In early April, BitAML Founder & President, Joe Ciccolo was interviewed about the shifting banking situations as it pertains to cryptocurrency companies who find themselves “debanked” or trying to establish a new banking partner.
This interview has been edited and condensed.
Interviewer: In your experience, what are some strategies or best practices for crypto companies looking to establish a strong banking relationship in this new challenging environment post this latest wave of banks closing?
Joe Ciccolo: It’s important to know that what got you a successful grade on your most recent regulatory exam or what got you that first bank account is not necessarily what’s going to get you that next bank account or that next successful exam. The standards are constantly increasing, both from a compliance perspective and in the view of regulators. It’s iterative, constantly enhancing, investing time, updating your AML policies and procedures, identifying alerts that may not be working, for example, and then either tuning those alerts to a degree or adding new alerts. Continuous investment in training, updating policies, fine-tuning, and making extra efforts is what will set you apart from competitors.
Interviewer: What would you say to a bank that is on the fence about getting involved with a cryptocurrency company?
Joe Ciccolo: I would challenge banks to invest time in understanding and researching cryptocurrency. Banks have a strict and conservative risk profile, so they may not jump into the crypto space immediately. However, they should at least understand it because whether they bank crypto or not, someone is transacting crypto through their institution. It’s a fact of life that banks need to accept and understand.
Traditional banks shouldn’t be oblivious or ambivalent to crypto. Part of strong AML is knowing your customer and understanding their financial dealings. If you’re dealing with crypto, you should know a lot about it. Gaining knowledge about crypto allows institutions to identify opportunities for new products and services. Banks should also reach out to members of the crypto space, particularly crypto compliance professionals, to learn about the risks and other considerations.
If a bank is interested in getting into the crypto space, they can start with something lighter, like opening a bank account for a tertiary services provider, such as a compliance vendor or consulting firm. This allows the bank to learn more about the industry and onboard a customer cohort that’s not as risky as a crypto money transmitter. This accumulated knowledge and connections will be beneficial when dealing with regulators and examiners, demonstrating that the bank has entered the crypto industry responsibly and for the right reasons.
Interviewer: OK, so if banks are hesitant to fully engage with crypto companies, they can start by partnering with crypto-adjacent firms, allowing them to learn and assess their interest in entering the crypto world while minimizing risks.
Joe Ciccolo: That’s exactly right.
Interviewer: And on that note, would you say that these banks, these medium and large banks that are crypto friendly, do they have their own crypto compliance departments?
Joe Ciccolo: Yes, medium and large crypto-friendly banks typically have a dedicated compliance unit specializing in onboarding crypto clients. They may have an associate compliance officer or senior analysts focused specifically on crypto. This non-traditional onboarding experience requires subject matter experts who can interact with a finite number of crypto companies, benefiting the financial institutions that offer services to the crypto space.
These banks adopt a holistic strategy with specialized subject matter experts and thoughtful architecture. In the past, we have helped crypto-friendly banks set up the infrastructure to bank crypto companies by bringing in subject matter expertise, creating specialized units, and immersing themselves in the crypto space by attending conferences and specialized training. This focus allows them to share information and best practices while staying up-to-date with industry developments.
Interviewer: Do you think there are currently enough experts to keep business flowing and keep innovation flowing in the crypto space?
Joe Ciccolo: There is a shortage of compliance professionals in the AML field, and this issue has only been magnified with the advent of cryptocurrency and fintech applications. Few people go to college aspiring to be financial crime professionals or AML experts, so most enter the field later in their careers.
The challenge lies in convincing compliance professionals to leave their traditional banks for the volatile crypto industry, especially with negative press and price fluctuations. Compliance professionals generally have a conservative outlook and are more likely to stay with a conservative bank.
However, even if they do not have aspirations to enter the crypto space, they can still become crypto subject matter experts within their traditional institutions. By doing so, they can retain their traditional job and its perks while bringing valuable expertise to the table. This is how I started my journey in crypto before founding BitAML.
Interviewer: How should crypto companies start looking for a new bank? Do you have any websites to recommend?
Joe Ciccolo: Well unfortunately there’s no definitive list of crypto-friendly banks. However, generally some quick internet searches will reveal some of the crypto friend banks. Bear in mind these lists are subject to change as institutions may enter or exit crypto banking. Once you have identified these institutions, it’s best to reach out and confirm that they are indeed doing business with and also onboarding crypto companies at this time.
Interviewer: Any final advice for either crypto companies or banks?
Joe Ciccolo: I would suggest to both banks and crypto companies to work together to create dialogue, information share, not just wait for the next compliance conference to have discussions, but actively reach out and engage one another and knowledge share. Clearly, there’s a need for more banks to support the crypto space, but they’re not going to do that until they see the opportunities, both on the business side, but also make sure that they can guard against any potential downside risk.
Interviewer: Is there a list of resources for crypto companies that could be useful?
Joe Ciccolo: If you really want to know what banks are expecting, the first step is to reach out to those individual institutions, have that phone call, speak to someone directly, and get to know what their expectations are. Generally speaking, they’ll have some form of checklist or information they can share with you. It’s best to get that ahead of time.
Interviewer: How does BitAML fit into the journey of working with a bank?
Joe Ciccolo: We provide a variety of compliance consulting services, from writing AML compliance documentation, annual AML compliance training for employees, independent AML reviews, and project-based consulting along the way. Some of that consulting has taken the form of helping with the bank application process.
Interviewer: Thank you for your time and sharing your expertise, Joe, about these complicated and shifting issues regarding regulation in the crypto space with banking.
Joe Ciccolo: Pleasure’s mine, anytime.
If you’re interested in learning more about how BitAML can help you navigate the enhanced regulatory compliance expectations and best practices banking partners are looking for, signup for a free consultation.