Building Regulated Crypto Infrastructure with Francis Forde, Head of Risk and Compliance of Wert

Cool. Francis, great to have you here. Um, so you once published academic research in biomechanics and you also helped secure the first ever national bank charter for fintech company from Wall Street market manipulation teams to Coinbase during crypto chaos and our leading risk at a web 3 startup. You've lived every version of compliance across finances last decade. Um, today we're going to unpack all of that and I'd like to start from the beginning.

You didn't really follow the typical path into compliance. Like as I said, you were publishing biomechanics research early on. How did you go from scientific research to investigating insider trading and financial crime at Morgan City? >> Question. Uh, so thank you for having me.

Um, of course you know I like you very much you know this. So it's a pleasure to be here. >> Yeah. So, how did I get from biomechanics to compliance? And the bridge really is law school.

And what really started me looking down the path of law was a project we actually did in the biomechanics lab for an attorney. So, we did a project for this attorney and it was really interesting because of the the case matter and I started thinking about what my next step would be after grad school and my next step was law school. I graduated in 2008. uh passed the bar uh got certified in 2009 and then started looking for my next steps. It was a terrible time in the economy as you remember.

>> Can imagine. >> Yeah. Yeah. Yeah. So I actually started as a broker for Morgan Stanley.

Yeah. My so my first job at Morgan Stanley was as a broker as a financial adviser. And during that time, I got a lot of nos. Like every every deal that I wanted to make, every thing I wanted to pursue was a no from the compliance guys. Um they were super riskaverse, you know.

And I remember thinking that I knew the people who I wanted to work with. I've been around people I wanted to work with. So I knew these the in my heart my perception was they weren't terrible people. They were good people um doing good things. So why would we say no to th to to those deals you know so first I found out I wasn't good at sales although I love people I can be persuasive whatever it is and second I started thinking where can I leverage uh scientific research background where can I leverage legal background where can I leverage my love for like pushing business forward and that's where I landed on compliance >> love that >> and again like 2008 today now there is AI and whatnot what did good compliance look like in those environments where well it was a bit mayhem in 2008 and um yeah let's start with that >> from my perspective as an investigator good compliance looked like catch the bad guy catch the bad guy who is the bad guy let's get the bad guy and at certain times I felt like in our pursuit to catch the bad guy we stepped on some really good guys >> y >> you know some some really good guys that maybe they're not used to what you should do in a financial environment.

I mean the customers. Yeah. Um so they do things that are weird. That's one of the first things I noticed about like really doing investigations. People do weird things, you know, like people would go to an ATM and withdraw money and then go to the bank inside the bank and also withdraw money.

So th those were things that are like atypical. Um they create some red flags and we do investigations into it. Um, and a lot of those people weren't doing anything wrong. They just didn't understand how to use a system, you know, and that I think is a lot of false positive noise that we get that ironically inhibits us from being able to catch the bad guys. Yeah.

How do you think this is going to evolve like today? You know, like uh AI is making frauds so much harder to catch. Like actual criminals are able to replicate patterns of regular people much simpler and then you're unable to discern the actual like truth between like real and fake. So what do you think is it that has to change in order for compliance to keep up? >> Sure.

I think that knowing your customer is ultimately the the most important thing for compliance, right? And having an understanding of the things that your customers will do. Um, not just the the biometrics of it, right? Not just like your name and your your address and this kind of thing. Those things are static.

I think they're fine for a for a compliance program so that when you do catch someone, you know where to find them, but they don't really speak to customer behavior, you know, and the behavior has to do within context as well. So when at work what we're looking at, uh, we look at the the behavior of the person relative to the type of product that we're we're offering. And I think as we expand into this web 3 space, especially with the rise of Bitcoin, we see a lot of different behaviors that you would normally see with uh with a traditional financial institution, you know, and I don't know, I guess I'm old enough to like really see these transitions, but as an example, so my older family, they will not use an ATM, believe it or not. Yeah. They're like I they didn't grow up using ATMs.

ATM was like financial technology for them. It was not a persontoerson transaction. they don't trust it. Then I have friends that are 20 that don't see the point in ever going to a bank ever. Right?

