Regulation is in the air. Recently there has been a lot of talk about the requirements to identify customers in specific ways and to collect information about them in specific ways under the Anti Money Laundering/Know Your Customer laws and regulations of various governments. Regulation has also to do with maintaining and ending customer relationships, and also around how entrepreneurs have had to radically change how they do business.
The connection with coworking is coming I promise.
Then I read an article by Patrick Mackenzie which brought it all into focus. Patrick does this a lot, he writes essay style and the clarity of his thought is not only a breath of fresh air but also raises your IQ by about ten points just by reading his stuff. It’s downright luminous for a certain kind of nerd (which I certainly am), subscribe already if you are too.
In this article, coworking is like the bodega he describes with exactly one important difference. When he is talking about the bodega, that is you as a coworking space right down to the delicious sandwiches, except that most of us are providing business addresses/virtual offices instead of money transfer services.
Regulation and enforcement under AML/KYC is generally drafted for financial institutions, like pay services and banks and so on and so it is very confusing to people when we are confronted with the fact that coworking is regulated by these laws as well. It is hard to carry out because of this. What does it mean for a coworking space to monitor transactions anyway? It is certainly required, but not defined.
Still this regulatory regime covers other business sectors which serve as infrastructure or gatekeeper for starting and operating a business. I have been hollering about how coworking is infrastructure for a decade or more and so it is interesting that the EU, US, and other governments agree with me – but only about one product. That product is known Stateside as the Virtual Office, in Europe as a domicile address or registered address.
AML/KYC covers, for example, lawyers and accountants and e-commerce and anything crypto related or gambling or gaming related. And it is spreading, more and more sectors are getting included as time goes on. Interestingly the only sector as far as I have been able to discover which is covered by this regulatory scheme but does not require a license to operate is coworking.
Anyone can start a coworking space, it is an otherwise unregulated sector. And yet this very sophisticated and complicated regulatory scheme is active for us. This makes coworking different from other regulated entities and in some ways makes it questionable whether the imposition of these rules on us is what some folks call regulatory overreach.
There is a whole side quest to go off on regarding the above about why the UK and US systems treat this differently than Europe does and it is very interesting but that will need to be another whole article because it gets at the very core of what the relationship is between a business and its many stakeholders.
So: there are a couple of take homes:
- If you offer virtual officing or a basic membership which is less than part time, and includes the right to use your coworking spaces address for regular mail, you really need to learn about this subject and think hard about how to integrate it into all aspects of your community. It can be done but not gonna lie it requires a lot of systems thinking;
- Some of your coworkers are almost certainly in high risk sectors and it is entirely possible that you will get questions about your relationship with them and also about how you are doing your due diligence;
- Debanking in specific and the regulation of coworking in general are deeply tied to structural discrimination and at huge risk of excluding people who already need to fight to get the most basic kinds of business resources and this should be top of mind when thinking about an approach;
- As a sector we really need to get together on this subject and develop some best practices. We need to stop, as Patrick says so clearly, playing the odds.
If you’re in Europe and interested in getting involved contact the ECA through the website, our socials, or drop me an email at jeannine@coworkingassembly.eu.