Bitfinex Hires financial crimes expert

bitfinex

Bitfinex, one of the world’s largest virtual currency exchanges, has hired Peter Warrack, a financial crimes expert, Bank of Montreal executive and self-styled cryptocurrency enthusiast, as its new chief compliance officer.

Warrack served as former director of anti-money laundering and chief compliance officer at the Bank of Montreal, one of Canada’s largest banks. He also has a varied career in military intelligence, senior police detective work with the Police Service of Northern Ireland and executive positions within the financial intelligence units of Royal Bank of Canada and the Bank of Montreal.

“As a longtime advocate of blockchain technology and the integration of token markets into the mainstream, I hope to be a valuable asset to Bitfinex moving forward and to help facilitate the continued expansion of their service offering to professional and institutional traders by ensuring the highest standard of regulatory compliance,” Warrack said in a statement.

Warrack is well known within the anti-money laundering (AML) community and has been recognized for his work within it, including establishing an anti-sex trafficking partnership between the Canadian government and the financial services industry, John Byrne, former head of the Association of Certified Anti-Money Laundering Specialists (ACAMS), told Bloomberg Law.

Warrack was an early advocate for AML professionals to look beyond traditional banking and focus on blockchain and cryptocurrency issues, said Byrne, currently vice chairman of AML Rightsource, a Bank Secrecy Act and AML staffing company for financial services companies.

Warrack identified the technologies as a space “that we, the AML community, should be paying attention to because, obviously on the surface, there’s a lot of potential gaps with cryptocurrency in terms of anonymity and tracking,” Byrne said.

Warrack taking over the reins for compliance at Bitfinex could be a small step to help reassure the financial institutions exploring whether to do business with cryptocurrency exchanges. Efforts by virtual currency exchanges to hire or seek counsel from AML practitioners or other regulatory compliance officials helps build comfort, Byrne said.

“The AML community can sense when there’s seriousness of purpose,” Byrne said. “Peter’s movement is a good example of that,” he said.

Wary Watchdogs

The anti-money laundering expert joins Bitfinex just as cryptocurrency exchanges are coming under heightened scrutiny in the U.S.

On April 17, the New York Attorney General’s office launched a “transparency and accountability” probe into 13 exchanges, including Bitfinex. The Securities and Exchanges Commission is also looking into crypto exchanges and whether any may have offered unregistered securities on their platforms.

Within the industry itself, virtual currency exchanges operating in the U.S. are exploring whether to establish a self-regulatory organization (SRO) to self-regulate and establish standards for trading, regulatory compliance and business conduct.

There’s a recognition by cryptocurrency businesses that they not only can’t ignore anti-money laundering compliance, but also must prove their case before skeptical regulators and banks, Ross Delston, a Washington, D.C. attorney and anti-money laundering expert witness, told Bloomberg Law.

One of the reasons for that skepticism is that cryptocurrency businesses and the cryptocurrencies themselves are viewed as ultra-high risk by the industry, he said.

“US banks consider cryptocurrencies so high risk that in some cases banks are monitoring customer accounts for cryptocurrency transactions and debanking those customers engaged in such transactions,” said Delston, a former assistant general counsel to the Federal Deposit Insurance Corp.

Having an effective and properly implemented AML program for a particular exchange, U.S. or foreign, “might be a starting point but it’s only one step that would be needed in order to reassure banks that they’re dealing with legitimate parties,” he said.

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