So you see this like and if we're going to be inclusive um and make sure that everyone has an opportunity to leverage DeFi and what the the brilliance and the magnificence of web 3 and cryptocurrency, we're going to have to really sit down and think about what those transaction uh what those transactions look like, what the typology looks like. >> Yeah. Yeah. that. >> No, that's great.

And I want to go back a little bit like you went from threshold banking and you went to Coinbase. Uh you joined the compliance team working on Coinbase consumer right as digital assets were going really mainstream. How did the shift from traditional banking to crypto hit you and what were the biggest shocks or rewrites to your playbook? >> Sure. So the transition to Coinbase was really interesting actually.

It was the first time that when I'd been on all sides of this I'd helped uh some litigators in thei the the New York AG litigate against big banks. I'd helped do investigations for other for the banks for against uh consumers and I was also on the on the buy side for for customers. One of the things about Coinbase that I thought was really illuminating was the fact that I got to see some of the customer service side of things. So, we serviced a lot of customers who would call and say, "Hey, I want to get my money or I need some help. I need assistance," whatever it may be.

And it really made me think about humanizing the way compliance uh reaches out or interacts with people, right? And because this is post 2009, one of the trends that I noticed was the fact that a lot of people were just trying to make up the money they had lost in 2009. So you found so this is why I mentioned like people who were never used ATMs to people who will not do anything but use digital banking. You found all these people who were in their 60s and 50s that were like, I lost my retirement and now I'm trying to make that up with the rally of Bitcoin, the rally of Ethereum. and so on.

Um, they're doing this without even knowing how to actually use the systems. Well, all right. So, it's like a real need that people have. Uh, and I really loved what Coinbase was doing specifically because it gave people the chance to hold on and control their money, right? Like you remember 2009, you just watch TV like banks are going bankrupt.

They make the the announcement on Friday and you can't do anything Saturday and Sunday. So you have to sit and wait and Monday you can't get your money. Yeah. But with cryptocurrency you can have like your own wallet. You can control your own destiny in a certain way.

And I think that's magnificent. >> It's interesting because then so you're very passionate about cryptocurrencies. >> Very. Yes. >> And you went from Coinbase back to a fintech more like uh let's say traditional fintech to Var bank >> and you helped them secure their first OC uh national charter bank charter.

Why go back from a fintech to well why go from a crypto company back to a fintech and then you'll later go back to another crypto company but why that why that switch my feeling is that if when when we talk about innovation and we talk about pushing things forward bank being a neo bank right kind of fits squarely within that principle of your bank is your your branch is your phone Mhm. >> Right. Like there's nothing that you that you should not be able to do. There's nothing you can not do, I guess. I don't know if that's the right the way to say that, but you have your phone.

You should be able to do everything. Pay your bills from your phone. Deposit from your phone, right? Uh pay your pay when I say bills, I mean like your utility bill, your your coffee that I just bought, everything from the phone, right? So, it fits squarely within this fintech kind of like ideal.

And my hopes at Varro were also for them to be the the crypto bank, right? Like the bank that is pushing things forward, you know, that we're going to help spin up other crypto crypto companies, other neo banks. Uh but if I was I mean I wasn't in operations at all. This is just my vision and my hope that some bank is going to say what can we do? How can we do things differently?

How can we engage everyone? Um and I think it's mobile through through being a mobile institution. Yeah. >> Did it best then doing or did anyone actually did it well? >> I don't think that I'm not sure that anyone's doing it to be honest.

>> Revolute maybe. Not even. >> Um I haven't looked into Revolute as much so I can't say. Uh but I know that if they are then they're going to be a leader. >> Okay.

>> Right. Like I don't see my niece my niece is like 17. My nephew is 15. They're not going to the bank. >> No.

>> They're going to use their phone. Right. Um, and a lot of my friends are, you know, you have YouTube, you have AI, you have like chatbt Grock, this kind of thing. Uh, I have a friend, uh, I won't mention him by name, but he is exquisitly intelligent and when he watches something, he does it on like 2x, right? Like I watch him watching videos and learning and it's almost like he's a computer.

