Compliance service for fintech startups

Summary of relevant findings (all information needed to create the blog + newsletter): - Core federal obligations - FinCEN / BSA / MSB: Many fintech activities (money transmission, prepaid access, check cashing, foreign exchange, virtual currency transmission in certain capacities) can make a startup a Money Services Business (MSB).

If so, register with FinCEN and implement a BSA/AML program (written policies, CIP/CIP, suspicious activity reporting (SARs), recordkeeping, independent testing, training). (See FinCEN citation.) - Other federal regulators to consider: CFPB (consumer protection/UDAAP, disclosures), FTC (privacy/deception), SEC or CFTC (securities or derivatives activity), OCC/FDIC/Fed concerns via bank partners. (See Stripe and InnReg citations.) - State licensing and variability - Most states regulate money transmission; requirements, definitions, fees, bond/capital, timelines and exemptions vary widely.

Operating nationally often means complying with 50+ state rules. Common practical approaches: (a) narrow initial launch states, (b) partner with licensed banks/processors (BaaS), or (c) pursue multi-state licensing with experienced counsel/agent. (See InnReg, MindK citations.) - New York: particularly strict — virtual currency businesses may need NYDFS licensing (BitLicense / virtual currency business license) and are subject to intense supervisory standards.

NYDFS also enforces robust cybersecurity rules (23 NYCRR 500) that apply to many financial services firms and impose program, CISO, MFA, encryption, incident response, testing, audit-trail and annual certification requirements. (See NYDFS 23 NYCRR 500 citation.) - California: strong consumer privacy regime under CCPA as amended by CPRA (effective Jan 1, 2023) — rights to correct, limit sharing of sensitive personal information, plus obligations to respond to consumer requests and provide privacy notices; fintechs with qualifying thresholds must comply. (See CA OAG citation.) - Other states (TX, FL, WA, MA, NJ): state requirements vary but commonly include money transmitter licensing or MSB-type regulation, state data-breach and data-security rules, and state consumer protection laws.

Given the variability, startups should consult each relevant state financial regulatory office and plan for licensing timelines and bonding costs. (High-level support and context in InnReg / MindK citations.) - Crypto-specific - Virtual currency activities raise overlapping obligations: FinCEN/MSB registration and AML obligations; potential state money transmission/virtual currency licensing (NY BitLicense is a leading example); and possible SEC/CFTC implications depending on token characteristics.

Enforcement and regulatory expectations tightened from 2020–2026; startups must treat AML/KYC and custody/asset safekeeping seriously. (See InnReg, MindK, ICLG citations.) - Cybersecurity & data privacy - NYDFS 23 NYCRR 500: requires risk-based cybersecurity program, CISO, MFA, encryption, incident response, vendor third-party controls, penetration testing, vulnerability assessments, record retention, and annual certification; exemptions are narrow and small firms may qualify only in limited circumstances. (See NYDFS 23 NYCRR 500 citation.) - California CCPA/CPRA: grants consumer rights (access, deletion, correction, limit use/disclosure of sensitive personal information) and imposes operational obligations on businesses meeting thresholds; fintechs must implement privacy notices, consumer request processes, vendor contracts, and controls for sensitive financial data. (See CA OAG citation.) - GLBA: financial institutions and some fintechs handling financial data will need GLBA-aligned safeguards and privacy notices (refer to federal guidance in other resources cited). - Practical compliance program checklist (minimum recommended for fintech startups launching in the US)

Summary of relevant findings (all information needed to create the blog + newsletter):

- Most states regulate money transmission; requirements, definitions, fees, bond/capital, timelines and exemptions vary widely. Operating nationally often means complying with 50+ state rules.

Common practical approaches: (a) narrow initial launch states, (b) partner with licensed banks/processors (BaaS), or (c) pursue multi-state licensing with experienced counsel/agent. (See InnReg, MindK citations.) - New York: particularly strict — virtual currency businesses may need NYDFS licensing (BitLicense / virtual currency business license) and are subject to intense supervisory standards.

NYDFS also enforces robust cybersecurity rules (23 NYCRR 500) that apply to many financial services firms and impose program, CISO, MFA, encryption, incident response, testing, audit-trail and annual certification requirements. (See NYDFS 23 NYCRR 500 citation.) - California: strong consumer privacy regime under CCPA as amended by CPRA (effective Jan 1, 2023) — rights to correct, limit sharing of sensitive personal information, plus obligations to respond to consumer requests and provide privacy notices; fintechs with qualifying thresholds must comply. (See CA OAG citation.)

