Episode 28: Building a Culture of Compliance with Faraz Rana

Episode Description

This COMPLY Podcast episode features a special guest, Faraz Rana, Founding Team Member and Former Chief Legal Officer at Bread and current Co-Founder and CEO of Affinity. During today’s episode, we sit down with Faraz to discuss building a culture of compliance, including:

• What the compliance team and processes looked like during his time at Bread
• How he prioritized what needed to be done to build this true culture of compliance
• How technology can be an integral part of the compliance process, especially as it pertains to automating and scaling this function
• And finally, some top tips for fintech listeners as it pertains to their compliance programs and readying them for bank partnerships

Show Notes:

• Fintech-Partner Bank Relationships: Regulatory Roles & Responsibility: https://bit.ly/3QrxLeE
• FinTech Compliance: What You Need to Know: https://bit.ly/3YAapFL
• Partner Banks: Marketing Compliance Trends You Need to Know: https://bit.ly/3OHsrCn
• Connect with Faraz Rana: https://www.linkedin.com/in/faraz-rana-502874a/
• Connect with Ashley “AC” Cianci: https://www.linkedin.com/in/ashley-cianci/

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About COMPLY: The Marketing Compliance Podcast

The state of marketing compliance and regulation is evolving faster than ever, especially for those in the consumer finance space. On the COMPLY podcast, we sit down with the biggest names in marketing, compliance, regulations, and innovation as they share their playbooks to help you take your compliance practice to the next level. 

Episode Transcript:

Ashley:
Hey there COMPLY podcast listeners and welcome to this week’s episode. This week’s podcast features a special guest, Faraz Rana, Founding Team Member and Former Chief Legal Officer at Bread, and current co-founder and CEO of Affinity. During this episode I sit down the Faraz to discuss building a culture of compliance, including, what the compliance team and processes looked like when he started and ended his time at Bread, how he prioritized what needed to be done to build this true culture of compliance, how technology can be an integral part of the compliance process, especially as it pertains to automating and scaling this function, and finally some top tips for  fintech listeners as it pertains to their compliance programs and readying them for bank partnerships. Thanks for listening and enjoy!

Hey Faraz, welcome to the COMPLY Podcast, thank you for being here!

Faraz:
Thank you for having me.

Ashley:
Yeah, we are thrilled to have you on. So why do not we just jump in and have you introduce yourself to our listeners?

Faraz:
I’m Faraz, I used to be a lawyer, still am a lawyer, but I was a corporate lawyer and decided to leave the practice of law to go into startups. So in 2014, I joined a small company  fintech company called Bread, a Buy Now, Pay Later Company. And I joined them when we were four or five people, just a bunch of people with laptops and a dream. And we built that to a 200 person company and got acquired in 2020 by a bank. So I’ve been on the  fintech startup journey for about a decade now.

Ashley:
Very cool. And I think one, your journey is super interesting in of itself, but I think a lot of our listeners are in that same ecosystem of fintechs trying to partner with banks. So we are super excited to have you on and then hear some of your expertise of what you learned over the years.

Faraz:
Yeah, I’m excited to share.

Ashley:
Awesome, so let’s start with your time at Bread. Can you just talk a little about what the compliance team looked like and the processes that you built and what they looked like when you first started and then where they were when you left?

Faraz:
Yeah, so when I started, we had nothing, and it was four or five people in a small room with laptops and so there is really nothing to build from a compliance perspective back then. And so when I joined part of me felt like, well am I really useful here? Like, what am I doing? And in hindsight I do think that there is a huge intangible benefit to having someone with a legal and compliance background be part of that initial team. I think it builds, what I think of is, like the core DNA of the company. Rhe core DNA is hopefully mostly technology, so good engineers, but if you can weave in some of the other non-technological areas into that initial early foundation, I think it only grows from there.

Faraz:

So I was sitting opposite our software engineers and they would pull me aside and ask me a question. They always, to this day a lot of my colleagues joke, the first time I saw software code, I was blown away because as a lawyer you do not really understand how technology works, and then you go look at a computer screen, you are like, oh, so this is what’s powering the world, it is just lines and lines of code. They would pull me aside, they would ask me questions and I would ask some questions, and one of the first things I think I learned how to do was learn to ask the questions that’ll help me understand the business. I think that is where a lot of folks who work in legal compliance, forget the importance of really understanding the business objective and the product that we are trying to build and what really the business outcome is, as opposed to just mitigating risk.

