The Spinnaker Sit-Down: Q&A with Risk and Compliance Expert Bob Birmingham

With our Spinnaker Sit-Down interview, we give you VIP access to industry influencers, thought leaders, and movers-and-shakers who share their unique insights and perspectives on industry issues, trends, and questions. This month we sat down with Maquette Advisors Managing Partner Bob Birmingham III, a seasoned consumer compliance professional, to talk about changing the narrative about regulatory compliance, what you need to know today, and what’s on the horizon as we fast-forward 10 years.

Following a 12-year career focused on regulatory compliance in the financial services arena, Bob launched his consultancy firm, Maquette Advisors, in 2018. Maquette — the name of which pays tribute to his childhood dream to be an architect — allows him to bring regulatory compliance expertise to a wide range of businesses. Bob is a former bank examiner with experience across multiple agencies and has extensive experience in the FinTech space. He is a subject matter expert in compliance management systems, consumer lending regulation, Bank Secrecy Act, mortgage servicing, Fair Lending, and UDAAP.

Bob began his career as an examiner at the Federal Deposit Insurance Corporation (FDIC) and was a founding employee at the Consumer Financial Protection Bureau (CFPB). He participated in more than 75 hands-on examinations at banks across America ranging from $18 million to more than $300 billion in asset size. He most recently served as the Chief Compliance and Risk Officer at ZestFinance, where he built, implemented, and managed the compliance and risk functions for a company pioneering machine learning modeling in financial services.

SPINNAKER: Tell us about changing the narrative of compliance.

BIRMINGHAM:  I believe it’s critical that we change the narrative on what compliance is, and what purpose compliance serves within an organization. I’m passionate about helping businesses leverage compliance as an effective tool and strategic advantage, with the goal of being a key business partner rather than being perceived as adversarial or a constant roadblock. It’s essential to build trust and respect for compliance, and to create a culture that helps foster that while not sacrificing compliance goals and requirements.

SPINNAKER: What’s one thing people should know about regulatory compliance?

BIRMINGHAM: Regulatory compliance should be viewed — and used — as a tool and as a competitive advantage. This is typically done with deep domain expertise and by applying business sense to compliance decisions. Take for example, FinTech and financial institution partnerships that are occurring monthly. The FinTechs with robust, bank-like compliance management systems built for the size, scale, and complexity of their business model will find themselves with more and better partnership opportunities. The increased regulatory scrutiny on these partnerships will require strong compliance frameworks at both the FinTech and financial institution. Compliance fails the organization if it’s unable to support evolving technology and change.

SPINNAKER: What’s the “hot topic” right now in risk and compliance?

BIRMINGHAM: The hot topic right now is machine learning, specifically determining how to adopt machine learning tools for business decisions. What data is being used? What business problem is being solved? How is it being adopted, deep-end or shallow-end? There are a lot of questions — and we’re all still figuring out the answers.

Machine learning in financial services is still in its infancy, and there’s often a misunderstanding of the regulatory components necessary to operate successfully. In pockets, some think of machine learning as a robot making decisions that may change every hour of every day. That is a scary world.  Debunking myths and misunderstanding use, as well as the fear of the unknown, are significant hurdles to advancement. With machine learning, there’s much better math available than what’s generally being used right now. And with that comes greater responsibility. That’s where strong compliance and risk partners are essential.

In the early stages, where we are now, deciding how, when, and where to adopt machine learning in a way that’s risk-appropriate requires leveraging the knowledge of subject matter experts throughout the business as well as establishing a strong partnership with risk and compliance.

SPINNAKER: How different will risk and compliance be 10 years from now?

BIRMINGHAM: Banking will look much, much different in 10 years, which means the same is on the horizon for risk and compliance. At a minimum, we know there will be significantly more automation around testing activities and the corresponding reporting. The key to success will be user-friendly tools that solve actual problems or automate a manual process.

Institutions need to start evaluating where labor-intensive manual processes exist or frequent testing occurs, and plan how those will evolve with automation. What oversight will be needed? What new problems will be presented? What roles change?  Proactively asking and answering these questions will be critical for compliance innovation.

SPINNAKER: What do you think are the qualities of a good compliance leader?

BIRMINGHAM: Leaders that are able to facilitate the responsible adoption of emerging technology, while still appropriately mitigating risk, will give their business a strategic edge. These decisions require layering business sense and risk considerations, all while always ensuring consumer protection — this is a delicate balance. There will be times to be a roadblock and times to be a partner, and most of the times a combination of both.

SPINNAKER: What do you think are compliance and risk leaders’ biggest challenges today?

BIRMINGHAM: Technology. There are buzzwords everywhere around business solutions, tool kits, and monitoring, and many more are coming. Some will provide real value. Others will provide nothing and, worse yet, time wasted on vapor. Complexity for the sake of complexity is not always necessary or the right solution. Leaders will be challenged as the banking evolution accelerates. Technology should and will never replace compliance and risk teams, but technology used correctly should enable strong teams to continue to perform at the highest level.

More About Bob Birmingham:

Special skill: attention to detail
Idea hot spot: ocean waves — the real deal or “Hey Alexa, play ocean waves!”
Brand crush: Marine Layer. Products are innovative with new twists on old classics and a focus on quality, durability, and versatility with a little humor mixed in – all things we aim to deliver as advisors at Maquette. 
Must-use app: Spotify
Must-read blog: MarketWatch: investing, personal finance, and retirement sections
Secret to success: reading, because you have to keep learning — I spend 3 to 4 hours a day reading content from blogs to newspapers to regulatory updates to literature
If I had an extra hour each day, I’d: spend it outdoors, because those hours never seem to be enough
Recommended reading: Sam Altman’s blog and Quora