He doesn't he doesn't do anything slowly. So, he's not going into a bank. he's not going, you know, and when he learns how to trade, he's like putting things in place. I have a lot of friends like this. Um, so I think that there is a market for innovation and for pushing things forward and I'm hoping that some bank uh does that.

>> I couldn't agree more on a completely different topic. I lost my eim at some point. tried to call T-Mobile and they wouldn't give me it to me um by the phone and I like I have to you need this and you need that and I had to go in the shop and it's an awful experience. Uh like having to travel like 20 minutes to go to a shop to ask for a QR code then to log back into your EIM it's horrible and like at least it's only 20 minutes. Banks can take opening an account.

We have an employee right now uh who who came from Colombia and needed to open an account. Took him weeks to to just open an account. >> And I'm not sure why it should, right? >> I don't know why >> it it shouldn't. It it's like that's actually I think so one of the things I think you mentioned um we had this in another conversation.

One of the things I think that crypto will solve or one of the reasons why it's so difficult to understand is that it does everything right. So if I said to you that I have this thing, it can do identity. It can do security. Uh it can transfer value. It can be the building block for an institution.

It doesn't really sound like it's kind of tough to like visualize or conceptualize that thing. But if you had a crypto key that was your identity and T-Mobile had that and use that, then it would take you >> I agree. I feel like this is also the future of compliance. But how do you then convince more traditional banks to adopt uh a new form of like KYC, a new form of KYB, a new form of identity? >> So I think you can go go about this in a couple ways.

Yeah. My reaction to that is you don't convince them. You don't you just build something on your own and they'll buy it, right? And I was thinking about that recently. I remember um JB Diamond mentioned that that Bitcoin was trash.

Uh, I think that a couple other banks were mentioning Bitcoin's trash. And I remember this in 2017. And I don't mean to say like I'm not I'm not like trying to say that these guys weren't wrong based on the evaluation of what they knew at the time. Uh, I'm tracking how, you know, things have changed because now these banks were investing in Bitcoin. Yeah.

So I think that without trying to determine the motivators for individuals and who have whatever experience to adopt something the the thing is to show that it works. >> But the thing is you don't even need so I agree with you. You have to build something that works. Um let's say you don't even have to convince the banks. The banks want to buy.

How about the regulators? Because at the end of the day, if the regulators don't approve it, the bank's never going to buy it. >> Yeah, that's that's like the big question. Yeah. And when I've looked at some of the notifications come through, some of the things that have happened in the industry, I think one of the biggest things for for regulators is is again understanding what you're looking at.

understanding that this this thing that you're looking at is um cryptocurrency web 3 is this blockchain is this huge thing that has applications in other places applications like has vast applications and when you look at the the vast applications of it it's not like bad everywhere so as an example everyone was kind of like going back and forth the weather blockchain or cryptocurrencies were securities. And I'm like, it could be. Yeah. And it could be when it fits howi, right? But if it doesn't fit howi, then it's not >> exactly >> right.

>> And so let's say, you know, there's a young startup trying to do something like that. You did get that first ever OC national bank charter for fintech which is like you must have convinced the hell out of regulators. >> We work with some very very very like knowledgeable people. I I have to say that the people I work with at Varro um were very well seasoned well seasoned like in risk and compliance and legal. Uh so I never had any doubt that it would happen.

I didn't go up I didn't go to work any day of the week thinking this might not happen. >> But what do you think it they had to have in order for it to happen? If we want to replicate what you've done for getting an OC national bank charter for fintech to allowing KYC compliance to be done through a crypto key. What do you need? Like what does a company need?

What do people in the company need? what it needs to be proven to the regulars in order to afford it to to work out. >> Have the courage. I I I really do mean that, right? Like uh if you get into the mindset of regulars are just there to punish you.

>> Yeah. >> Uh every what do you always avoid? You always avoid getting punished, right? >> Yes. >> But if you get into the mindset that hey, I'm going to present something and be persuasive about the benefit of it, right?

