In contemporary financial markets, compliance is a huge undertaking. The average US firm spends between 1.3–3.3% of its total wage bill on regulatory compliance. The rules governing financial services, data privacy, Anti-Money Laundering (AML), and consumer protection grow and change so quickly that it’s difficult for many companies to keep up. Building an in-house compliance team can be expensive and slow, and even a perfectly calibrated team becomes underpowered the moment you expand into a new market or product category.

To stay up-to-date, many companies outsource compliance services. Below, we explain what outsourcing compliance involves, the benefits of outsourcing compliance, and how to assess whether it's the right decision for your business.

Highlights

• Outsourcing compliance gives businesses access to specialized regulatory expertise without the cost of building an internal team.

• External providers can reduce risk by handling ongoing monitoring, maintaining high screening accuracy, and updating audit documentation.

• Outsourcing compliance works well for businesses that are entering new markets or adding new products, while keeping an in-house team often works better for larger and more stable operations.

What does it mean to outsource compliance services?

Outsourcing compliance services means contracting external specialists (e.g., firms, consultants, managed service providers) to handle some or all of your regulatory obligations. Some businesses outsource a single compliance function, such as Know Your Customer (KYC) screening or transaction monitoring. Others might outsource an entire program, such as policy development, staff training, audit preparation, or regulatory reporting.

What are the benefits of outsourcing compliance?

Outsourcing compliance services can be more effective than building and relying on an internal team. Outside experts often provide more effective guidance at a lower cost.

Outsourcing can give you:

• Access to specialized knowledge: Compliance specialists work across dozens of clients and regulatory environments simultaneously. A firm that has helped guide 20 financial technology businesses (fintechs) through the revised Payment Services Directive (PSD2) implementation has built a practical understanding of the problem that then benefits all its clients.

• Faster response to regulatory change: When a new rule is passed (e.g., a revised AML directive, an updated sanctions list, a new privacy law), an outsourced provider with dedicated monitoring infrastructure will often act on it more quickly than an internal team can.

• More flexible cost structure: Most full-time chief compliance officers in the US earn between $215,000–$300,000 annually. Supporting staff and training budgets add more cost. Outsourced models let you buy the level of coverage you need and adjust it as that need changes.

• Cleaner audit trails: Providers that specialize in compliance are good at maintaining documentation and reporting that hold up to regulatory scrutiny.

How does outsourcing compliance work?

Outsourcing should start with a review of your business. The external provider maps your current regulatory obligations against relevant aspects of your business model and then surfaces gaps in your existing controls.

From there, the process takes one of two forms:

• Project-based work: Project-based work has a defined scope and endpoint. Common examples include gap assessments, remediation projects, or audit preparation. The provider comes in, completes the work, and then hands off the deliverables.

• Ongoing managed services: An ongoing managed service provider takes continuous responsibility for a compliance function. They might run your transaction monitoring queue, handle regulatory filings, manage your sanctions screening program, or staff a virtual compliance officer role. When a business uses Stripe, for example, it benefits from Stripe's compliance infrastructure across PCI DSS, AML program requirements, and sanctions screening.

How does outsourcing compliance help businesses scale?

Scaling generally brings new compliance obligations. Each new market and new product your business expands into comes with more requirements for you to track, follow, and record.

Outsourcing can help with:

• Geographic expansion: Opening in a new country or US state requires understanding a new regulatory framework, establishing new processes, and often obtaining new licenses or registrations. A provider with expertise in that jurisdiction can help you complete these tasks faster.

• Product expansion: Expanding into a new payment method, lending product, or cross-border capability also expands your compliance surface area. Outsourced providers can quickly meet these new demands.

• Volume growth: As your volume grows, so do your tracking obligations. Transaction monitoring is a clear example because increasing your transaction volume also increases flagged transactions. Outsourced monitoring providers can handle these peaks because they distribute the workload across their analyst teams.

How can outsourcing compliance reduce regulatory risk?

Outsourcing helps address two aspects of regulatory risk. The first is the risk that a violation occurs. The second is the risk that the violation becomes a bigger problem than it had to be. Specialized services can reduce regulatory risk by improving the following aspects of compliance.

Ongoing regulatory monitoring

Rules change constantly. Tracking them across every jurisdiction where you do business is a time-intensive job that compounds as you expand. Outside specialists follow these changes for you and their other clients.

Screening and reporting accuracy

In suspicious activity reporting, false negatives create regulatory exposure while false positives create unhappy customers and logistical drag. Keeping the right balance requires pattern recognition built over time from real cases. Specialists develop this across their client base and use it to help you.

Audit preparedness

True audit preparedness means being so organized that an audit doesn't derail the business. External providers hew to the documentation practices expected by regulators (e.g., written policies updated on a defined schedule, training records, testing logs, exception tracking). If your compliance function is a side responsibility of a legal or finance team, an audit can be disruptive even when the underlying controls are solid.

Due diligence

In the event of a failure, having outside compliance oversight demonstrates that you had appropriate controls in place, which matters to regulators.

Is outsourcing compliance the right move for your business?

In some cases, outsourcing compliance can help your business speed up and scale up while keeping risk low. In other cases, an in-house team is a better fit.

Here are some factors to consider:

• The size of your business: At a very large scale, some compliance functions are cheaper and more controllable in-house. When you're running enough transaction volume, proprietary monitoring infrastructure might make sense; when your compliance footprint is stable enough, dedicated internal expertise might pay for itself.

• How well you understand your regulatory obligations: If you're unsure whether your AML program meets current expectations or whether your privacy practices are up to date across all the jurisdictions where you sell, outsourcing compliance might help clarify.

• How much of your compliance work is specialized vs. administrative: Some compliance work requires deep expertise, while other work needs a well-defined process that can be handled systematically. If your team is spending a lot of time on the latter, you might consider a software or automation solution rather than outsourcing.

• The realistic cost of making a mistake: Understand the consequences of potential compliance mistakes. In payments specifically, compliance failures can mean losing the ability to process transactions.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, VAT, and GST on both physical and digital goods and services—in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful API.

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.