In the Bitcoin Blockchain space, startups need to do the right things for regulatory or compliance with anti-money laundering programs. Amber D. Scott and BitAML Inc. help compliance officers understand their role. Knowing these compliance policies and procedures are in place is important for startups because money is involved in the process. Joseph Ciccolo of Outlier Solutions Inc. also works with clients early in the startup phase to help them with cryptocurrency regulations and compliance since it’s what drives the US market in this space.
We have a wonderful show lined up for you that deals with cryptocurrency, blockchain entries and some of the pros and cons of each. We will be talking to two very exciting people who are extremely knowledgeable on these topics. Amber D. Scoot, MBA, CIPP/C, CAMS and Joe Ciccolo, a graduate of Northeastern College of Criminal Justice. Amber is the founder of Outlier Consulting Services and lives and works primarily out of Canada. She has a master’s degree from Aspen and has a broad-based experience in financial compliance and anti-money laundering among many other areas. Amber is a firm believer in the idea that good compliance can and does enable good business.
Joe is the founder and president of BitAML, a compliance advisory firm exclusively serving the Bitcoin and cryptocurrency market. BitAML clients include Bitcoin ATM operators, exchanges, traders and trading platforms. Crypto hedge funds, ICO and ICO platforms. He is a frequent guest speaker at both Bitcoin and compliance industry events, and is a certified anti-money laundering specialist, certified fraud examiner and anti-money laundering certified associate. Joseph and I have spoken with both Amber and Joe at some length and are excited to have them on the show.
Listen to the podcast here:
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Cryptocurrency Regulations with Joseph Ciccolo and Amber D. Scott
Amber, tell us a little bit about your services.
In the startup in Bitcoin blockchain space, we spend a lot of time helping people make sure that they’re doing the right things from a regulatory and compliance perspective, setting up anti-money laundering programs, doing training, making sure that the compliance officer that is appointed within the company is comfortable with their role and understands what they’re doing. We also do two-year reviews. Those are effectiveness reviews. It’s like an audit for compliance. It’s exactly as much fun as it sounds, but we try to make it as painless as possible and hope that it’s a good learning experience for everyone.
Is that review or that audit similar to if somebody wants to go public in an IPO, they would do their audit in pre-IPO?
A little bit different than that because it’s very specific to certain types of compliance. For AML, which is anti-money laundering, you would have an AML-specific compliance review that’s looking to see do you have policies and procedures in place? Do you have a risk assessment? Do you have a compliance officer? Does your compliance officer know the difference between AML and other types of compliance? Are they doing what they’re supposed to be doing? It’s a little bit different but similar. I think most of the functions from an audit perspective are similar in that way, but this is a very specific slice. It would just be looking at a particular type of compliance
At what juncture would you begin to work with your customer?
With a lot of startups, we work with them very early on. What often happens is that people will approach a bank or payment processor, and that bank or payment processor will say, “Before we can even look at your business, before we can even consider opening an account for you, we need to know, because you’re dealing with money, that you have compliance policies and procedures in place.”
You primarily work for the Canadian market. Is that correct?
That’s correct, yes.
Joe works here in the United States.
Yes, that’s right.
Joe, tell us how and what stage would your group get involved?
We typically are involved very early on with our clients, most of whom are start-ups or entrepreneurs by nature. They tend to come to us early in the process, because there is a great onus on compliance and regulatory matters here in the US. There is a lot of material out there, thankfully, that redirects a lot of these startups and entrepreneurs to the attention of our company and other folks that are in a position to advice from a compliance and legal standpoint. We’re very fortunate that word seems to have spread quickly that getting one’s compliance affairs in order early on is the best approach to market. It’s great that we hear from entrepreneurs, maybe they have a business model, maybe they even started doing a little coding, but they really aren’t at the point in time where they’re going to market. They still have some time to begin the process of thinking about compliance and how it’s woven into the fabric of their company. We’re very fortunate to work early on, and in that capacity we’ve met so many wonderful people with tremendous idea. It’s a great position to be in. I’m sure Amber shares my excitement in terms of the folks we’ve been able to meet and some of the ideas and innovations we’ve been able to be on the cutting edge with our clients.
