ComplianceX
We're excited to bring to you all of the interesting and wild stories happening in the compliance, legal, risk, audit, anti-money laundering and related spaces.
I'd like to introduce you to the inaugural issue of the ComplianceX newsletter!
We're excited to bring to you all of the interesting and wild stories happening in the compliance, legal, risk, audit, anti-money laundering and related spaces.
Our take is that compliance will take center stage, as we're seeing a potential banking contagion/crisis and the SEC and CFTC going after several cryptocurrency exchanges.
Over the last 20-plus years, I've consistently seen hiring explode when regulators start aggressively investigating and examining companies.
Many people don't realize that this is a super cool space! Where else can you find over-the-top shenanigans, like Sam Bankman-Fried committing a crazy alleged Ponzi-scheme, along with other shady mysterious characters and CEOs of crypto platforms?
Feel free to share any wild and wonderful stories you come across, your own original content and any job listings you'd like to get in front of our audience.
Please feel free to share your feedback and comments.
Thank you for your support!
Best regards,
Jack Kelly
Will There Be A Big Demand For Hiring Compliance Professionals in 2023?
It is likely that there will be a big demand for hiring compliance professionals in 2023 due to the increasing regulatory investigations and evolving regulatory pressures. The competition for compliance talent has already intensified, and this trend is expected to continue in the coming years.
Compliance personnel should be cautious, as they grapple with updated corporate enforcement policies from the United States and other countries. There will continue to be an increased focus on risk mitigation and corporate compliance practices, and countries are enhancing regulations to ensure that companies comply with anti-money laundering laws and sanctions.
The Financial Industry Regulatory Authority’s (FINRA) Special Investigations Unit is also expected to play a key role in investigating potential violations of securities laws and regulations. It is important for companies to invest in compliance programs and hire qualified compliance professionals to ensure that they comply with regulations and avoid potential legal and reputational risks.
The job outlook for compliance officers in the next five years is positive, with a projected employment growth rate of 4.3% between 2021 and 2031, according to the Bureau of Labor Statistics (BLS).
Relevant Articles:
What Are The Biggest Challenges Facing Compliance Professionals In 2023?
Compliance professionals are likely to face several challenges in 2023, including updated corporate enforcement policies from the U.S. and other countries, continuing digitization efforts and incorporating environmental, social and governance (ESG) considerations into compliance training.
Compliance professionals will also need to get better acquainted with their supply chain and be prepared to face potential obstacles and compliance challenges that evolve on a near-daily basis. In addition, there will be an increased focus on risk mitigation and corporate compliance practices.
Compliance professionals will also need to address the challenges posed by digital transformation, increased cybercrime and third-party risks. It is important for compliance professionals to stay up-to-date with the latest trends and regulations and to invest in training and technology to ensure that they can effectively manage compliance risks and avoid potential legal and reputational risks.
Relevant Articles:
McDonald’s Ruling Shifts Oversight Liability Focus to Corporate Officers
DOJ Announces New Guidance On Executive Compensation And Evaluation Of Corporate Compliance Programs
Visibility Into Communications Remains A Worry For Compliance And Security Chiefs
What Is The Highest-Paying Industry For Compliance Officers?
The highest-paying industries for compliance officers include public healthcare firms, public energy sector and financial services. Public healthcare firms paid compliance chiefs an average of nearly $550,000 in total compensation in 2020, more than any other industry.
The financial services industry is also known to offer high salaries for compliance officers, with some positions paying over $200,000 per year. It is important to note that salaries may vary depending on factors such as location, experience, education, and the size and type of organization.
Why Did The Regulators And Compliance Officers Not Know About The Problems At Silicon Valley Bank, Signature Bank And First Republic Bank?
In the wake of Silicon Valley Bank’s collapse, which set off panic in the financial sector and concern across the global economy, a crucial question has been whether regulators could have intervened sooner.
Recent reporting has indicated that, more than a year ago, the San Francisco Fed did notice problems—including how the bank managed its exposure to changes in interest rates and whether it would have enough cash in a crisis—and warned S.V.B. about them. (Between 2017 and the time of those warnings, the bank’s assets had quadrupled to more than two hundred billion dollars.)
After the financial crisis of 2008, Congress passed the Dodd-Frank Act, which imposed stricter regulations on the banking sector. In 2018, Congress scaled back Dodd-Frank, raising the threshold for increased scrutiny of banks from $50 billion in assets to $250 billion. The Federal Reserve, FDIC and OCC refined those rules in 2019.
