The Tortoise, the Hare, and the Compliance Race

Once upon a time in a fast-growing early stage FinTech startup company, there were two very different employees: the Tortoise and the Hare. Both were true believers that the company could change the world for the better and meet customer needs better than any other company. However, their personalities and priorities often clashed, and they didn’t get along very well.

The Tortoise was a meticulous compliance officer. He was slow but steady, taking his time to assess risks and ensure every regulation was met. The Tortoise believed that a well-prepared and compliant product was the key to long-term success. However, he could be quite slow and had trouble requesting and accepting help from others in a productive manner. If the Tortoise can’t move forward more quickly while also mitigating risks and ensuring compliance, the company might miss key targets and not receive additional capital needed for the business; or, a competitor might arise and meet the market need effectively before the company gets its product to market.

The Hare, on the other hand, was a fast-paced executive. He believed in cutting corners and was often blind to risks due to haste when necessary to move forward faster. The Hare thought that speed was everything and that compliance was just hurdles to be jumped over and boxes to be ticked. He believed in selling the market what it asked for and then building out the product and guardrails after the market need had been proven and the company was receiving significant growing revenue to support further product development and compliance.

One day, the company’s Board of Directors decided to launch a new financial services product. The Tortoise and the Hare both volunteered to lead the project, each convinced that their approach was the best.

The Race Begins

The Hare darted off, skipping over the risk assessments and regulatory checks. He requested legal advice but didn’t listen carefully and didn’t seek to fully understand it before moving forward. He quickly put together a flashy product with the help of the IT staff and requested Board approval to send it off to the market with great fanfare and boastful press releases. Hare was very proud of his speed and believed his product was a reasonable first start.

Meanwhile, the Tortoise began his methodical process. He carefully assessed the potential risks, addressed every compliance step, and made sure everything was in order before moving to the next phase. He was so meticulous that it would be quite a while before he was ready to fully flesh out the new product and work with the IT team to develop it. The Tortoise didn’t engage with the Marketing team yet because there was so much remaining to accomplish before the product could be fully and accurately defined and its phase 1 beta test features fully laid out. With hard work, a bit of luck, and significant additional outside investment, the beta product would be ready in three or four more quarters.

Clearly, neither the approach of the Tortoise nor of the Hare was going to work effectively for the company.

Olivia the Owl Swoops In

Olivia the Owl had also been at the Board of Directors meeting. Wise and knowledgeable, she was known and respected for her deep understanding of compliance and regulatory requirements and her practical approach to balancing operations, sales, and compliance issues.

Owl recognized clearly that neither the Tortoise nor the Hare would effectively meet the company’s needs if left to their own devices.

Risks of the Hare:

The Hare's shortcuts in rushing to market could lead to a series of compliance failures that would only be seen as hilarious from a distance and by competitors. If someone didn’t step forward with authority and change things, the rush to market could lead to angry regulators storming into the office, upset investors bombarding the company with complaints, and customers screaming their frustration with the faulty product to regulators and the press. The company could even face hefty fines and a public relations disaster. Investors might not be willing to provide additional capital and the company could fail.

Risks of the Tortoise:

The Tortoise's steady, methodical approach is critical to success but can also lead to ultimate failure if not balanced with an understanding of other risks to the company. Unfortunately, this particular Tortoise was not familiar with many of history’s great thinkers. He wasn’t aware of Voltaire who said, “The best is the enemy of the good,” of Confucius who said, “Better a diamond with a flaw than a pebble without,” or of Shakespeare who wrote, “Striving to better, oft we mar what’s well.” If Tortoise set the bar too high and didn’t work with a reasonably risk-based iterative approach, the product might never come to fruition and the company could fail.

Owls Balanced Approach:

Owl is efficient, swift, sees clearly, and always speaks truthfully with wisdom. She sees the best in each person on the team and strives to get things done by harnessing the unique power and ability of each person to achieve the company’s desires. Owl maintains a very balanced approach, ensuring that all compliance and risk mitigation steps are followed while maintaining a reasonable pace to meet achievable deadlines.

Owl meets privately with the Board after seeing that the competing efforts of the Tortoise and Hare won’t serve the company well. She respects both the Tortoise and the Hare but thinks their efforts will fail to meet the company’s needs if not reined in by a manager seeking to foster their greater teamwork towards a common goal. Owl recognizes she can’t complete the project without the goodwill and hard work of the Tortoise and the Hare. The Board agrees and gives Owl the product leadership role to lead the combined efforts of the Tortoise and Hare.

Compliance and risk mitigation may seem slow and tedious, but in the long run, they ensure success and avoid costly mistakes. However, these goals must be met within a broader context and in balance with other critical goals.

There is great value in tortoises, hares, and owls. Ultimately, a company’s goals can only be effectively met when these three combine their talents effectively as a cohesive team.

Disclaimer:

This blog post is intended for informational purposes only and does not constitute legal, accounting, or professional services advice. Our team of professionals with expertise in BSA/AML and OFAC compliance uses AI tools like ChatGPT to support our writing process in different ways. Sometimes, AI is used to improve upon a draft we've written, while other times, it's employed to synthesize and combine information from reputable sources, such as FinCEN, FFIEC, CFPB, FATF, and state regulatory bodies, around a concept or idea. In both cases, the final content is shaped and validated by professionals to ensure accuracy, clarity, and alignment with compliance standards. However, since each institution's compliance needs are unique, we recommend seeking advice from qualified experts in legal, accounting, or compliance consulting. The effectiveness of the strategies and practices discussed depends on your institution's specific risk profile and tolerance, so customization is advised.