Ashley:
Absolutely, I think a couple things that you said there, like building it into the DNA of the business from the get-go, how much easier that probably was in the long run than trying to come back in later. And then just like you said, understanding the business model, because if you can match the goals of the other folks you are working with, then life will just be easier, so that makes a ton of sense.

Faraz:
Yeah, and you also bridge that relationship, right? you are no longer the risk mitigant, you are the person who is working alongside them to build an alternative solution if the current solution isn’t working from a legal or compliance perspective. I think that was really helpful to me to be part of that initial team and kind of help build the initial product, and kind of build it into the core foundation of the company. So when we were 200 people, like it was a very natural thing for us to do, to kind of weave in compliance and legal as part of the company.

Ashley:
that is awesome. And to know that compliance is enabling these other departments to do their jobs better, that is very cool.

Faraz:
Yep.

Ashley:
So how did you prioritize what needed to be done to build this kind of culture of compliance you are talking about?

Faraz:
One of the first things I would focus on is writing stuff down. So even early on I did a lot of memos to file and I wrote down processes and nobody read them. So they were in my secret little file that nobody read. But what that forced me to do is really refine my thinking about what I wanted to build in terms of a core infrastructure. And there is a lot of companies who really value writing as part of the culture. And I think there is some merit to that. So Amazon famously is like a very big writing culture. And I do not think that is for every company, but at least for me, writing stuff down as processes force me to refine, how’s this going to work when we are 10, 15, 20, 30 people, or 50 people, we didn’t think we would ever be that big, but 200 people at one day.

Faraz:
One of the things that I think is so important when you are building a compliance program is really understanding how you are going to operationalize the program. So it is one thing to write stuff down, it is another thing to actually take that into a three dimensional world and begin to think about, all right, well now I know who’s in engineering, I know who’s in sales, how do I get the two of them to talk and do A, B, and C that I’ve written down on paper? Even thinking through those problems that are going to arise when you actually try to operationalize it is really important in the beginning. So that is what I did, I wrote a lot of stuff down. And then I got help, I hired smart people smarter than me to help me with my team. So we ended up, when we were done, a seven person team across legal and compliance, which is small, but for a 200 person company, it seemed like the right number.

Ashley:
that is very cool to grow from the four to five people in the whole company to seven folks in compliance, that is awesome. So this is a perfect segue of talking about scaling and growth. When you are reaching those larger numbers, technology can be an integral part of that process. And sometimes when we talk to folks, it can be daunting to the teams that we mentioned like incorporating a technology piece into their compliance systems. So can you speak to the role that technology can play when it comes to automating and scaling some of these processes?

Faraz:
So I’m reading a book right now called “Automate Your Busy Work” on Audible. And I’m fascinated with this idea of automating everyday tasks. And it is a short book about four to five hours, about how there is so many tools out there today that can automate a lot of things that we used to take for granted. And we just thought, because we are built as humans to think we need to do the busy work, right? And the whole premise of the book is if you can sort of automate the busy work, it allows you to take a step back and really focus on the 80/20, right? What is the small percentage of work I’m going to do that is going to have the most impact on either my work or my relationships or whatever it is that you are trying to achieve.

Faraz:
I think a lot about that in terms of today’s technology when it comes to building fintechs, but also in legal and compliance as well. So I think there are two things that when it comes to technology, people wonder about. First, is a technology good enough, right? Is it good enough to really replace a smart human? And second, the elephant in the room, is it going to replace me eventually one day, right? So the first question I think is, you know, my opinion on the first question is, we all know technology gets better over time, right? It just aligns the software code and eventually you can make it better enough so that it can, I think, do as good of a job as a human can on most repetitive tasks. So like, technology will get better if it is not good today, it is going to get better to a point where it does sort of do the same thing that a human can do.

Faraz:
The second question is a tough one, right? Especially in the environment that we are living in today. And there is this whole debate about AI and whether AI replaces especially sort of compliance and legal roles. And I mean, I think the opinions are varied, but my view is if we say that this time it is different, right? Somehow this time technology will replace humans and humans will have absolutely nothing to do. I think we are like ignoring the mountain of evidence that has existed for like hundreds of years, where like every time technology has come into an industry and a sector, people have adapted. And so I think technology augments, it does not replace the human. And thinking back to our days at Bread, one of my compliance team would go through, so we were Buy Now, Pay Later company, marketing was a big deal for us, especially with our merchants doing marketing on our behalf.

