linkedin

Crypto v. Traditional Finance: Contrasting the Chief Compliance Officer

Jackson Baker
6 months ago by Jackson Baker
Chief Compliance Officer For Crypto Firm

The digital assets sector has been gaining a lot of traction over the past years - with hedge funds notably showing increasing interest in crypto in recent times - and more than ever, the growing industry has been expressing the need to build strong internal teams to steer their ship through the upcoming regulations the space is expecting.

Crypto firms have been facing a lot of pressure from governments and regulators, with associations such as the FCA requiring crypto businesses to formally meet regulatory requirements by a certain date in order to continue their operations in the country. This has forced crypto and digital assets companies to pay close attention to their compliance and financial crime functions - and to the people who could sit in the decision-making chairs. Hiring the right people has never been so crucial for crypto firms, as some of the appointees will be put in high-risk positions and will have to navigate their teams through grey areas in the next few years.

What exactly should digital assets businesses look for when hiring a Chief Compliance Officer? A trend we have noticed in the past year is one where digital assets companies are increasingly trying to attract regulatory leaders from traditional firms such as hedge funds or asset managers. Whilst the skillset might be the same all around, it is worth noting that there are key requirements for each type of business, and CEOs and executives must be aware of these differences in order to make a sound hiring decision.

What Traditional Financial Services Firms Look For in a CCO

As explored in our whitepaper How to Hire the Best CCO For Your Firm, whilst every business will have a different risk profile, there is a set of attributes that remain consistent and crucial across the board when it comes to finding the perfect CCO. From hedge funds to asset and wealth managers, CEOs and hiring managers alike will be looking at specific skills, technical knowledge and previous experiences when appointing an executive Compliance professional.

Being Commercially Aware

Whether the Head of Compliance has an investor-facing position or not, their risk appetite should be strongly aligned with the firm’s. CCOs are expected to make significant contributions to long-term commercial success, which will come through the active promotion of ethical standards within the business all whilst proposing commercial solutions that are compliant with internal and external standards.

The Capacity to Forge Strong Relationships

Building trusted and strong relationships lies at the heart of a CCO’s duties. And the bigger the firm, the more stakeholders will have to be dealt with.

People management skills quickly become one of the biggest requirements sought after by CEOs and executives when hiring a Head of Compliance. They will look at previous experience in managing people and navigating group politics, and will also seek evidence that a CCO candidate has effectively built, retained and developed high performing teams.

Embracing Technology

The COVID-19 has forced financial services firms around the world to embrace technology and ensure compliance standards were met even in a remote-working world. Whilst lockdowns may be a thing of the past, hybrid working has now become a new normal. The majority of compliance candidates are even asking for a hybrid working model when looking for a new position.

Embracing regulatory technology (RegTech) has since become a necessity for CCOs in the traditional finance world, as these tools allow teams to automate mundane tasks and to help increase overall effectiveness. A strong Head of Compliance candidate should therefore demonstrate the capability - and desire - to enable change through the implementation of technology.

What Crypto Firms Look For in a Head of Compliance

The Chief Compliance Officer’s duties at a crypto firm won’t be too dissimilar to the ones a CCO would have in the traditional financial services world. The key differences will actually lie in the context in which they operate, with their working environment highly influencing what are going to be the priority skills.

The Capacity to Communicate

The biggest difference between being a Chief Compliance Officer for a digital assets business versus a traditional financial services firm is the ability to deal with people and effectively communicate and convey critical points.

Having been regulated for numerous years, the finance world has now grown used to compliance standards, rules and overall processes. Compliance professionals at firms like investment banks or asset managers operate under strict rules: everything is straight to the point, and those sitting in risk functions (SMF16/17) demonstrate a willingness to work to regulations.

The crypto industry presents a completely different context, as the sector remains quite new with far less precedent and regulations. Compliance professionals wishing to join the space will have to operate in grey areas where stakeholders will be asking for justifications behind any conclusion. With fewer principles in place and more room for discussion, subjectivity prevails and the right CCO must demonstrate a capacity to adequately communicate - and negotiate - with business stakeholders. This point becomes particularly important with front office people who might see things differently, when there are no regulations to fall back on. Moreover, there will be an expectation for the Head of Compliance to build strong relationships with exchanges in order to get tokens listed.

A Strong - and Global - Knowledge of the Sector

The crypto world is borderless, meaning the right Chief Compliance Officer will need a sound understanding of the space and its inherent risks and technologies from a global standpoint.

With the space advancing quickly, CEOs and executives will have to ensure their appointed Chief Compliance Officer is comfortable with the ever-evolving sector, its fast pace and the risks that may arise in the short and long term - and most importantly how the latter can affect business operations. The Head of Compliance will also need to be tech-savvy and demonstrate the capacity to implement cost-efficient controls for a firm when things are moving quickly.

Setting the Right Tone

Some say that the crypto sector is still in its infancy stage, as very little regulations, controls and processes have been put in place. CCO candidates in the space will have to remember this crucial aspect when stepping into the role, as there will be an expectation to build and set up strong processes from the start which will take into account operational risk all whilst ensuring proper control.

CEOs and executives must therefore look for Compliance candidates who are not short-sighted: they must be able to assess how the sector will evolve and what regulators might put in place in the near future. The Chief Compliance Officer will have to demonstrate strong proactiveness skills through previous experience.

A Chief Compliance Officer wanting to migrate from a traditional financial services firm to a crypto business will quickly be faced with the reality that they will be moving from a process-heavy environment to a blank canva where everything will need to be built from the ground up. The increased popularity of the digital assets sector presents a fantastic opportunity for Compliance professionals ready to take on a new challenge to rise to the occasion and be part of the growth of a buoyant industry.

If a move within the crypto world is of interest, or if you wish to hire a Compliance professional for your digital assets firm, get in touch with Rutherford for a confidential chat. Our team of crypto compliance recruiters have an extensive database of specialists in the space as well as strong expert knowledge, allowing you to secure the best talent in the field.


Contact our Crypto Compliance Recruiters

Jackson Baker, Director
jackson@rutherfordsearch.com
020 7870 7409

Georgina Housden, Principal Recruitment Consultant
georgina@rutherfordsearch.com
020 3778 1252

Jack Merriott, Consultant
jack@rutherfordsearch.com
020 3778 0846