- Virtual currency activities raise overlapping obligations: FinCEN/MSB registration and AML obligations; potential state money transmission/virtual currency licensing (NY BitLicense is a leading example); and possible SEC/CFTC implications depending on token characteristics.

Enforcement and regulatory expectations tightened from 2020–2026; startups must treat AML/KYC and custody/asset safekeeping seriously. (See InnReg, MindK, ICLG citations.)

- NYDFS 23 NYCRR 500: requires risk-based cybersecurity program, CISO, MFA, encryption, incident response, vendor third-party controls, penetration testing, vulnerability assessments, record retention, and annual certification; exemptions are narrow and small firms may qualify only in limited circumstances. (See NYDFS 23 NYCRR 500 citation.)

• Core federal obligations
• FinCEN / BSA / MSB: Many fintech activities (money transmission, prepaid access, check cashing, foreign exchange, virtual currency transmission in certain capacities) can make a startup a Money Services Business (MSB). If so, register with FinCEN and implement a BSA/AML program (written policies, CIP/CIP, suspicious activity reporting (SARs), recordkeeping, independent testing, training). (See FinCEN citation.)
• Other federal regulators to consider: CFPB (consumer protection/UDAAP, disclosures), FTC (privacy/deception), SEC or CFTC (securities or derivatives activity), OCC/FDIC/Fed concerns via bank partners. (See Stripe and InnReg citations.)
• State licensing and variability
• Other states (TX, FL, WA, MA, NJ): state requirements vary but commonly include money transmitter licensing or MSB-type regulation, state data-breach and data-security rules, and state consumer protection laws. Given the variability, startups should consult each relevant state financial regulatory office and plan for licensing timelines and bonding costs. (High-level support and context in InnReg / MindK citations.)
• Crypto-specific
• Cybersecurity & data privacy
• California CCPA/CPRA: grants consumer rights (access, deletion, correction, limit use/disclosure of sensitive personal information) and imposes operational obligations on businesses meeting thresholds; fintechs must implement privacy notices, consumer request processes, vendor contracts, and controls for sensitive financial data. (See CA OAG citation.)
• GLBA: financial institutions and some fintechs handling financial data will need GLBA-aligned safeguards and privacy notices (refer to federal guidance in other resources cited).
• Practical compliance program checklist (minimum recommended for fintech startups launching in the US)

Determine regulatory category

are you an MSB, money transmitter, lender, broker-dealer, investment adviser, payments processor, or crypto custodian? (Start with FinCEN and relevant state definitions.)

Register where required (FinCEN MSB registration) and apply for state money transmitter licenses as necessary; assess BitLicense/NY requirements if serving NY residents.

Build a written AML/BSA program

risk assessment, CIP/CIP, KYC tiers, transaction monitoring, SAR/CTR workflows, recordkeeping, independent testing, AML officer, training.

Consumer protections & disclosures

design product disclosures to avoid UDAAP issues; implement clear pricing and terms.

Data privacy & security

implement privacy notices, consumer request processes, data minimization, encryption, access controls, and incident response; comply with GLBA if applicable and state privacy laws (e.g., CPRA).

Cybersecurity controls

adopt risk-based program, CISO role (or outsourced), MFA, vulnerability scanning, pen testing, vendor security reviews, logging and 3–5 year retention for audit trails (NYDFS style), and annual certifications where required. 7. Bank/partner due diligence: expect deep due diligence from bank partners; document controls, SOC2, and compliance monitoring.

Licensing operations

budgeting for licensing fees, bond/capital, legal counsel, state exam preparedness and multi-state maintenance.

Ongoing compliance

monitoring regulatory changes, audit/controls testing, employee training, customer complaint handling, and enforcement readiness. - Enforcement & risk - Enforcement trends through 2020–2026 show heavy focus on AML failures, consumer protection/UDAAP, privacy breaches, and crypto-related enforcement. Fines and remediation can be material; regulatory relationships and documented remediation plans matter. (See InnReg / ICLG / InnReg checklist citations.) - Practical market resources - Primary regulator pages (FinCEN, NYDFS, state AGs) for registrations and rule text. - Industry guides and firm checklists (Stripe guide, InnReg, MindK) for practitioner-level next steps and product-specific nuance. - Compliance-as-a-Service vendors and RegTech tools: use to automate CIP/KYC, transaction-monitoring, sanctions screening, and privacy workflows; combine with experienced counsel for licensing.