Getting back to a typical client, would they have a white paper written yet, or is it two guys that get together and say, “We have great idea. Let’s start the process and see what all we need to get put together?”
I don’t think there’s necessarily a white paper or maybe even a formal business plan. Much of that is digital at this point and there’s a lot more collaboration. Certainly we’re looking for clients that have an existing partnership. We’re not looking for two people that have been in a parking lot and decided it was a great idea to start some cryptocurrency exchange. We’re looking for folks that have the aptitude, have been together, have planned this out, and thought this through. Maybe it’s not written on paper or some formal prospectus, but rather have an idea as to what their game plan is and are at that point early on in the process engaging us in battle testing their idea. Does this make sense? In the case for us, they’re asking certain questions relative to states, the particular state licensing for their particular business model, what interpretation might the state regulator take, or is there anything they could do to help mitigate or offset some of the risk based on the model that they have on the paper that they’ve drafted. It’s a really great opportunity to work with our clients early on and help shape and, if need be, reshape their business model to meet the compliance and regulatory demands.
Those demands are changing constantly. From what I remember, I saw on your site, Joe, a Bitcoin machine, like an ATM. Is that right? Did I see that on your site someplace?
Yeah. A strong percentage of our client base, maybe even the majority of our clients, are Bitcoin ATM or Bitcoin Kiosk operators. We just eclipsed the thousand kiosks mark here in the US. I’ve been told that there are about 2000 or so worldwide. It’s a very popular business model. We’re seeing a lot of folks enter that area of the crypto market. The barriers to entry are very reasonable. You’re looking at a fairly low cost for the hardware and software. The opportunity to go to market at a very reasonable upfront expense has really helped to drive that market. Interestingly enough, it’s actually regulation that’s also helping drive that market here in the US. Here, with respect to money transmitter rules and what’s required from a federal level as well as the state level, we have each different state taking its own interpretation of money transmission and how it applies to cryptocurrency.
If you were to open an exchange in the US, you are expected to obtain a state license in every single state, provided you want to do business with folks in that state. If you do anything online, everybody thinks they’re your customer. Exchanges in that regard have to go state by state and accumulate these licenses. For a Bitcoin kiosk operator it’s a lot easier because they’re picking one or two jurisdictions. Hopefully those are favorable jurisdictions where they can then go to market a lot more efficiently and don’t have to accumulate state licenses and go state by state.
Getting into this, and the reason that this is so important, is that we’ve seen these different agencies pop up over the past decade or so. For instance, there’s an agency out of New York that has been around since 2011 that you would need to get licensed as a money transmitter.
When you’re speaking of New York, you might be speaking of the so-called bit license, which is the state’s version of a money transmitter licensure for those that are operating within the state of New York. It’s extremely cumbersome, and our firm’s position is that it is arbitrary and capricious. It’s completely unnecessary, in the opinion of our firm. I suspect a wider audience of those in the crypto space would certainly agree with us. To date, there have only been three or four licenses issued, and there is a complete backlog of applicants that are still waiting to hear something and several freedom of information requests have gone unanswered. It’s a little bit of a black hole in terms of the application process, and that’s something that really concerns us. Unfortunately for us, and maybe unfortunately for New York, there was and still is, an exodus of entrepreneurs in the crypto space that have simply decided to take the bridge over to New Jersey or somehow find a new place to start and grow their business. Unfortunately for New York, it is getting to a brain drain in the crypto space, but to the extent that other states around there and other metropolitan areas can gain from the knowledge of those folks that decide to start their business elsewhere. Of course, that’s a positive.
[Tweet “We’re looking for folks that have the aptitude, have been together, have planned this out, and thought this through.”]
Are you seeing that money or cryptocurrency follows the absolute best jurisdiction?
