Rutherford is delighted to introduce Crypto Talks, a series of interviews where our team of crypto recruitment specialists sit down with key regulatory players in the digital assets industry to discuss the latest news in the space.
These conversations will serve as an opportunity for compliance, legal, risk and security professionals to get meaningful insights on the topics that are trending in the buoyant sector. Crypto Talks also aims to provide informal advice on potential upcoming challenges regulatory specialists might face in the near future, with the digital assets industry being in constant evolution.
For this instalment of the series, we continued our conversation with regulatory attorney and Chief Compliance Officer Benjamin Melnicki (ex. Robinhood, Ripple and Blockchain.com) to dive into the upcoming challenges of compliance functions in the crypto space and what to look for when building a crypto Compliance team.
How do you see compliance teams evolving within the digital assets space over the next few years?
Each day, as we see new entrants to the marketplace, the skill set and level of experience needed is also evolving. To me, it has always been a curiosity how the prototype for an individual to serve in a compliance function has been focused solely on those with a financial crime or AML/CFT background.
Although it makes sense because the primary regulatory consideration is detecting and preventing money laundering, the traditional financial services firm, whether it be a bank, broker-dealer, futures commission merchant or investment adviser, has always treated AML as merely one vertical in an overall compliance program. The Chief Compliance Officer or Head of
Compliance is generally one with a more rounded skill set, rather than an individual with a focus on one area.
I think as the industry continues to grow, we will start to see market participants in the digital asset industry shift their hiring practices as well. New laws, rules and regulations, as well different types of products and services will require companies to re-evaluate their hiring practices. In fact, I think we are starting to see that play out in real-time already.
What do you think wil become a priority when hiring compliacne professionals within the digital assets space?
In addition, one other thing I would add is that it is likely we will see the required background and experience, more so in senior level hires, to include those with a legal background.
The complexity of issues, which cuts across geographic regions and various governmental agencies, will make it increasingly complicated to navigate the regulatory landscape. I believe having a legal background will likely be critical in identifying qualified candidates.
I remember about 10+ years ago post the financial crisis, and how in the wake of the Dodd-Frank Act, the regulatory landscape was extremely challenging to navigate, thus making it difficult to advise businesses on the implications of their daily activities.
A lot of the hiring included those with a legal background to interpret, for example, the seemingly never-ending litany of no-action letters as well as exemptive relief and interpretive guidance. The same or similar scenario is likely to play out over the coming years.
What mistakes have you made when hiring in the crypto space? What are the learnings you have made from those mistakes?
Don’t necessarily disregard those with no crypto experience out of hand. Although the digital assets industry and the way in which the technology is intended to function differs, there are some areas where a hiring manager can make what I like to call opportunistic hires.
For example, market surveillance, a core tenet of a compliance program in traditional financial services, is growing in importance in the digital assets space. There are vendors out there who are developing products and services that are designed to help firms guard against, or at least identify, potential forms of market manipulation and fraud.
To be clear, I am not talking about on-chain, forensic blockchain analytics. That is a function typically performed by those with a financial crime background, although as I said earlier, I think we are seeing a shift where the actual review can be performed outside that vertical by individuals with a different skill set. What I am talking about is non-AML related surveillance - guarding against wash trading, spoofing, front-running - basic garden variety fraud. And that is one area I think firms can make opportunistic hires.
As for past mistakes, I think this is something that a lot of people are doing, and it will likely pay a price down the road. Hiring people one has worked with in the past solely because of that specific factor seemingly comes back to haunt hiring managers more than ever before.
It leads to group think, and especially where the hiring manager may lack digital asset experience themselves, the problem becomes exacerbated when you grow a team with individuals who are simply used to “following the leader”. A good hiring manager should never be afraid to hire someone that possesses skills that they may lack themselves.
What are the skills and traits a crypto Compliance Officer should have? Is there anything specific a hiring manager should be paying attention to?
First off, the space moves fast. Those who have worked in crypto would likely agree with me unanimously. There is a saying that one year in crypto is like 5 years in traditional financial services.
I think the one mistake People and HR teams make - from my experience - is looking at the CV of a candidate who has been in several stops (like myself for example) and saying “Well, this person has moved quite a bit”. I believe it is a sign of a true lack of understanding about how the space works.
Companies fail to commercialise (e.g. file for bankruptcy), are mismanaged, and run into legal or regulatory challenges. There is a limited pool of talent, especially those with senior level experience, and firms are flush with cash, so talent can more easily get picked off. Adopting the mindset from traditional financial services where you disregard a candidate solely based on tenure is closed-minded and a disservice to the organisation you are looking to staff. Everyone has a story in crypto, some more than others!
Listen to the stories and then make a determination.
What Was The Most Challenging Issue Faced in Compliance?
The most challenging issue faced in compliance is staying up to date with the ever-changing regulations and laws. Compliance officers must be aware of the latest changes in the industry and be able to quickly adapt their policies and procedures to ensure that their organization is compliant. This can be a difficult task, as new regulations are constantly being introduced and existing regulations are being amended. Additionally, compliance officers must be able to interpret the regulations correctly and ensure that their organization is following them. This requires a great deal of knowledge and understanding of the regulations, as well as the ability to quickly adapt to changes.
What is The Purpose of a Chief Compliance Officer?
The purpose of a chief compliance officer is to ensure that an organization is in compliance with all applicable laws and regulations. The chief compliance officer is responsible for developing, implementing, and monitoring the organization’s compliance program. This includes developing policies and procedures, conducting risk assessments, training staff, and monitoring the organization’s activities to ensure that they are in compliance with applicable laws and regulations. The chief compliance officer also serves as a liaison between the organization and regulatory bodies
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