And like when I'm having a conversation internally, I think about who I'm speaking to, right? So if I'm speaking to a compliance person, I highlight the compliance benefits. If I'm speaking to the finance guys, I I highlight the the the difference in cost, right? Um or the things that matter to that person. If a regulator wants to keep the financial market safe and they're concerned about the speed of transactions and so on, I think if you are able to say, "Hey, we have this totally transparent thing that you can look at anytime 24/7 that's going to have every transaction that ever happens on it ever." Which means that no one's getting away.

No one is getting away. Right? So I remember like in 2017 guys were like oh people just steal with Bitcoin this kind of thing. I'm like the most in my opinion at least as of right now the most risky assets cash. If I give you a dollar, you know, you don't know where that goes, right?

I don't know whose hands were on that. But if I send you a Bitcoin, >> we know exactly when it was made, every time it change, well, whatever percentage every time it changed hands, right? If we attach like a an identification, a block like a key to a person when they're born, we know everything that person is going to do or doing, right? that I think is a regulators like you know dream. It's like you know it's a dream.

Don't you think it's often times, you know, we we for instance we I mean we work with you guys and we help um build these agents that can automate compliance and the amount of banks we talked to that are like ah it's too good to be true and they they don't believe it and of course you need to put it into action and show them but it took us quite a bit of time to convince our first bank and once the first bank is convinced it's much simpler to convince the other ones. Do you think it's the same for regulators? you need to find the regulator that's going to, you know, give a shot. >> Yes. It's I I think there's a there's a mindset in place.

Um, and one of the things is that like history matters. Yeah. And I know that in tech before it was move quickly and break things. I think that's what that's what the terms move quickly and break things. Yeah.

And I think that that works when it's not so much money. It works when it's not the financial markets. Um but when it's capital markets, when it's when it's deposit institutions with people's life savings, uh you're managing mortgages, this kind of thing, uh moving quickly and breaking things is not an option, right? So we have to move like I don't know if steadfastly or we have to move um cautiously, but I liken it to like friction, right? Like friction is that thing that runs in the background that no one kind of sees, but it allows you to have like the best maneuverability possible, you know?

That's how I think about compliance and risk. So like I don't need to be seen. I don't need thank yous. I don't need any of this right? What I want is to make sure that when you hit that corner, you can like like go faster, right?

Like when you need to stop, you can stop. When you need to accelerate, you can accelerate. All that's like what I'm thinking about when I think about compliance. I'm curious about something. Um, most of the compliance we have today is obviously web two.

Uh, you're at a web 3 company word right now. >> Um, is there anything do you think today is distinctly different in web 3 compliance or something you think in the future will be distinctly different? >> Well, the speed of it for sure. >> Yeah. >> Right.

So, I mean I I can't think of I can't think of a time when you could So, a couple things, right? But first, uh, settlement and transaction happening at the same time is kind of like super novel and it continues to be novel, right? Um, that's the first thing. And then the idea that you could start an account and within a matter of seconds uh, move millions of dollars if you wanted to, millions of I think it's unheard of, right? So, um, that's I think is one of the compliance hurdles that you'd have.

Uh and the check on that is the fact that unless this person is completely new, never did a transaction in web 3 ever, you can find what they've been doing, right? So, you know, our our head of fraud, he's super excellent. I you know, like and he will find you, you know, like like we do all the research, we do all the research, he will find you if you're doing something wrong. So again, it's like thinking about how can we help those individuals who really want to leverage uh technology, leverage their resources to make money while se segregating the bad guys, you know. So I don't know.

I think about the good guys more than the bad guys. I think about helping the good guys and if you're a bad guy, then yeah, we remove you immediately. No, I think and that's a big thing about like risk and gen risk and compliance and fraud in general is that we too many people focus about the bad guys, but then because you don't focus about the good guys enough, the user experience they have is horrible. Uh being asked 20 times uh back and forth with documents and being debanked and because you have this a similar name from you know a sanctioned individual, you can't use that fintech and coming from a high-risisk country. So I do agree that like crypto will have a lot of that um good good effect on on fintech.

My belief is that stable coin is probably the best bridge between the traditional finance and um crypto and for it to become even more mainstream and allow you know crypto KYC to potentially happen one day. Um do you agree? >> Short answer is yes. Uh I think stable coins are I think it's exceptional. Yeah.