I don’t necessarily think that there’s a forum shopping going on, but you tend to see a lot more successful businesses in the crypto space in favorable states such as Illinois, my home state, as well as Texas, and even in states that quite frankly don’t have an opinion, like California, which has tried to put a license forward for three straight years. It’s been unsuccessful, so there’s a gray area that essentially indirectly allows or enables individuals to bring their Bitcoin kiosk or other type of trading service to the market. Whereas New York, the moment that licenses were released, we saw a bit of an exodus of companies just nearly shutting down and moving to other jurisdictions or exiting that market altogether. We have a similar activity with Washington State and, to lesser extent, maybe Georgia and North Carolina, once they started to go down that road, and most recently Hawaii, with the exit of Coinbase.
There definitely is a driving force based on what states are willing to do in terms of interpretation and application of existing money transmitter. In the case of New York, if they decide they just want to create their own out of thin air and apply it to cryptos, there’s obviously going to be an impact on our market. It’s no surprise that the Chicago market for cryptocurrency is just going crazy right now. We’re joking that at one point it will become like Starbucks. There’ll be on every street corner we’ll see a crypto kiosk.
The CME broke some new ground as well recently, the Chicago Mercantile Exchange.
Getting in the future’s market our position here and my work where we’re engaging with the state, it’s our position that we believe Chicago to be the trading and options capital of the world. It would serve to reason that we would be on the forefront of any sort of trading activities involving crypto or any other innovation within financial services. That’s something that the state of Illinois has taken very seriously, as well as the municipalities, including the city of Chicago, really wants to be on that cutting edge and has a lot of buy-in both from the private and public sector. We’re very excited about that. For once, Illinois got it right.
Amber, is it the same way there in Canada? Are the agencies all jumping in to say, “We’re an agency so we’re going to regulate. If you’ll ask for permission and fill in the application, we’ll sure take your money and regulate you.”
No, for the most part. Federally, we don’t have anti-money laundering regulation that applies to Bitcoin or cryptocurrencies. They’re not considered to be money service businesses at this point. We did have, as part of the Federal Budget Bill that passed in 2014, which was Bill C31 at that time, a statement that said that dealers in digital currency, which is not yet defined, would be considered money services businesses at some point in the future. Before that happens, we have to have draft regulation. That draft regulation comes up for public comment. The Department of Finance takes it back to the bat cave. They examine those comments, they edit it, they publish a final version, and then there’s a grace period before everyone needs to get compliant. From the date that that first draft is published, it’s a safe assumption that there’s probably about a year and a half to two years before those requirements are fully enforced. That will happen at some point in time. We may actually even see a draft this year, but I’m not sure yet exactly what that will look like.
I’m not sure if Canada has this, but do you guys have a FOIA type of request like we have in the federal system here?
Is that a Freedom of Information Act type request? Yes.
Joe, maybe you’ve seen this here in the US. Have you been able to get a determination from the different agencies, or maybe even municipalities, of how they’re going to look at cryptocurrency?
Quick drawing the distinction fenced in at the Federal Level Financial Crimes Enforcement Network, it’s a bureau of the US Treasury, there’s really nothing to interpret there. They’re pretty straightforward in what they view as regulated activity and regulated business models. As far as the States, we’re seeing them fall into one of three buckets. They either have a proactive positive stance, a proactive negative stance or, as is the case for most, no action position. Meaning there is nothing tangible that you can point to or you can pick up with your hand and say, “Here is what their position is of the state regulation.”Until they decided to formally regulate that, at this point, it’s fine on the individual in his or her business to contact that particular state agency and play the MNSIB game. That means calling up, hope you get to speak to the right person at the right time, hopefully they’re of sound mind or in a position to help you make a determination. They’ll ask you for some facts and information, facts and circumstances. Sharing that information with that person, for that particular state agency, and then ultimately listening to his or her interpretation, generally it’s the, “We just haven’t decided yet. We don’t know. You’re okay to go.”