Faraz:
And we could have someone who would sit there and review 200 websites once a week going through all that marketing that our merchants were producing in our product. And it was a horrendous task. I mean, I felt so bad for my team member, and like humans are fallible because I have emotions like sometimes you are bored, sometimes you are hungry, sometimes you have not had enough coffee. And you know, you are going to miss something. And so eventually we automated that process with a product like PerformLine, which really comes in and says, all right, we can do the same thing in five minutes, probably with a lot more precision because the software code is able to pick up on details in a very automated way.

Faraz:
And guess what? Now that human being can go on and focus on more creative or impact building tasks. So not to make an advertisement about PerformLine, but I’m a huge fan of products like PerformLine that do that. And yeah, I’ve seen it happen where people are then able to really make more of an impact on tasks that are not as repetitive. So to answer your question, I think technology is coming into compliance in a very big way especially now. And I think it is really going to augment how people are able to function at the workforce, not necessarily replace them. That assumes that people are willing to adapt though. If you are not willing to adapt if you are that person who won’t accept that email is somehow going to replace how people communicate and you are like, ah this’ll go away, it is just a fad. Then I think you are in trouble. So I think you have to adapt and accept that it is coming.

Ashley:
Absolutely. Yeah. I mean, everything you said, I think we feel spot on and we appreciate the shout out to PerformLine. We always say like, let technology do what technology does best so that humans can do what humans do best. it is not a replacement, it is just to go back to what you said earlier, we are enabling these teammates to do, like you said, more creative, better work. And like you said, there is mountains of evidence over decades and decades now just to facilitate that argument. So I think that makes a ton of sense.

Faraz:
Yeah, I’m in San Francisco right now, and here you see these self-driving cars.

Ashley:
Yeah.

Faraz:
And I live in New York, and you do not see them. I do not think self-driving cars will ever work in New York, there is so much variability on the road. it is like when you took that driving test in high school, you know, where there is like things emerging like that old lady walking in and the bicycle and you have to like learn how to navigate. Like New York is like 10 times that, I do not know if self-driving cars will work, but here you see them everywhere. And it is kind of freaky to see a car on the road, you know, with no human being inside just driving casually along the road. And I was thinking about it, I was like is this any different than the car replacing the horse and buggy a hundred years ago? Is this somehow different? And I think it is a very myopic view to say, well now it is different somehow and that humans won’t adapt. It is kind of weird to see those cars on the street.

Ashley:
Yeah. Oh, I can’t imagine absolutely. And maybe New York will be like the ultimate point of success for self-driving cars. that is how they know they are here to stay.

Faraz:
Right?

Ashley:
So we’ve a lot of listeners who obviously are on compliance teams at  fintechs, and they are either partnering with the bank currently or they are hoping to partner with the bank in the future. So what are the top tips or suggestions you have for them as it pertains to their compliance programs and readying them for these bank partnerships?

Faraz:
The one thing I always tell people who are either embarking on a bank partnership or who have just gotten into it is, you will underestimate how much work it is to work with a bank partner. And it is only getting more cumbersome with time because a lot of bank partners are under a lot of regulatory scrutiny to have more oversight over their fintechs. I think that is naturally how it is supposed to work. The whole idea behind this bank partnership model was regulators saying, look banks, you are not good at technology, we know that and so in order to survive in the modern environment and get new customers, we are okay with you partnering with people who are good at technology, who are creating these cool new interfaces and products, as long as you have complete oversight over their product and what they are doing, right?

Faraz:
do not think of them as a third party, think of them as an extension of your bank. That was sort of the condition of doing this partnership thing. And so that is evolved over time. I think thing number one, I always tell people, the bank is in charge, right? They call the shots, especially when it comes to compliance. If you believe otherwise, you are just going to constantly be frustrated when they veto a product idea or they ask you to send back up on something. So go into that relationship knowing that while I am bringing the bank new customers and I do have something of value here, ultimately the bank is the one calling the shots. So if you do that, you are almost accepting how this relationship is supposed to work.

Faraz:
Then the second thing is there is just a lot of operational work that you need to do to get that relationship set up and to maintain it. And so what I recommend to companies, especially early on is try to model in one FTE into your business plan, who’s going to be managing this relationship, or 80% of their job is going to be managing that relationship because it ends up being something that is significantly a lot of work. So if you are just a founder of a company, probably it is your job to do it right now, but once you get to 10 people, I think it is a good idea to maybe think about someone, and it does not need to be a Chief Compliance Officer, it could just be a junior ops person, but their job is to take in all that inbound and maintain that relationship. The bank is in charge and it is a lot of work, so be prepared to maintain that critical relationship.

