Increasing focus on the cryptocurrency industry has placed new pressure on crypto compliance officers and legal professionals, who worry regulators will hold them personally responsible for issues at their companies.
That’s according to a Monday (Aug. 8) report by the Wall Street Journal, which noted that these professionals face greater personal liability risks while lacking the resources available to people at larger financial firms.
“There is more risk because there is no clear rulebook,” Jeff Horowitz, chief compliance officer at Palo Alto, Calif.-based crypto custodian BitGo Inc., told the Journal.
Horowitz is a 25-year veteran of more traditional firms, such as Bank of New York Mellon Corp.’s Pershing LLC. He said crypto compliance professionals need to balance adhering to the rules while dealing with the pressure to take risks to help businesses grow.
He added that many businesses in the sector “operate from a startup mindset.”
According to the Journal report, the Financial Industry Regulatory Authority in March delineated the potential liability for compliance chiefs, saying it would only take action against chief compliance officers who failed to perform specific supervisory responsibilities established by their companies.
Read more: Robinhood Crypto Unit Faces $30M Fine for AML, Cybersecurity Violations
This is happening as cryptocurrency companies face increased pressure from regulators. Last week, the New York State Department of Financial Services (NYDFS) fined the cryptocurrency trading unit of online brokerage Robinhood $30 million for alleged violations of anti-money laundering (AML) and cybersecurity regulations.
The enforcement action — the first against a crypto company by the NYDFS — said Robinhood Crypto “failed to maintain and certify compliant anti-money-laundering and cybersecurity programs.” The regulator also ordered the company to retain an independent consultant to evaluate its compliance.
The NYFDS determined Robinhood Crypto triggered “significant failures” which led to “shortcomings in the company’s management and oversight of its compliance programs.” That included failing to maintain a culture of compliance or allocate resources to the programs, especially as the company saw rapid expansion.
Read also: Sen. Warren Issues Rallying Cry to Counter Crypto’s Influence Over Banks