Usually it hinges upon a couple of different factors. Is it a direct transaction, wallet to wallet, between one party and another with no intermediary? That’s usually a good sign that you could be in a position for an exemption. If it’s non-custodial, if there’s no third parties, any of those what we call trigger words for regulator, is probably going to move you over to a regulated side, if you don’t have those factors in play with your particular business model. Again, facts and circumstances. We coach them. We work with our clients to call up their various state regulators that apply and make that phone call. We’ve been surprised that over the years, and we’ve been in the business about three years now, we’ve noticed that the state regulators are more interested in actually answering the phone and giving us an answer than maybe they were three years ago. That could be because some of us call a lot. Maybe they figured it’s easier to just answer on the first time someone calls up. It’s just better practice. What are the rules and how do I play? That’s mostly what my clients are asking me. They’re not trying to get out of anything, they’re not trying to get into anything. They just simply wanted to know, “What do I need to do, what’s the best way to execute on that, and how can I be above board?”We salute that and we’re glad that the regulators at the state level have realized that it’s much easier to engage and that we’re really just nice folks in the crypto space.
One of the things I want to add to that, just for the startups that are reading this that are like, “I’ve got to call my state regulator.”Document when you make those calls. You want something that you can point out later to say, “Yes, Joe and I called the state of Illinois, this department, this person, here is the response they gave.” You really want to have that in case there’s an issue later on.
Words that are written in the code or statute have a different meaning in a legal realm compared to what normal people think these different things mean. A guy that is just now getting into crypto, and he says, “It looks like a green pasture. I can just take off running,” it may not be the case. If they’re not familiar with those words, they could very easily get tripped up.
I never want to discourage anyone from reading source regulation and from reading guidance. Definitely get that expertise from someone who understands the system, who understands what the regulator is looking for. Have those conversations, but also look at that source material. You can never really learn enough about that context. As Joe had mentioned, we have a lot of very early stage conversations, where someone might be calling simply to say, “This is the idea, this is what I’m thinking of. How am I covered? Where am I covered? Where would I even look to read more?” The regulators also, both in Canada and the US, have both been tracking and FinCEN, the SEC on the securities level, the OSC, and other provincial securities regulators here in Canada released really good plain language guidance. The intent of that guidance is that entrepreneurs can pick it up and look at it and understand what it is that the regulator is thinking and what it is that they need to do. Even if that source law is drier than the Sahara Desert, so to speak, you probably still pick up some of the guidance and make sense of that, because it’s intentionally written in a way that’s plain language and directed to business.
A regulator may have a very clear distinction of what they’d like to see, but a prosecutor may have a completely different view of that. That’s why it’s so critical and so important for these entrepreneurs, that for the most part are positive and optimistic people, they need somebody to come to and sit down and say, “Here’s our plan, what do you think? What are the steps that we need to take? How do we put this thing together?” instead of trying to be a lone ranger out there.
From my perspective, having been in traditional banking for so long before getting into crypto, it’s amazing to talk to all these tech entrepreneurs. Both Amber and I are giddy over this when we talk to the innovative entrepreneurs in this space. We get excited and we share their excitement and their energy. It occurred to me, working so long in banking, there’s this night and day comparison between the two industries. The banking industry regulation is like furniture. It’s always been here. ”It’s nothing new, just put it in the box. We’ll take a look at this or have our lawyers look at this.”In the area of technology, we talk about Silicon Valley as a measure for technology and all the innovation that’s going on here, they’d never really thought about regulation, not to the degree that financial services has regulation. Maybe they were concerned about patent infringement or some other areas that are important from a legal and compliance standpoint, but pale in comparison to the regulatory regimes we have in financial services. There was a bit of a culture shock there early on in the industry, and hopefully we’ve worked through that as an industry.
Our constitution in Article 1, Section 10 says, “No state shall; make anything but gold or silver coin a tender in payment of debts.”The only real money that we have is gold and silver. How was it that we could consider cryptocurrency as money, when it’s obviously in violation of the constitution?”
When it comes to crypto currency and is it currency? Is it money? What is it? That is still an open question. The courts continue to debate that, and I don’t see that going away anytime soon. You could have several different agencies here in the US, line them all up, and they have a different interpretation. We’ve talked about this before, where FinCEN says it’s money transmission, the SEC says it’s a security, CFTC says it’s a commodity, the IRS says for purposes of taxation it’s property. When my clients ask which is it, I answer all of the above. It’s based on facts and circumstances. I know that doesn’t necessarily answer your question directly, and I wish I had more insight on that. Quite frankly the entire Bitcoin and crypto community wishes they had insight as well. Is it a currency or is it not? We’re going to have contradictory thoughts on that. I don’t necessarily see a one-size-fits-all approach or resolution to that anytime soon.