So if you ever wanted something to be that bridge of understanding uh and I'll give you an example. I remember I was talking to a friend of mine. I think this is like around 2019 and uh my friend mentioned that they didn't know if they could buy Bitcoin because Bitcoin is so expensive. And I it hit me that in 2019 people still didn't know you could buy a fraction of a Bitcoin, right? Um, which is interesting cuz obviously you can um but in thinking of stable coins where it's like, huh, if I get one USDC, it's $1.

It's not very it's not very much to think about from a on from the consumer's point of view, right? Like you don't know all the stuff in the back. All the stuff in the background is different, right? Like all the stuff in the background is it running on whatever chain, but like this is easy to understand. Um, but what's really great is what I'm thinking of when I I think someone's going to solve it, of course, right?

is like how fast payments can happen. It's amazing how fast payments can happen. Yeah. So like it's going to test it's going to test all kinds of uh current rails in terms of being able to get things done quickly. The other part to it that I think is uh interesting for anyone who is like uh who likes fairness.

I mean it creates an ability for you to have foreign vendors across across platforms. Yeah. So if you you know you make a a nice leather shoe somewhere and you want to get paid in USDC and you have like someone who's willing to ship it across across like the globe then that's an opportunity for you. So I think it it would actually feed entrepreneur entrepreneurship as well. >> Yeah.

people are seeing it. I I would agree that for me like the main use case of stable coins isn't so so much like dollar to dollar like I don't think there's a massive stable coin need for people that are just in the US and transacting just in the US but when you have remittances paying paying people abroad um Argentina having the biggest inflation has ever seen which is better now but like being able to keep your money from inflating and connect it some way to the um while not having all those fees that you have when doing remittances is is insane. I'm glad you mentioned Argentina actually cuz it made me think of something that I experienced at city. Uh we'd see a lot of odd transactions from people and people would like literally fly in from Argentina to the US to kind of do like some weird things, you know, u because they needed US dollars. Yeah, I think stable coins would have would have solved that problem, right?

A USDC USDC could solve that problem, right? Like you don't have to do weird stuff like and even if you did do something that's like odd in terms of traditional banking, we still see it on the on the chain so we know what you're doing, right? And then it brings in more information and the more information you have of um understanding customer behavior, the more likelihood you're going to be able to catch the bad guys, right? Like this is what I think about all the time. Like the more information, the more we understand, you mentioned it earlier in this conversation.

Um, customer experience drives customer behavior and customer behavior drives the way people transact. The way people transact and this is just like linear linearly thinking literally are the things that would have us determine what red flags are and what's suspicious or uh what's anomalous behavior, you know. And the more we get an understanding of that, the more we can refine products to make sure it's a good product fit or what have you, uh, the better off we'll be, right? So, this is like the product side and and just introducing new technology and understand how people are going to use it. I think it's, you know, yeah, >> today stable coin adoption, I think I saw I was at a stable con conference recently and it's how was that?

It was pretty good. And the number of billions being transacted in in in stable coins is already increasing, but it's still still a fraction. It's still not completely mainstream yet. >> Imagine 5 years from now, 2030. How does the world change?

>> How does the world change? >> Yeah. What is the biggest impact you think stable coins might have on on the world? >> I'm wondering if we're going to start seeing a like a single and this is just like speculation. Yeah.

Um well we have like a single global currency something is completely dominating uh across across the globe. Yeah. So like or maybe we have like people who are in smaller shops starting to do arbitrage deciding how they're going to what what what currency they're going to sell their their products, you know. Um I think it's fair to to pay someone when they work. I I I I I can't stress this enough, you know, like you should get paid something that you can live off of when you when you work.

And a global currency that's accessible in the way that stable coins will be accessible. I mean, I'm not even sure the possibilities are endless. I'm not sure what that looks like. Right. So, like as an example, um before you got to travel 20 minutes, you said, to a branch or wherever, right?

