NEW YORK/LONDON (Reuters) – After nearly three decades in senior compliance roles at major financial firms including the Bank of New York Mellon’s Pershing and Goldman Sachs Group Inc., Jeff Horowitz is an unconventional step in your career.
FILE PHOTO: Logo of Monex Group Inc and Coincheck have seen their joint press conference in Tokyo, Japan on 6 April 2018. REUTERS/Toru Hanai/File Photo
In July he was chief compliance officer at cryptocurrency exchange Coinbase, taking a leap into the more lightly regulated world of digital assets.
“It is not for the faint of heart,” Horowitz said of the move of the compliance on Wall Street, a cryptocurrency startup. “You have to have a flexible risk-needle. The old school attitude of compliance, Doctor No, really do not translate well to this industry.”
Horowitz is one of the several senior compliance officers hired by cryptocurrency companies in the past year in a recruitment spree aimed at helping them to cope with the increased regulatory burden and more and more palatable to mainstream investors.
The companies are especially eager to poach managers like Horowitz, who have been in the legal and compliance departments of big banks and law firms. But to convince them is not easy, say headhunters and recent hires.
They tend to be risk-averse and can be deterred by industry of the libertarian establishment ethos that might mean hostility to government regulators.
Digital currency trading also has to do with a year-long decline of the volumes, making it harder for firms to attract candidates, with promises of crypto wealth.
The salary for senior positions in London are approximately 120,000 pounds ($158,000) or more, and in the United States approximately $ 300,000 or higher for larger companies, recruiters said.
If these salaries are in line with the mainstream financial sector, recruiters pitch the opportunity to work in a fast-changing and emerging industry.
“The best chief compliance officers have with success reduced risks for the life, and they tend to be relatively risk-averse when thinking about their career,” said Scott Fletcher, founder of fintech C-suite recruitment firm Junction Growth ners.
“To find a person who has the skills and is also willing to take the risk to join a cryptocurrency company, it is difficult.”
The checks on new customers, handling of requests for information from the enforcement of the law, and figuring out what legislation is applicable to new financial fixed assets – often between the jurisdictions in the tasks that can be a greater challenge in a crypto-company.
“On-boarding a new client that you will need to undertake careful due diligence,” said Charles Beach, Lendingblock, a London-based securities lending platform for cryptocurrencies. “But you would not have the same level of security from a company in the still very new crypto-industry as you would from a regular financial company.”
He previously worked in senior risk positions in the trading firm IG Group, UBS and PwC.
THE HACKING SCANDALS
The crypto-industry is punctuated by scandals, including hacks, technology errors and alleged use of virtual currencies for money laundering and illegal online marketplaces.
In September, the New York Attorney General’s Office said several cryptocurrency exchanges have faced conflicts of interest, were vulnerable to manipulate the market and put customer funds at risk.
The same month, British lawmakers said the cryptocurrency market seemed like “the Wild West” and should take steps to protect consumers and make it less vulnerable to hacking.
Some cryptocurrency industry bodies, such as Britain CryptoUK, received calls for the regulations to be a balance between rules for the protection of the consumer and the nurturing of innovation. Others, such as the Global Digital Finance, have looked to establish industry-wide international standards.
Still, major lapses continue to happen.
In January, approximately $135 million in cryptocurrencies were frozen in the accounts of the Canadian exchange Quadriga to its founder, the only person with the password, suddenly died.
In a statement which was submitted on the Quadriga on behalf of this, the founder of the widow said that she is not the password of a “cold wallet” that the cryptocurrencies on the founder of the computer.
A year earlier, hackers stole cryptocurrency to the value of $530 million from Tokyo-based exchange Coincheck, which is an industry-wide approach by the japanese financial watchdog.
Coincheck eventually refunded duped investors about 46 billion yen ($413 million) with its own resources, and was purchased by the online brokerage Monex Group Inc. last April.
“THE MAJOR LEAGUE TO LITTLE LEAGUE”
As regulators consider new, stricter rules for the exchange or increasing the enforcement of the existing, demand for experienced compliance professionals has grown.
“In the past 12 months we have seen somewhere in the neighborhood of a 230 percent increase of the volumes of the compliance-related jobs,” said Zeth Couceiro, the founder of Plexus, a London-based recruitment firm whose specialties include cryptocurrencies.
Exchanges are also looking for employees that can help them adopt standards in order to appeal to more mainstream investors, such as pension funds and asset managers. They have largely remained crypto, partly as a result of the concerns about breaches of security and the perception of lax internal controls.
“The people who can do that are the ones who have dealt with the regulation for highly regulated institutions,” said Josh Goodbody, who was hired as general counsel for worldwide sales and institutional business in Singapore on the basis of exchange Huobi in June. Goodbody’s experience includes positions at State Street Corp. and JPMorgan Chase & Co.
Some executives who have made the switch, say the industry’s reputation still gives them pause.
Chief compliance officer at a major Japanese exchange said founders of cryptocurrency companies often lack the experience and hardness that are required for the execution of a financial company.
“Every day I experience the difference,” the person said. “It’s huge – it’s like going from major league baseball to little league.”
Edited by Anna Willard