Charles V. Senatore, former Director of the Southeast Region of the US SEC, shares his essential insights for crypto compliance officers. Senatore has over 36 years of industry experience; as a trial lawyer, a federal prosecutor, a law firm partner, and a senior regulator at the SEC. He then went on to lead global compliance functions at Merrill Lynch and Fidelity.
We’ve created a post with the top 10 takeaways from his conversation with our co-founder and CEO, Pelle Brændgaard.
1. Regulators have developed timeless principles they care about, and compliance officers should implement policies to address them.
The compliance team must keep in mind the timeless principles the regulators care about. If they look back to the essence of what regulators tend to think about, then they can provide input on how these principles may need to apply to new crypto products.
2. Crypto firms should do three things to encourage regulators to continue taking a risk-based approach with crypto to achieve desired regulatory outcomes:
Remember that it is your responsibility to become compliant. You are accountable for outcomes and must prepare adequate controls.
Work as a community to achieve herd compliance.
Engage with regulators responsibly.
3. Mandating technology doesn’t end well.
The danger of mandating a technology is that the technology changes, yet the regulation stays set to a specific point in time. It’s hard to unwind firm regulations, which creates all sorts of inefficiencies.
4. A healthy regulatory relationship can benefit the industry.
Regulators, as public servants, have an interest in the integrity of their markets. Accordingly, many regulators are eager to engage and learn–keeping up to speed is crucial for carrying out their mission.
5. Companies that view compliance as an opportunity for differentiation will have a competitive advantage over their competitors.
Businesses that do not take the proper steps to handle consumer assets well will lose ground to firms with strong and effective compliance programs.
6. Want a compliant product? Involve compliance officers during the ideation process.
New product ideas will have better outcomes if compliance officers successfully integrate themselves from the start. Nothing is more frustrating than having an excellent idea for a use case shot down by a compliance officer. Involving a compliance officer during step one mitigates future disappointment.
7. Compliance officers should consider aligning themselves with business goals and growth.
To forge a one-on-one connection with business leaders, compliance officers should search for compliant ways to realize business goals instead of reflexively saying “no.” With that mindset in place the compliance team will eventually advance from being seen as the “anti-business department” to being appreciated as part of the solution to help the business grow.
8. Compliance officers are in a great position to have a seat at the leadership table.
Once business leaders realize that the compliance team is a part of the solution to help the business grow, an opportunity for compliance officers to be a respected part of leadership soon follows.
9. Most compliance principles fall into two major categories: binary “yes” or “no” decisions or risk-based considerations.
Use cases without specific binary regulatory requirements are where compliance officers can work their magic and show their value by applying time-tested risk-based principles to get a high level of comfort. Appropriately assess risk, and propose mitigation steps, and create that new product.
10. Talent that understands both tech and regulatory principles will be key to success in this industry.
As we head into uncharted waters, having people who understand the tech and how these regulatory principles apply to it will be crucial ingredients. The teams with these capabilities will be best suited to nimbly and quickly adapt as new use cases emerge. It will take collaboration among different teams and working seamlessly together to reduce friction and allow innovation to flourish.