And then you got to have all these different IDs and all this stuff. All that slows it down. Yeah. Now, you just need a phone and a and a network. So, if I'm thinking about the the things that are supporting this thing, uh in 5 years or 10 years, I think the networks are are what's going to like be the big change, right?

like what do the networks look like that allows someone in the mountains versus someone at the beach versus like in all these like different places that never had access what does that look like you know and then what does that look like from a from a goal perspective in terms of now you have a freedom of movement right so imagine working remotely and I I don't I don't I don't know man you know but it's it's it's exciting >> it's very exciting I think like to your point like it is going to allow more connections and the ability for like everyone to be at least on the same level of pay or at least being paid which is uh which I think is like still a massive problem. Um and it will allow I think for quite a bit of talents to interact with the US more. So I'm hoping it's going to be just a virtuous cycle and less corruption as well. I think especially on the government level um from the moment you have stable coins I think like you know you mentioned also Argentina um Venezuela all those countries are going to have Lebanon I mean as well much more of a problem to block the accounts of their of their citizens. So it'll be interesting to see like how that's going to shape and the next few years as well.

>> We're going to really find out who's connected to what. >> Yeah. >> So that'll be interesting. Um, >> I want to go back into like startups because obviously you've you've loved startups and you've it seems like you've went always uh earlier stage. Um, Coinbase was pretty big.

Um, now it's completely massive. Um, then you went to Var and today to to W. And one thing you said at the very beginning of the conversation is like, oh, when you were at like those traditional banks, um, deals would be killed or slowed down by compliance. And I do think that there's, you know, this is something that people often see. It's like, okay, compliance uh is what is going to kill my deal or is going to drag on forever because of compliance.

Um, how do you flip the narrative? How have you done it in like those three companies so that compliance may be seen as a growth enabler rather than uh something that's going to kill your pace? Yeah. Um, so I've had the most uh the most influence at work. Yeah.

And in that position working directly with the C with our CEO, uh, what I've thought about the most in terms of making sure that we have a compliance culture that makes sense is leveraging everything around us. We leverage technology. We have very open and candid conversations about what's permissible, what's not permissible. Um, I don't always start with a no. Actually, I seldom start with a no, but I start with a yes, maybe.

This is what has to be in place. And then when once those things are in place because we can have very little uh especially using your product, yeah, there's not much variability. So, I know that we if we're going to say when I say variability, I mean variability in assessing a customer. if we have these particular rules um your AI is going to give us those rules versus like you know a person who work 10 hours a day or 50 15 hours a day or whatever it may be you know hour one looks a little different than hour 15 right um but with leveraging technology uh is we we build a consistency and I said before I think that having a healthy relationship where you explain things in a way that makes sense so I don't think of compliance as a cost center at all. I think of compliance as a savings center, right?

Um find your taxes. Yeah. Uh being having to cut accounts because something went wrong in the beginning or terminate relationships because something went wrong. That's a tax. That's a cost.

Um good compliance means that when we onboard a customer, they can stay here unless they do something wrong. It's not going to be their fault. Yeah. when it's not it has to be their fault when they do something wrong. Um our reputation is going to be stellar.

Yeah. Uh so I think of it as like we're going to save you money cuz when we do a deal, the deal is done the right way. We never have to pay back anything. Yeah. Uh when we onboard a customer, it's done the right way.

So we don't have to cut a cut a relationship. So in my mind, compliance is like again the friction. We want to be able to move quickly and safely. So, I'm making sure that you don't hit these guardrails, you know. Uh, and that's why I explain to the sales guys as well.

Um, of course, there's always friction. I think the friction is necessary. You know, they want to do a deal really quickly. I want to do do a deal really safely. So, I don't think in terms of speed.

I think in terms of safety and safety for me means when we make a deal, we don't have to pay anything as a consequence of that deal. >> Yeah. >> I think that's a great way of seeing it actually. And and so the interesting thing is like I mean we've been working together for a couple of months. Uh you're one of >> a couple years soon.

>> A couple years soon. One of the earlier clients which is you know um which is great for us >> and there was a lot of like human in the loop initially uh and now maybe less. So I I want to have your understanding about automation versus oversight. So word is growing really fast. You obviously can't manually review anything anymore.

