Compliance officers at crypto firms cite worries about personal liability
Cryptocurrencies lately seem to generate equal amounts of excitement and fear—dreams of big paydays compete with worries about price dives, hacks, bankruptcies—and a fast-developing AML Compliance and regulatory landscape. For Chief Compliance Officers at crypto ventures, worries about personal liability add to the stress of the job.
Personal liability for Compliance failures has been a powerful stick in the carrot-and-stick approach for a while now, and this potential punishment cuts across industries for compliance officers. But crypto firms often have risk-taking start-up mindsets even though they are increasingly beholden to the heavily regulated AML-centric world of financial institutions.
A Wall Street Journal report describes how the start-up mindset of crypto businesses can clash with regulatory imperatives in a way that creates non-stop stress for chief compliance officers. And the threat of personal liability raises the stakes—and the stress—ever higher.
Various financial regulatory bodies and industry groups are working to clarify personal liability for chief compliance officers across diffent sectors industries like banking/FIs, securities, and so on. SEC Commissioner Hester Peirce provided a framework overview in July to help clarify expectations and explain administrative proceedings against Jeffrey Kirkpatrick, a principal and also CCO of Hamilton Investment Counsel LLC.
The National Society of Compliance Professionals, a U.S. group, also advocates for greater clarity and appreciation of context when regulatory entities are considering personal liability of compliance officers.
Advice for compliance officers from various sources emphasizes the importance of working for firms and leadership with a good culture of compliance, having sufficient resources and backing to do the work of compliance, keeping strong records/documentation, staying current on evolving requirements, leaning on legal support when needed, not wearing too many hats, and hiring a strong team.
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