Jun 29, 2022 - 1h
EPISODE 22
TRM Talks: Hot Topics in Crypto Compliance
With Alfarida Mohammed, and Jamal El-Hindi, and Tom Armstrong and Brandi Reynolds
As regulators and policymakers around the globe continue to debate and discuss, cryptocurrency businesses and financial institutions must work to ensure that they are skating toward where the regulatory puck is headed. This means building robust compliance frameworks to mitigate the risks of fraud and financial crime.
On June 23, TRM’s Ari Redbord spoke to an all-star crypto compliance panel to discuss today's key issues and challenges for compliance teams in the digital asset space. Panelists included Alfarida Mohammed, Senior Vice President of Compliance at FTX.US; Brandi Reynolds, Managing Director of the Bates Group; Jamal El-Hindi, Counsel at Clifford Chance and former Deputy Director of FinCEN; and Thomas Armstrong, Compliance Advisory at TRM and former Head of Financial Crime Compliance Digital Assets at Goldman Sachs.
It was an in-depth discussion on what businesses and financial institutions should consider when adopting and managing their AML crypto compliance program in order to meet evolving regulatory obligations. Here are a few key takeaways:
Institutions must focus on the basics first
Jamal El-Hindi explained companies and firms need to start with the fundamentals and take time, “assessing their business model and what the risks actually are.“ Brandi Reynolds agreed, cautioning firms against "throwing a lot of things on paper that sound really great but that they don’t have the intention to operationalize — or yet know how to operationalize.”
Alfarida Mohammed, who built FTX.US’ compliance program, highlighted the need for firms to do a thorough AML/CFT risk assessment of products, customers, and counter-party risks before the creation of a compliance framework, and policy and procedures. Hiring appropriately trained and educated staff who can implement and operationalize a comprehensive compliance framework is especially important. Finally, “with respect to the technological aspects, we analyze the marketplace for all the different vendors, making sure we are selecting the best in class to verify the data that we being are given and screen them from an AML standpoint.”
Many organizations are taking a conservative approach
Ms. Reynold also suggested, “that institutions really need to pursue conservative risk tolerance because regulators are taking notice,” especially when it comes to OFAC and sanctions compliance. While regulations are still evolving, it is critical to have a framework in place today.
This sentiment was echoed by Tom Armstrong, who recently joined TRM from Goldman Sachs’ Financial Crime Compliance Department. He highlighted Goldman’s evaluative framework, which, “covered off on all of the risks irrespective of whether there was a regulatory obligation to do this or not.”
One example is in the sanctions area. While OFAC’s position on sanctions is clear — crypto is treated the same as any other currency for purposes of sanctions compliance. In fact, OFAC has provided extensive guidance on what it expects from cryptocurrency businesses including transaction monitoring, geolocation and other tools to mitigate sanctions exposure. However, when it comes to Russia/Ukraine sanctions, there are still not cryptocurrency addresses on OFAC’s list.
How does a crypto business navigate this potential lack of information? Ms. Mohammed stressed the importance of conducting name screening and transaction monitoring, and of carefully evaluating the technology solutions available to support these processes, to manage sanctions-related risk.
Frequent dialog with regulators is key
Mr. Armstrong also discussed the challenges in a regulatory landscape that includes both regulation and regulatory expectations: “The latter is, I think, much harder to manage. So we wanted to, from the beginning, have early, frequent, and transparent interactions with the regulators.” Mr. El-Hindi highlighted that regulators desire to engage with industry and suggested firms engage regulators about emerging issues in the crypto space, focusing on the regulators’ goals.
Looking over the horizon
Ms. Mohammed stated that FTX.US will need to be, “flexible and nimble to whatever is going to come...we know the landscape will continue to evolve. I expect over the next few months there to be quite a bit of regulation by enforcement action. We read those enforcement actions and amend our compliance program accordingly.”
