Compliance – the key component of trust

Effective compliance is vital for the future of the digital assets industry, says BCB’s Kym Routledge, both for service providers and their clients.

The digital assets market is maturing at a rapid pace. Once regarded as a ‘wild west’ of finance, the sector is being embraced by mainstream institutions and is being integrated into regulatory frameworks, and rather than being seen as an intrusion, these developments are being welcomed by responsible service providers as an aid to risk management and a boon to businesses.

None of which is to say there are no challenges in adapting to changing regulations, not least the fact that rules are evolving at different speeds in different markets.

BCB Group has adopted a straightforward approach to the wide variety of standards across the world’s market – always taking the highest regulatory standard as the base level for compliance.

“There are obviously individual nuances that we need to meet in specific markets, but we absolutely always go to the highest regulatory level,” says Kym Routledge, BCB Group’s Head of Compliance. “If you consider onboarding, we have clients onboarding for our UK entity, our Swiss and EU entities and/or for other services and we will always go for the highest standard in each case, whichever country’s/regulator’s standard that might be.”

Building a trusted platform

The fast-moving nature of the digital asset world and fintech in general means some organisations try to run before they can walk – at least when it comes to compliance.

“We often see fintechs and startups who are aiming to make money very quickly, although this can be at a risk of long-term reputational cost. When you’re going to go for the quickest win or solution it often becomes a  tick box mentality towards regulation,  applying or setting up where there is little to no  regulation. Now that is ‘possible’ for short term success and growth but reputable providers like BCB Group will not entertain this kind of lax controls.  We are faced with multiple strict audits from banking partners, regulators and those we impose on ourselves and I can only imagine the reports if we started allowing a tick box mentality to breach our standards!” Routledge says.

Having superior compliance in place is vital to BCB’s risk management but also helps all clients in the BCB ecosystem. One of BCB’s objectives is to create a network of clients that can benefit from being part of that ecosystem, for example by using its fee-free instant payments system BLINC. For that system to work and continue to be a trusted success, all clients need to know that everyone else in the system has been through  robust due diligence.

Transaction monitoring

BCB has an in-house team of 24 experts working on compliance and financial crime, supported by an external team of 24, covering the full client lifecycle with BCB Group. 

“We operate three tiers of checks for client and transaction monitoring” Routledge explains. “The first level is getting rid of most of the noise. Any issues are escalated  to the second level – our senior analysts – who are trained to challenge and to spot anything which requires full investigation. Those examples go to level three where we really dig deep and conduct interviews with the clients.” 

The vast majority of issues are resolved without difficulty, but one or two cases every month raise a significant red flag. BCB naturally rejects prospective clients who have been unable to meet the compliance requirements. Similarly, this may be the case for existing clients, after internal transaction monitoring and investigation.

EU is setting industry benchmarks

The regulatory and compliance agenda for the year ahead is a busy one. The incoming Markets in Crypto Assets (MiCA) regulation from the EU is imposing requirements on service providers. BCB itself is already an authorised Digital Asset Service Provider and is well on its way to meeting all the requirements of MiCA.

The other key development in the EU has been the creation of the Anti-Money Laundering Authority (AMLA), whose objective is to coordinate national authorities to ensure the correct and consistent application of EU rules on money laundering and in countering terrorist financing.

Both MiCA and AMLA are examples where the EU is leading the way and are set to become the highest standards in these fields.

“AMLA is going to unite Europe’s Financial Intelligence Units (FIUs) and that to me is something that we all should be pushing for. There needs to be more transparency between us all to make this work, so anything that’s bringing about transparency is for me a winner,” says Routledge.

Routledge’s team already monitors transactions, and where appropriate raises a suspicious activity report (SAR). Routledge has also stopped some payments that looked to be in breach of international sanctions.

The other pressing issue is Authorised Push Payment fraud (APP) reimbursement, an area where the UK authorities are pressing hardest with new regulations and which they implemented in October (2024).

“We have a lot of conversations with our clients, double checking the banners they have on their website, their geoblockers in place and the controls they have in place to warn their clients of the risks of crypto investing. These ongoing checks and conversations do result in us offboarding the clients who don’t maintain rigorous standards.

“With the APP Reimbursement Policy now live, we have used this as a trigger across all of our retail exchanges to revisit them, to talk to their compliance teams to see what they are doing with regards to safeguarding themselves and their clients against this reimbursement regime.”

Again, Routledge adds that these conversations have been hugely beneficial to all sides, with positive insights and ideas being shared between everyone involved. Such sharing and cooperation are, Routledge argues, the way forward, since the APP regulations mean that a confirmed fraud will result in shared liability between the Payment Service Providers (PSPs) that allows the fraudulent payment to be sent and received.

Effective compliance is commercial good sense

The evolution of regulation is not always smooth – and sometimes regulation goes awry – but Routledge argues that it is beholden on organisations like BCB to be engaged in dialogue with other companies and regulators to build a robust compliance culture in the industry, because effective regulation is in everyone’s interest.

Routledge openly describes herself as someone who loves rules and for one simple reason: “When it comes to compliance, you have a duty to protect your own business and your clients, which, to a responsible service provider, amounts to the same thing.”

Author: Kym Routledge, Group Head of Compliance

The information contained in this document should not be relied upon by investors or any other persons to make financial decisions. It is gathered from various sources and should not be construed as guidance. The information contained herein is for informational purposes only and should not be construed as an offer, solicitation of an offer, or an inducement to buy or sell digital assets or any equivalents or any security or investment product of any kind either generally or in any jurisdiction where the offer or sale is not permitted. The views expressed in this document about the markets, market participants and/or digital assets accurately reflect the views of BCB Group. While opinions stated are honestly held, they are not guarantees, should not be relied on and are subject to change. The information or opinions provided should not be taken as specific advice on the merits of any investment decision. This document may contain statements about expected or anticipated future events and financial results that are forward-looking in nature and, as a result, are subject to certain risks and uncertainties, such as general economic, market and business conditions, new legislation and regulatory actions, competitive and general economic factors and conditions and the occurrence of unexpected events. Past performance of the digital asset markets or markets in their derivative instruments is not a viable indication of future performance with actual results possibly differing materially from those stated herein. We will not be responsible for any losses incurred by a client as a result of decisions made based on any information provided.

Written by

Sam Shrager

Share