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Why Hire a Fractional Compliance Officer

Updated: May 13

Heritage Risk and AML Services is seeing an increase in CEOs reaching out for fractional compliance officer services. Our clients have many reasons to retain the service, such as they:

· Run an agile management structure and do not need full-time support from an internal Chief Compliance Officer (CCO),

· Need time to properly evaluate their candidate pool,

· Are supporting their business by speeding up the regulatory approval process,

· Need time to develop an internal resource on a new business element.


With the explosion of online money transmitters, payment processors, crypto exchangers, Non-Fungible Token providers, cannabis, and traditional banking, everyone is looking for a CCO to either develop or lead their compliance programs, and there are just not enough qualified individuals to fill all the open spots. In many cases, our clients use our fractional compliance officer services.


What is a fractional compliance officer?

It’s not a commonly used term, but you get the picture if you’ve ever heard of or used an “interim” CFO, CEO, or CIO. A financial services fractional compliance officer usually has 15+ years of experience in the industry. They have served as a BSA/AML Officer or Chief Compliance Officer for several years. Many love what they do and want to enable new companies to compete in highly regulated markets because that is where the exciting work is.


What is a “fractional basis”?

Think of fractional basis as full-time use of a compliance expert without the full-time payroll. Our fractional compliance officer service is usually utilized for 20 – 40 hours a month. In that time, the clients expect us to enable their internal compliance or operations analysts to complete the work. This might include:

· Developing policies and procedures,

· Working with your procurement team to select third-party vendors,

· Developing internal controls,

· Performing risk assessments,

· Reporting to the board on the status of compliance in the company,

· Managing audits and third party requests,

· Liaising with regulators during an exam or

· Several other tasks that all start-ups must face but don’t have the resources to hire a qualified CCO full time.

Our clients mainly focus on these four values when hiring a fractional compliance officer.


Four Values To Consider When Hiring A Fractional Compliance Officer


#1) Cost-Effective

A fractional compliance officer is a cost-effective way to obtain your expertise.

Fractional compliance officers can give your team the insight of an industry veteran for the cost of an entry-level employee. This reduces the cost of activities like obtaining state licenses or opening bank accounts. Even more importantly, the service reduces the risk that your business is found noncompliant, which can cause fines, stall your business plan, or include criminal convictions.

Further, our fractional compliance officer services can train your staff to enhance their capabilities or assist in the hiring / recruiting process when you are ready for a full-time CCO. Our goal is to get our clients the most effective outcome possible.

Given 20 – 40 hours a month, fractional compliance officers can maintain your banking partner needs, prepare the company for a regulatory examination, write licensing documentation, and lower the friction that compliance is putting on the customer.


#2) Special Projects

Sometimes, our clients have a one-time need for specific compliance skills or knowledge. They need a temporary solution that can free up time so their executive team can focus on building the business. Regulations can feel like they come out of nowhere; create an ID Theft Red Flag program to keep your bank account or run an internal audit to assure that your KYC program isn’t causing more friction than expected. When most businesses do the numbers, they find that hiring a trusted advisor for one to three months to guide the company’s resources to success is more cost-effective than a consulting engagement. Many also consider the opportunity cost of a slower or less robust rollout by internal staff with limited or no experience in a new area.

Our clients use our qualified fractional compliance officers to manage projects to efficiently use existing staff and train them on the skills and techniques needed in the future. In essence, use the fractional compliance officer to learn to fish rather than buy the fish from consultants.


­­­­­­­­­­#3) Stability

When a CCO leaves, it can create significant instability because it is a required role for licensed financial institutions. Most of our clients do not have the luxury of bench strength, where the next most senior person on the team can step up into the role. However, regulators expect the company to have a clear continuity plan and appoint a compliance officer that meets specific qualifications and experience. Many start-up firms and even established companies do not always have the depth of experienced staff to quickly fill in for a departing CCO.

Bringing on a fractional (or interim) compliance officer can reduce this instability, restore staff confidence, and increase the success of in-flight audits/tasks. Many clients realize it can take 3-6 months to conduct the proper due diligence and hire a new CCO. The business's AML/sanctions/privacy/regulatory compliance risk does not suddenly leave because the CCO is gone. In addition, qualified fractional compliance officers are valuable in recruiting and interviewing a new full-time chief compliance officer. A qualified fractional compliance understanding of the industry, the company, and their extensive network can significantly reduce the time to onboard a new CCO and increase the odds that they will be a strong fit for your organization and culture.


#4) Subject Matter Expert / Staff Development

CCOs all have different backgrounds, qualifications, and experiences. Sometimes, you have a one-time need for specific compliance skills or knowledge. Bringing in a fractional compliance officer with the subject matter expertise needed can provide robust results.

Compliance training is an area many of our clients use the fractional compliance officer service for short engagement but feel it pays long-term dividends. As a foundational element of risk-based compliance, all staff must have robust compliance training. While off-the-shelf training by a third-party provider can work, most companies benefit from in-depth training on the best practices that address their higher-risk issues—bringing in a qualified fractional compliance officer, someone who has “been there and done that” and can personalize compliance training to your staff by giving real-world examples. Our clients know that their compliance functions want the business to succeed; giving them access to a qualified fractional compliance officer allows them to find the answers that best serve the business while maintaining compliance.


Heritage Risk & AML Services: FRACTIONAL Compliance Officer SUPPORT AND MORE

As a CEO in a highly regulated market, you understand the need for compliance to support the business. It may not be as obvious that there are solutions between a full-time CCO and nothing. Heritage Risk & AML Services specializes in providing qualified fractional compliance officer support and assisting organizations in overcoming current challenges.


Contact us at:

Heritage Risk and AML Services

chris.gunias@heritageaml.com

303-725-5900


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