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About TRM Labs
TRM provides blockchain intelligence to help financial institutions, cryptocurrency businesses, and public agencies detect, investigate, and manage crypto-related fraud and financial crime. TRM's risk management platform includes solutions for transaction monitoring and wallet screening, entity risk scoring - including VASP due diligence - and source and destination of funds tracing. These tools enable a rapidly growing cohort of organizations around the world to safely embrace cryptocurrency-related transactions, products, and partnerships.
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About the guests
Alfarida is a Senior Vice President of Compliance at FTX.US focusing primarily on leading the cryptocurrency exchanges compliance program in the US. Prior to joining FTX.US, Alfarida worked at UBS in Compliance in Chicago, London and New York, most recently in the Asset management division. Alfarida has an undergraduate degree in Politics from Goldsmiths, University of London and graduated from BPP Law School, London in 2010.
Alfarida is passionate about creating true Equity and Inclusion in society and as such serves on the Greenwood Project Board, an organization that benefits diverse, underserved students as well as partner firms’ efforts towards enhanced Diversity, Equity, and Inclusion initiatives.
Jamal El-Hindi is a former U.S. Treasury Financial Crimes Enforcement Network (FinCEN) Deputy Director, having previously served as the Office of Foreign Assets Control (OFAC) Associate Director for Program Policy and Implementation. Jamal was also Treasury’s inaugural Chief Data Officer, with responsibility for enhancing management and use of all Treasury data.
At FinCEN, Jamal led the operational, policy, and strategic planning aspects of the bureau, overseeing rulemaking, guidance and interpretation efforts, and counselling on enforcement, regulatory analysis, and industry outreach. Jamal has demonstrated experience with respect to new payment methods, including prepaid access and virtual currency. In his role at OFAC, Jamal led Treasury engagements with industry and other stakeholders regarding compliance with OFAC sanctions, rulemaking and licensing.
Tom Armstrong currently serves as TRM's Compliance Advisor where he provides expert guidance and advisory support to traditional financial institutions, emerging crypto businesses, and regulators on industry best practices for the detection and prevention of money laundering and financial crime within digital assets. Prior to joining TRM, Tom spent over nine years at Goldman Sachs leading various investigative teams. He served as the Head of Financial Crime Compliance Digital Assets at Goldman Sachs, leading the strategic efforts to build the bank’s first dedicated financial crime compliance team covering blockchain-based assets. He also served as the Global Head of the Forensics Group, Head of the Financial Intelligence Unit, and Transaction Surveillance Group. He earned his Juris Doctorate from the University of Tulsa College of Law where he specialized in International Law.
Brandi B. Reynolds is Managing Director of AML & Compliance at Bates Group. She has more than 17 years of experience in the financial services industry supporting companies in the areas of anti-money laundering (AML) and consumer protection compliance.
Ms. Reynolds was President and Chief Executive Officer of CorCom, LLC—a consulting firm (that is now part of Bates Group) specializing in federal compliance and risk management offering services in BSA/AML/OFAC Program Development, Risk Management, Training, and Independent Reviews and specializing in areas such as AML, Financial Crimes Prevention (FCP), Consumer Lending, and Money Services Businesses (MSBs). Prior to CorCom, she was an in-house Deputy Chief Compliance Officer for 11 years.
Ms. Reynolds supports various financial institution types as outsourced Chief Compliance Officer. She is often sought for her extensive experience in fintech and cryptocurrency compliance. She has delivered efficient and effective solutions in areas of AML compliance program development, compliance monitoring and testing, and training. She has certifications for both Certified Anti-Money Laundering Specialist (CAMS) and Certified Anti-Money Laundering Specialist Audit (CAMS-Audit) and prides herself in advising companies on both the strategic side of growth and compliance as well as the intricacies of day-to-day compliance.
Ms. Reynolds recently partnered with the Association of Certified Anti-Money Laundering Specialists (ACAMS) to re-develop their advanced certification course, CAMS-Audit.
She is a frequent speaker at the International Money Transmitter Conferences (IMTC) and events.
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