduct of doing the work, not a separate documentation exercise. When a training module is completed, the evidence exists. When a vendor assessment is approved, the approval chain is recorded. When a policy is updated, the version history is preserved.

Exam readiness - Instead of scrambling for weeks before an examination, compliance teams maintain a continuous state of readiness. Evidence packages export on demand because the evidence was captured as work happened.

Canarie was built for this pattern. Regulatory requirements decompose into executable workflows with built-in evidence capture. Deadlines are tracked and escalated automatically. When examiners arrive, the evidence is already there.

See how fintech compliance teams stay exam-ready →

Frequently Asked Questions

How many compliance staff does a fintech typically need?

It depends on products, customer volume, and regulatory footprint. A lending fintech with 100,000+ accounts typically needs 3-5 compliance staff minimum. Automation doesn't eliminate headcount - it prevents the need to scale headcount linearly with account growth. A team of 4 with proper automation can handle what would otherwise require 8-10.

What regulations apply to fintechs that don't hold a bank charter?

Fintechs without bank charters are still subject to FCRA (if using consumer reports), ECOA/Reg B (fair lending), TCPA (marketing), state money transmission laws, state lending laws, and UDAAP under CFPB jurisdiction. The CFPB has asserted authority over fintechs through "larger participant" rules (12 CFR § 1090) and individual enforcement actions.

Do neobanks need their own compliance program if they use a BaaS partner?

Yes. Regulatory agencies - particularly the OCC, FDIC, and CFPB - have made clear that fintechs operating through bank partnerships retain compliance obligations. The FDIC's 2024 guidance on third-party relationships (FIL-29-2024) specifically addresses compliance expectations for fintech-bank partnerships.

What's the biggest compliance risk for scaling fintechs?

Deadline management. As transaction volume grows, the number of SARs, disputes, and monitoring tasks increases. Missing a single SAR filing deadline (30 days from detection under 31 CFR § 1020.320) creates an examination finding. Missing multiple deadlines creates a pattern that suggests program deficiency - a much more serious finding.

Should we build compliance automation internally or buy a platform?

Building internal tools works for simple tracking but breaks down when you need regulatory intelligence, cross-regulation workflow management, and examination-ready evidence packaging. Most fintechs that start with internal spreadsheets or Jira-based tracking migrate to purpose-built platforms within 12-18 months as complexity compounds.