The reason I ask is because you and I are not states. You and I are just people, and you and I can use anything for currency that we want to. We can use cryptocurrency, we can use sea shells, we can use salt, we can use gold or silver, we can use anything that you and I both feel has a value as a medium of exchange. It’s only the states that are bound by the constitution to consider only gold and silver as money. My point is, if I want to use cryptocurrency to buy something from you, for example, and you want to sell it to me for cryptocurrency, that’s not money. That’s just an exchange that we have. I’ve exchanged something that we both feel has a value for something that we both feel has a value.
That’s where we get into all different court cases with different interpretations. Is it money? Is it not? The government says, “It’s money because it’s money laundering,” and then it makes a separate argument, “It’s not money because it’s not issued by the government.” Which is it? Is it money? Is it not? It’s not issued by a government. We can certainly debate this on and off and go on into perpetuity with this argument. People have really begun to think about money as something that’s not necessarily needed to be issued by government anymore. That’s one thing that our industry talks at length about. Here is this observation that seemingly comes out of left field, but if you look at historically, economics and financial services, there’s really a small point in history where it’s the government that controls the money, that the state controls the money, that before it was gold and other precious metals and resources that individuals can assign value to. It’s only in fairly modern history where we’ve had governments and flags and some nationalism assigned to currency. I’m not saying that that period of our history is about the sunset, but we’ve really opened up a dialogue into what is money.
As soon as you begin to ask questions about what money is and you try to explain it to your son, your daughter, grandson, granddaughter, you quickly realize that you just don’t really know as much as you thought about money. What gives it value? Who issues it? Once those discussions come about, inevitably cryptocurrency and Bitcoin find their way into that discussion. It’s healthy for us to really rethink money and our monetary system. I’m not advocating any special changes or any updates per se, but I’m just glad that there is this ongoing engagement, ongoing debate, and individuals are all of a sudden interested in where money comes from. It should be no surprise to folks that the white paper for Bitcoin that was issued by Satoshi, came on the heels of the market meltdown, the credit crunch of 2008. That’s not by coincidence.
The other thing that bothers me here is that the Coinage Act of 1792 sets a specific value on the dollar, so many grains of silver or so many grains of gold. That’s what the value of a dollar is and we have a dollar as the formal currency, if you will. I don’t see how cryptocurrency comes in there. Maybe I’m just not smart enough to get it.
It’s very much an open question. The idea of laws is that laws should not be something that don’t change over time. They should change to serve the needs of the society that they’re there to serve whatever function in, be that to protect people, to guide people, whatever reason that those laws exist in the first place. The fascinating thing about Bitcoin and other cryptocurrencies is that we’ve not seen anything that behaves quite like these things ever before. They’re quite new. There has never been a time that I can send value to someone across the world in seconds and have that be a completely disintermediated, peer to peer transaction, that is not reliant on any other government or intermediary in any way. That’s fascinating and beautiful and dangerous and wonderful, but we don’t always know how to fit it into existing laws.
Most of what we’ve seen that isn’t a disaster ala BitLicense, from a legal and regulatory perspective, has really been an attempt to take existing laws and say, “How do these things fit?” That’s not always a neat fit. That’s not always a clean fit. As Joe alluded to, different agencies have different opinions and different things, so the idea that something might at once be a commodity and money in various situations. It’s Schrodinger’s currency in a way. It both is and isn’t various things, in terms of the way that it’s behaving or the way that it’s being used at any given point in time. That’s okay. We’ll figure these things out in time. In the meantime, the practical thing for people that are using, that are buying and selling digital currencies to do, is really to understand their own context, make sure that they’re getting good legal and tax advice. I am not a tax expert, but that’s something that everyone in this space really needs in terms of having those consultations, understanding the tax consequences, and again, documenting those positions. The only thing that I can guarantee is that they will probably change over time.
We’re doing a complete series on where money originated, going all the way back to the 1913, to the Federal Reserve, to show that these are Federal Reserve notes, and they used to be able to take it down and get it traded in for coins, and then the 1933 where they took all the gold away. We’re taking the American people through the steps of what has really happened over our history because there are people that work 40, 50, 60, 70 hours a week for something that they don’t even know where it came from. How does this originate? Where did it come from?
