Sima Gandhi, following the sale of her fintech startup Creative Juice in 2023, has taken on a significant new venture aimed at addressing the compliance challenges faced by fintechs. Creative Juice was founded in late 2021 to offer digital banking services and funding to creators like YouTube influencers. However, the company faced hurdles due to its partnership with Blue Ridge Bank, which had come under scrutiny from federal regulators for unsafe practices. This resulted in delays for Gandhi in gaining timely approval for new product releases and marketing initiatives. Given the growing compliance burdens and the challenges in the fintech sector, Gandhi realized that simply changing bank partners could jeopardize her startup’s growth. Ultimately, she decided to sell Creative Juice’s assets to Rho, a digital banking services provider, which allowed her to pivot in a new direction focused on compliance.
Inspired by her experiences, Gandhi launched the Coalition for Financial Ecosystem Standards (CFES) to create a set of compliance guidelines tailored specifically for fintech companies. This initiative is designed to help both startups and their partner banks avoid pitfalls that have plagued the industry, such as the collapse of Synapse and increased regulatory scrutiny. Gandhi emphasizes that the fintech sector needs a clearer understanding of regulatory requirements, and compliance must become a standard expectation moving forward. Collaborating with FS Vector, a compliance consulting firm, she is developing comprehensive guidelines that cover various regulations, such as the Bank Secrecy Act and anti-money laundering (AML) requirements, alongside best practices for marketing, complaint handling, and operational risk management.
Gandhi’s background in law and technology, including her education in engineering at Stanford and her law degree from NYU, uniquely positions her for this endeavor. With former roles that include being a tax lawyer and policy advisor at the U.S. Department of the Treasury, as well as business development lead at Plaid, Gandhi understands the intersection of law, compliance, and technology. Since embarking on the CFES initiative in March 2024, she has successfully attracted eight fintech companies as members, including Rho and major players like Block and Stripe. These firms have committed to membership dues and providing valuable feedback on the emerging guidelines, reinforcing industry resilience and regulatory alignment.
Relay, a digital banking service for small businesses, showcases the practical need for such compliance guidelines. Its CEO, Yoseph West, recounts the costly transition from reliance on prior technology and banking partners, which posed risks that led to significant customer losses as Relay moved away from Synapse. Now, West recognizes CFES as a means to establish excellence in compliance and enhance transparency across bank-fintech relationships. As Gandhi seeks to create the compliance manual, she envisions standards that will foster a culture of accountability in fintech, such as requiring employees to undergo annual anti-money-laundering training and mandating that CEOs appoint in-house Bank Secrecy Act officers sooner in the viability of their startups.
Gandhi encourages the voluntary adoption of her compliance guidelines by fintechs and aims for regulatory bodies to embrace them similarly to established cybersecurity standards like SOC2. She believes that robust adherence could set the stage for regulatory frameworks issued by the Federal Financial Institutions Examination Council (FFIEC). Post-development of the guidelines, she envisions fintechs engaging compliance advisory firms for audits that will yield scores on a scale of one to five in various dimensions, encouraging continuous improvement and goal setting for companies of all ages. This move is aimed at establishing clearer compliance conversations between fintechs and their banking partners.
Moreover, the collaboration of CFES with Alloy Labs, an initiative focused on setting standards for partner banks, enhances the comprehensive approach toward compliance in the fintech ecosystem. With Alloy Labs having a substantial member base of banks, Gandhi sees value in exchanging insights that can help streamline compliance practices. There is an underlying significance to maintaining robust partnerships between small banks and fintechs, as evidenced by research indicating that banks involved with fintech partnerships grew their deposits, while others did not fare as well. In essence, Gandhi’s efforts in establishing CFES not only aim to establish compliance standards but also underscore the vital relationship between innovation, compliance, and the sustainability of fintech partnerships.