And that's what we're trying to help you with as well. So, how do you ba balance the automation with human accountability while keeping your team comfortable? >> I think it's more like random checking. >> Yeah. >> So, random but still still guided.

Uh, and I think that Yeah. Yeah, I mean that's how I've looked at it so far. Yeah. Um, working with AI is very new to me. So maybe if you ask me this question in a year, it'll be a different response, you know.

But I think that accountability is very important of course. Uh, but once trained appropriately, I don't think a human being can repeat the the same results as consistently as an AI. Actually, I do know a human being cannot. I agree. >> They consistently um repeat what an AI agent can do with the same level of quality.

Uh but what they can do is they can look for things that are outside of the scope of what the AI has learned so far. And I think that's why humans are ahead, you know. Um but as far as uh just first level understanding a customer, doing the review to onboard a customer, I think AI is is going to have it. Like I I don't know why anyone wouldn't wouldn't like >> That's for sure. And you know, one of the things that we've been doing with prospective customers right now and even real customers is like we'll go through their backlog of cases they've already reviewed.

We're going to give them all the true positives that their teams missed. And because it's impossible, you're like we have customers that have 50,000 cases in the backlog and their teams are working 12 13 hours a day to try and get through it. You're going to miss something. Like for sure you're going to miss something. I'll do a bit of advertisement for what do you think has been the best thing about working with swings?

>> What the best thing? >> Yeah, I was >> or the worst thing as well, but I'm not putting that in. >> It's funny you mentioned that because as you were speaking about it, you know, I was thinking I used to have to do these reviews myself. Uh Carlos and I would do some of these reviews ourselves. Like some things are being escalated and there's this channel that we have for the escalations and it would be chirping and chirping and chirping.

Uh, and as you were talking, I was thinking this has quieted. I do not I don't know the last time I even had to do one. By the by the time it gets to me, it's a serious issue. You know what I mean? So, like and Carlos is happy about it.

Once Carlos is happy about it, I'm happy about it. Right. Like, so like I think that what's the best thing? The best thing is having a very consistent uh quality of review that doesn't matter when it happens. It could happen on Saturday.

It could happen on Sunday at 12:00 a.m. Um, the individuals who are looking at it are developing more complex skills than if they were just looking at this thing and being tired all day. Right? When I manage I manage a human being, you know, and when you manage a human being, you can't have the expectation that they're going to be 100% at 9:00 a.m. as they are at 9:00 p.m., right?

that they're going to be happy if they have to do a review at some obscure time like 3:00 3 p.m. on a Saturday, right? You have to call people in. People have their lives and they want to lead, you know? So, I think because AI AI is the AI agency you have for us are very focused.

Um, it's very deliberate what you've done. I see like I get the reports on uh how you are, you know, improving them over time. I think it's incredible. I love it. >> Love it. Listen, and I think one of the big bets we've made early on is we have built a compliance team in house. And I think that the point of it is we know that we can't uh subtract the expert knowledge with just a model.

Um, you know, currently our compliance team is helping fine-tune the models, running the evals in order to make sure that okay, the outputs of our a AI agents are what they should be and if they're not, why is that and how can we fix it? And they work with teams in order to like really get to that level of comfort. um in a world where there's you know more and more AI all over how do you still think like do you still think that this is a way for companies like ours to win to still have like this deep human experts knowledge directly in the company not from your end you know like of course like we take words feedback to fine the agents but having it at the core of the company itself >> so it's okay so this Just philosophically, huh? >> Yeah, of course. >> Uh, I take a look at AI.

I think it's great. Fine. It does one thing, right? Like you can train it to do a couple things, but I am one of the people in the camp that AI can take over certain levels of activity, but imagination, that's a human quality. And imagination is what leads to like people thinking of these esoteric or like super complex ways of committing fraud, right?

Or even solving a problem. I don't know that AI is going to be able to do that, right? So, having at the core of the system that you can deploy to do exactly what you ask it for from first instance to 10,000th instance is great, but having this thing that has the imagination to like dream of something that they'll do, right? Like when I think about trying to be a criminal, like trying to catch criminals, I have to be in the the I have to have this imagination to do this, right? Um I don't think that AI is going to be able to catch that in my lifetime.