Ashley:
Perfect. Well, finally, obviously your background’s super impressive and very cool the journey that you have been on, but I wanna make sure we get a chance to talk about what you are currently working on. So can you tell us a little bit about Affinity and on the same note as rest for conversation, like why is training and development so important when it comes to compliance management?

Faraz:
So Affinity is a compliance training platform that we decided to build just for regulated industries. And what does that mean? We wanted to build a platform that allowed people to train their own employees, also train external parties. So if you have got like a bank and you want to train all your fintech sub-portfolio organizations, you can do that through this platform. Training was a big part of building this culture of compliance for us at Bread. And I saw the impact of that from day one, sort of when I first joined, one of the first things I did was create a training program. And every new employee that would join, I would sit down with the cohort of employees who joined that quarter, sit down with them in a room for two hours and like go through all the trainings.

Faraz:
And it wasn’t so much training, it was, hey, this is you may not have worked at a fintech, you may not have seen what a bank partner is, or you may not know our regulations. Like here is all that context, right? it is a big part of what we are building, and here is all the information and the background information you need, so you feel like you are more part of the ecosystem. And I could be biased, but I did think it had an impact on how they thought about the function of compliance within the company. That it is not just something that is like a back office function. it is truly like a core part of the company. And so I continued doing that until we were about 150 people. And then it eventually got too big and I had to like leverage that out to,or delegate that out to my team.

Faraz:
But we used to do a lot of functional trainings and I just found that people, when it was relevant to them, people actually found it helpful and useful, and I think it made them better at their jobs. And by relevant to them, I mean that we really took the trainings and said, all right, you are product person, let’s forget about the regulation, but here are all the things that are relevant to you as a product person, right? When you are building the UI of the product. Like, here are the things you need to think about and this is why. So back to Affinity, our core thesis is that learning and management at regulated companies, especially fintech companies and financial services, is an area that makes companies smarter and more effective at what they do and allows for more employee engagement.

Faraz:
And then why we decided to build it, we actually looked at the tools in the market. Because I was doing this as a side project, and I called one of my engineer friends, I said, can you help me build this thing? We will just do it as a side project. We might make some money, but it would be fun to build this. And then when we started building, we realized that, wow, the tools out there are really not that good for training, and they were kind of outdated technology. We thought we could do something way better just by using today’s technology. 

Faraz:
The last thought on this the idea of culture compliance, that was I used to say this a lot of Bread and I still continue to believe this. I think companies get in trouble. I used to say our compliance program is as good as the last person we hire, right? it is not the core compliance team that is going to mess up, it is not the senior leadership, it is the junior person who joins, who’s employee number 147, who just does not know better because they have not worked in this industry before. And so your culture of compliance has to continue every time you have a new person join and has to be an extension of what you have already built, and I think training is a way to do that.

Ashley:
Very cool. I love that. As good as the last person we hired. That makes a ton of sense and definitely resonates, with what we hear from folks we talk to. So, very cool. And we always say too ongoing training and just learning from the team, like that is a key part of compliance. Like technology can help, but like you said, everyone has to be up to speed on what’s going on. So very cool what you are doing. Thank you so much for joining us in the COMPLY Podcast. Where can folks find you and learn more about what you are up to?

Faraz:
Yeah, I would do the thing of following me on Twitter, but I’ve got four followers on Twitter.

Ashley:
Awesome.

Faraz:
And I’m pretty sure three of them are not humans, they are bots. So do not follow me on Twitter. I’ve got nothing interesting to say there. But if you would like to learn more about our product Affinity, please just email me it is faraz@itsaffinity.com, and we’d love to show you a demo of our product. Or you can just email me with any questions about  fintech or bank partnerships, I’m always happy to chat.

Ashley:
Very cool. Well, thank you so much for your time Faraz. This has been a blast to talk to you.

Faraz:
Awesome, thank you, likewise.

Ashley:
Thanks for listening to this episode of the COMPLY Podcast! If after today’s podcast you are interested in learning more around building a culture of compliance, especially at your fintech or bank I have a few resources for you into today’s show notes, including a piece titled, “FinTech-Partner Bank Relationships: Regulatory Roles & Responsibility” and another around “Marketing Compliance Trends You Need to Know for Both FinTech and Partner Banks.” As always for the latest content on all things marketing compliance you can head to performline.com/resources. And for the most up-to-date pieces of industry news, events and content be sure to follow PerformLine on LinkedIn. Thanks again for listening and we will see you next time!