Have you used part of that process talk to a lot of people about the gold standard and what that means, and whether they’re aware that the gold standard isn’t really part of most monetary systems at this point in time?
Yeah. When people understand what this note represents, then there’s nothing backing it up. The only thing that backs up the US dollar is the US military. Steve Mnuchin came out and said, “We hope this Bitcoin thing doesn’t turn into another Swiss bank account.” I don’t know if you saw that article.
I did. Those comments were similar to what then-President Obama said as well, using an analogy of drawing the coin into the same sentence as a Swiss bank account. I don’t necessarily think that that’s something that is a surprise. It’s concerning but it doesn’t surprise me that the government takes that particular position.
How is this coming about, as far as regulatory issues? How is this playing out with the Libertarian Movement?
I suppose I can only speak for the Libertarian movement so much as I’m aware of it here in the US. Bitcoin and cryptocurrencies is very much of interest and is a very popular topic of conversation among Libertarians or Libertine, those of libertarian values but not part of the party. It really speaks to their ethos of liberty and independence, especially from government, but to the extent that that is a critical piece in which leads the industry. Early on there was a lot of libertarian and cyberpunk influence, but over time, their voice is not heard as loudly. I don’t mean this in a disrespectful way, they are rebels that led the industry, because we need rebels to lead the way. That’s how things work, at least that’s how the US started.
We have the rebels lead the way, and then over time these rebels were replaced by entrepreneurs. My clients say to me, “What are the rules and how do I play?” Three years ago that was almost unthinkable. It was very much, we’re going to create this whole independent system, and if you don’t have money to report, it’s none of the government’s business. It turns out that’s not the case. Unfortunately, or fortunately, depending on one’s perspective, over time that libertarian leading voice has become a little bit more under the surface. In other words, if you go to a typical cryptocurrency event, you’re likely to find individuals that have some libertarian and archaical capitalist type of viewpoint. That’s not what they lead with. They lead more with business. They lead more with, “This is how I am bringing my products and services to market. This is how I’m staying compliant.”They’re not going to hide who they are, but they’re not using that as their lead in, and they’re not using that as their call to action. In that way, to a certain extent we’ve matured in the business sense, but to the degree that answers your question regarding politics, the political aspect has, over time, gone down in terms of its influence on day to day operations within the space.
Both of you are going to speak at the conference here in Dallas in February. Amber, could you tell us a little bit about that? Are you guys set for a certain day or have they figured out the schedule yet?
I believe that we are on the Friday, but we’re in the midst of confirming. Joe and I will actually be co-presenting together, so bring your Canada questions, bring your US questions, bring your global context questions. We’ll be there for you.
Do you have anybody down in Mexico? Do you have a connection? You could have the trifecta if you had that.
We’re working on it. If you’re running an awesome compliance firm in Mexico, please drop us a line. We’d love to hear from you.
We can complete our map of the Americas. That’ll be wonderful.
This industry is not going to go away and compliance is going to be huge. You’re going to have the patronauts out there, and the patronauts aren’t going to want to have any type of compliance, and so those guys are going to have to get in line. Then you’re going to have the other guys that are going to be on the complete opposite side that are begging the regulators to regulate more.
We call them incumbents. They’re known as banks, Jamie Dimon.
When the market, forex, crashes, whatever the scenario, there’s going to be people that are going to start screaming for the regulators to come in and regulate these people, and it’s just going to get more and more and more.
I don’t think Bitcoin is where we’re going to see that in a big way though. That’s going to happen as we see some of these things that developed where there really is no functional token, there really is no product, there really is no project behind what’s been promised, other than some slick marketing and a couple of dudes who have now bought a Lambo and moved to Seychelles.
[Tweet “Get that expertise from someone who understands the system, who understands what the regulator is looking for.”]