The changes released certain regional banks from some of the strictest requirements imposed in the aftermath of the 2008 financial crisis, a downturn that pushed the banking system to the brink. A lack of liquidity turned out to be a major problem for Silicon Valley Bank as deposits left the bank and the value of its assets declined as interest rates rose. In a recent federal filing before its collapse, the bank acknowledged it was not part of the Fed’s standardized liquidity coverage ratio requirements. The revised regulatory framework left Silicon Valley Bank and other mid-size peers in a new air pocket of the banking universe: too small to be deemed “systemically important” but now, as we’ve learned, big enough to bring the system to the brink again.
Relevant Articles:
Bank Runs In The ‘Twitter’ Age – SVB’s Collapse Poses New Challenges For Firms, Regulators
A Big Question for the Fed: What Went Wrong With Bank Oversight?
Congress Was Told Deregulating Banks Increased Crisis Risks. They Did It Anyway.
Which Cryptocurrency Exchanges Are Currently Under Investigation?
The CFTC sued the world’s largest crypto exchange Binance and its chief executive Changpeng Zhao, alleging the firm had worked to “keep the money flowing and avoid compliance,” including by letting U.S. customers trade on its platform even though it isn’t registered under U.S. law (Zhao called the suit “unexpected and disappointing”).
Do Hyeong Kwon, founder of the stablecoin TerraUSD and its companion token Luna, was charged with fraud by U.S. prosecutors after he was arrested in Montenegro, adding to a civil suit brought against him by the SEC in February, nine months after the sudden collapse of both tokens last year.
The SEC announced charges against Justin Sun and three of his companies over the sale of the tokens Tronix and BitTorrent, which the agency said are unregistered securities—the agency also charged eight celebrities with illegally promoting the tokens, including Akon, Lindsay Lohan and Lil Yachty.
Cryptocurrency exchange Coinbase said it received a notice indicating that the SEC had identified possible violations of securities law—the SEC focused partly on Coinbase’s “staking” service, which pays a return if customers allow their crypto to be set aside to help process blockchain transactions (Coinbase called the move “disappointing” and argued the industry has faced “conflicting statements from regulators”).
Nishad Singh became the third executive from the once-dominant cryptocurrency exchange FTX to plead guilty to charges of criminal fraud, amid a federal investigation into the crypto giant after it collapsed late last year and its former leader Sam Bankman-Fried was criminally charged.
The Federal Trade Commission announced it was investigating crypto lender Voyager Digital—which filed for bankruptcy in 2022—for the company’s “deceptive and unfair marketing of cryptocurrency to the public,” according to a filing.
The crypto exchange Kraken agreed to pay the SEC $30 million in penalties and to cease offering staking services to U.S. customers, after the agency said Kraken failed to register the service under securities law (the firm that runs Kraken did not admit to or deny the SEC’s allegations as part of its settlement).
The SEC charged cryptocurrency lender Genesis Global Capital and the crypto exchange Gemini Trust—owned by Cameron and Tyler Winklevoss, two twins who are known for claiming they created the idea for Facebook—with offering unregistered securities to investors with the promise of high interest on deposits through a program called Gemini Earn, causing Genesis to file for bankruptcy a week later.
Relevant Articles:
Policymakers Didn’t Regulate Crypto ‘Because They Thought It Would Essentially Die’
An SEC Watchdog’s Take On Crypto Rules: Everyone Would Be Better Off
Coinbase Tapping Into Innovation-Friendly Brazil Amid U.S. Regulatory Crackdown
What Are The Allegations Against Binance?
Binance, one of the largest cryptocurrency exchanges in the world, is facing several allegations from the CFTC and the SEC. The allegations include claims that Binance encouraged its US-based customers to use VPNs to bypass U.S. restrictions, that compliance efforts were merely "for show" and that Binance told its most valuable U.S. customers how to avoid its compliance controls even after announcing US restrictions.
The exchange also stands accused of going to great lengths to do business with U.S. customers and failing to register with the CFTC.
Noah Perlman, the newly hired global chief compliance officer at Binance, said the regulatory environment for the cryptocurrency industry has made his job one of the “most challenging opportunities in compliance.”
Perlman, speaking at a crypto industry conference on Tuesday, said it has been difficult to navigate the often opaque rules governing the crypto industry without being on the wrong side of the regulators.
One reason, Perlman, who joined Binance in January after a monthslong search by the exchange, is the “regulation by enforcement” approach taken in the U.S. He contrasted the process in crypto with working at traditional financial institutions, where compliance is difficult, but there are rulebooks and track records to guide a compliance officer’s work.
“Very difficult here in crypto, where you try to apply the same mindset, and all of a sudden, it’s not a discussion, it’s a Wells notice or worse,” Perlman said at the Links NYC conference hosted by blockchain analytics firm Chainalysis.