Joseph Ciccolo, AML veteran, explains how to engage with your regulator and manage your money transfer licenses

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I split my time between the crypto and international money transfer world. To speak in generalities, the energy, mindset, and concerns are dramatically different. When it comes to compliance, however, I do think some parts of the cryptosphere are starting to edge closer: Fear the regulator — or your business will face capital punishment. No pun intended.

Joseph Ciccolo, founder of BitAML and ComplyFit (RemTECH Awards 2019’s first entry) has witnessed this since he started his compliance consulting firm in 2015. What I appreciate about Joe is that he was once the banker who was approving money transmitters, and now is sitting on the other side of the table helping clients have the compliance programs, systems, and documents they need for approval. He’s a rare breed of creativity while also remaining highly pragmatic with an attention to detail and schedules.

Also rare: his advice on crypto regulation is not garbage.

I’ll let you learn more about him in this week’s RemTECH Chats.

Olivia Chow: So you’ve had quite a bit of experience in anti-money laundering and from many sides of the table. Can you give us your high-level compliance story?

Joseph Ciccolo: I’ve spent about a decade and half working in the greater risk management space with various leading financial institutions. After beginning my career in fraud prevention and corporate due diligence disciplines, I transitioned my experience to the AML space.

Throughout my career, I’ve had the pleasure and good fortune to work in and support the building of various AML programs. This includes developing processes, writing formal policies and procedures, hiring teams, and, in the case of a Top 100 financial institution, building an AML department essentially from scratch into a mature, self-supporting business unit in less than one year. These experiences, individually and collectively, prepared me well to serve the dynamic cryptocurrency space alongside the most amazingly talented team we’ve assembled at BitAML.

OC: When and why did you decide to start BitAML? This was way before your taxi driver was talking about bitcoin.

JC: BitAML was founded in 2015, which is about 100 years ago in “bitcoin years”.

The year prior to launch, I started hearing about cryptocurrencies. At the time, and even to this day, the reception among traditional bankers and compliance professionals was dismissive and derisive. However, I decided to look into it for myself, focusing my attention on the underlying technology and innovation. This journey of discovery included attending several Meetups and crypto events. When it inevitably came time to introduce myself, I noticed that crowds were beginning to gather around me, asking compliance questions and requesting my time. This is not normal for a compliance professional; most people run the opposite way.

After some follow-up and questions of my own, it became quite clear that there really wasn’t anyone in compliance focusing their attention on helping, coaching, and guiding these innovative entrepreneurs in the fast-paced and ever-evolving crypto space. So, I decided to build a compliance advisory firm focused exclusively on crypto financial institutions to help these insanely talented entrepreneurs. One year later, after much preparation, I formally launched BitAML. Four years and counting later, it continues to be nothing short of an amazing journey!

OC: And now you and your team have developed ComplyFit. It’s a compliance reporting tool to manage your US state money transfer licensing. Which of course is not just a bitcoin exchange problem but any entity requiring a MTL. Have you found any differences working with these two segments?

JC: Yes indeed. ComplyFit supports and is open to both crypto and traditional financial institutions with U.S. state money transmitter licensing requirements. Interestingly enough, we’ve found that the needs and demands of both subsectors of the money transmitter industry are quite similar. They want to be able to submit the proper reporting to regulators in a timely manner and without the mind-bending task of having to compile, update, and track this information themselves via a chain of spreadsheets, calendar reminders, collaboration/messaging tools, and sticky notes. We’ve also found that cutting expenses and reprioritizing is agnostic to the business model. It’s hard to argue with that!

OC: And because you’re such a compliance nerd, you call it ComplyFit, as if it’s a FitBit or Apple Health of compliance. Is there a story behind that? And feel free to clarify to our readers what exactly ComplyFit is.

JC: Yes, it’s true, I’m a self-professed compliance nerd!

The ComplyFit name is indeed a hat tip to the FitBit and other devices that help people track their fitness goals and health. Like these devices, our goal is to help crypto and other financial institutions to track their regulatory compliance health goals. It is our hope that like a FitBit, ComplyFit will encourage users to challenge themselves to be even healthier in terms of their overall compliance efforts.

ComplyFit is a SaaS platform with two key innovations:
I. ComplyFit offers the first-of-its-kind Money Transmitter License (MTL) reporting tool. The platform provides current alerts for action items required by each of the 50 states including quarterly reporting, annual renewals, annual reports, and miscellaneous required reports. The MTL tool is updated regularly by compliance professionals with the assistance of machine learning and keeps licensees on top of regulator reporting changes in real time.

II. ComplyFit provides transaction monitoring tools designed to be customized to fit the user’s AML Program. It’s our philosophy that transaction monitoring software should be tailored to each business’s individual needs, eliminating the elevated costs associated with transaction monitoring software full of unnecessary bells and whistles. ComplyFit provides the industry-absent, economical, no-nonsense solution for cryptocurrency businesses who possess well-defined transaction monitoring needs.

OC: You’ve also told me that engaging the regulators has often been your go-to advice for innovative clients with new models and trying to navigate US compliance. Do you have any stories you can share?

JC: Yes, I can’t emphasize enough the importance of starting a dialog with regulators, especially for those working on new and innovative business models. They don’t bite.

Recently, while working with a crypto company, we approached a state money transmitter for a determination as to potential licensure. Importantly, there was no precedent for this particular business model, so far as we could tell. So, tactically, we decided to take a step back and prepare a request for determination letter that emphasized how the technology worked and walking the regulator through the customer experience, as opposed to strictly citing legal chapter and verse.

We believed that the best path to receiving a determination was to write our letter in the style of a front porch conversation. That is to say, we imagined we were explaining the business to our moms, our neighbors, or the average “Joe” on the street. We felt that the explanation could then be followed by a discussion of laws and regulations only after the readers (i.e. regulators) felt reasonably informed about the proposed business. As it turned out, the regulators appreciated
our level of detail and ultimately provided an opinion in writing with little discussion as to the nuances of the laws and regulations on the books.

OC: Finally, any changes in sentiment from regulators that you’ve noticed over the years in terms of anti-money laundering?

JC: Yes! A resounding yes. We’ve noticed that regulators are much more engaging and actively seeking to connect with and learn from crypto companies. In fact, several of our clients have led demos for regulators and members of law enforcement. This dialog, in part, has helped to close the knowledge gap and really remove some of the early stigma associated with engaging regulators in the crypto space. We’re pleased to see the level of interest among both crypto
companies and regulators continue to rise. This is good for compliance and business!

Hope you are enjoying our RemTECH Chats and that you’re learning more about the innovations that are happening in the industry. For those remittance innovators who want to join Joseph in participating in the RemTECH Awards, we want to know! So badly that we’re  providing an extension with entries due June 14th. Please enter here: https://remtech.org/callfor-entries/