We’ve been working with our clients for more than a year and a half now, and it was our contention that the next regulatory front in the crypto space will be consumer protection. This was pre-ICO and before Coinbase started having their difficulties scaling customer service. We could perceive that eventually, as this reach the masses, you would have a lot more people coming into the space that were green. Consumer complaints don’t start at the head office. Consumer complaints generally start off as a misunderstanding or a simple error that could have been corrected with a direct phone call or some email correspondence immediately, properly and thoroughly. That’s the way it’s playing out right now, the next frontier for regulatory compliance is consumer protection. We’re working with our clients to make sure that they’re keeping good records. It’s always great to have a memo from state regulators. It’s always great to document any interaction, especially those that are negative or those that may have a consumer connotation to them, so that you have a record of what transpired, how you fixed it, and then hopefully how it will never happen again.
If something were to come up from a legal aspect, and you could show as a prudent person that you’ve gone through the different steps of compliance to make sure that you were in compliance, I don’t know if you could get a FOIA request out of IRS or out of the SEC or out of the different agencies to say what’s your exact position because they’re not going to be nailed down for that. There is some type of thought, of saying, that it’s not two cowboys that jumped out here and had this great idea and took no counsel from anybody, and now we got this big problem in our hands.
The regulators do take into account, they say this publicly, this is not any trade secret, they are very up front that cooperation, “Are you putting your best compliance foot forward? Are there good faith efforts? What have you done on your own? What have you done since we worked with you?”Those come into shape in a dramatic way. The outcome, whether that’s a fine, some monitoring, or some remediation that you’ve been tasked with by the government, there you can dial that knob up and down significantly. A lot of the decision points are, “How did you start off? Did you work with attorneys? Did you work with a good attorney? Did you take the right steps from a compliance standpoint? Were you documenting things? Were these things done in good faith? If you did find something wrong, did you lift the rug and sweep it underneath, or did you attack it head on and say, ‘I’m better than this, I need to fix this, I need to work with the right people and I need to be a better participant in the market place?’”If you can answer those questions in the right way truthfully with a regulator, a whole different ball of wax right there.
Thanks so much to you both.
About Joseph Ciccolo
Prior to launching BitAML, Joe was a founding member and architect of the BSA/AML program of a top 100 U.S.-based online financial institution. He also served as a project manager for a top 20 global bank, where he led several regulatory and AML audit remediation projects, and consulted on the enhancement of existing procedures for money services businesses (MSBs), politically exposed persons (PEPs), and other high-risk customers. Before entering the field of AML, Joe held leadership positions within various risk management disciplines, including vendor due diligence, fraud prevention, and corporate investigations.
He is a frequent guest speaker at both bitcoin and compliance industry events, and regularly consults with policymakers and law enforcement, as well as traditional retail and investment bankers on both cryptocurrencies and customer onboarding. Joe enjoys volunteering his time with the non-profit, student-led Blockchain Education Network, and serving as an advisor to the Illinois Blockchain Initiative, a collaborative state interagency effort to promote innovations in blockchain and distributed ledger technology in Illinois.
Joe is a Certified Anti-Money Laundering Specialist (CAMS), Certified Fraud Examiner (CFE), and Anti-Money Laundering Certified Associate (AMLCA). He is a graduate of Northeastern University, College of Criminal Justice.
About Amber D. Scott
Amber completed her undergraduate studies at the university of Waterloo. Her academic interests have always included law and criminology. As a teaching assistant she assisted in the development of the university’s first applied psychology course on criminal profiling. She has also received an MBA from the University of Aspen.
The first memory that Amber has about financial crime is hearing her father and a friend of the family discussing the dilemma faced by a local union that had fallen under the influence of an organized crime group. Pension monies had allegedly been deferred into investments that benefitted the crime organization, but not the union membership. Many discussions with her father followed on the structures that could allow a criminal organization to circumvent the controls in an established organization for their own purposes without suffering any consequences. It was all very confusing and fascinating for a ten year old.
While her confusion has faded, her fascination never has. Amber is passionate about ethical and legal compliance. Her obsession with understanding the risks and devising actionable solutions has lead her to work in the financial services industry and with Canadian consulting firms. In 2013, she founded Outlier Solutions Inc. to provide anti-money laundering (AML) solutions to Canadian reporting entities.