Now maybe in 100 I don't know when but not in my lifetime you know. So I think at the core of any company you would need those individuals who are imaginative innovative. They're like they're the individuals that are going to say hey I've seen this thing and I imagine that this other thing could happen. Because that's what's happening with the with fraud, right? Like I'm not a criminal but I think about it all the time.

like what would I do if I was a criminal? You know, what would I imagine that I could do? Um I don't know that AI can catch in in in our lifetime, but having human beings at the core where you can deploy an AI agent to catch things, I think that would be great for your company. >> 100% that's a way to do it. >> Um and so I'm going to go into like today the I want to talk about like how fragmented the tooling ecosystem in compliance is today.

um despite you know massive investments there's never been a Salesforce for compliance there's like I mean there's some subexus and nice act and compliant and the the the amount of tools that exist that are also you know sometimes very specific for the region you operate in is is wild you think that is >> I think it's that way because of the newness of it right um but I also like so I think it's that way because it's kind of a novel area and we're going through this new thing with web 3. Yeah, if it was really static, there would probably be someone who would have been able to pour resource into it in a certain way uh and dominate. Having said that, I like the way it is. I like that competition, right? Um that kind of competition like with different tools doing different things or doing the same thing differently is what I think is going to lead to some great in innovation, right?

Um, so there's always that that external competition with these different tools. Uh, actually I saw that with your company. Um, we work with another company that did exactly what you do, >> but you did it better, right? And I mean this. I I honestly mean this.

Yeah. So like if there was only one and there was that company, then we would lose something, right? I think it's a very basic concept in like competition, right? But that's that's that's my belief right now. Yeah.

>> No, I 100% agree. And do you think that with like the the fact that AI is a little bit more agnostic, you know, like I think there's a thing in compliance where tools had to be very specific to like set of rules and like very specific transaction monitoring and like you had a set of rules and that and you had to find like for AML the right vendors in Brazil and the right vendors in Eastern Europe and the right vendors in Indonesia with you know AI research agents and but allowing companies to be a bit more agnostic and doing those thing things faster. Do you think it's going to consolidate or do you still think it's going to stay relatively fragmented as it is today? >> I'm not sure. I'm not sure.

Uh it's a good question. Let's let's go through and then ask you this question again after >> ask it to you later. >> Um okay. So, but if you were if you were building a compliance platform from scratch, >> a compliance platform from scratch >> for modern fintech or crypto, what would you do differently than how it is today? You know, uh which pain points of yours would you fix first?

Is it false positives, identity, blockchain and attics? Like Yeah. >> Yeah. So, you're working with a company right now that is kind of asking the same question. So, I do feel like we're helping that thing build out in a certain way.

Um I think having a holistic view of a customer is the way I would start. So you may not even recognize it as a compliance platform, right? You recognize it as a customer relationship platform with a focus on making sure that we catch or identify anomalous behavior that could be suspicious. So what does that mean? It means that we're looking at the everything this customer is doing, right?

We want to know how many times you call customer service. We want to know what emails you're sending to and what requests you're making. We want to know what transactions, why, when, how. We want to know who you're interacting with. Um, network resolution, right?

These are things that I think will build into a platform where you can tease out what is good behavior, what's bad behavior. So, if I were to start a platform from scratch, this is what I need to know. This is like the first thing, you know, building out something that's going to allow me to figure these things out about a customer. And the reason why uh blockchain is so valuable is that when you have uh an understanding and you see these customer activities, you don't have to wait. I don't have to do a 314 to anyone.

I can see it, right? I don't have to like guess at who you're doing business with or send you a questionnaire. I can see it. Right? This is like the greatest thing.

The transparency piece is the greatest thing I think for compliance when it comes to using blockchain. I don't have to make any external requests. I don't have to worry about any any like roadblocks. If you've made a transaction, I can find it. If you've interacted with someone that looks odd, I can find it.

We have all this information, right? And it's like seasonality matters. So, I don't know if it's like some kind of esoteric. So, as an example, right? Um, sometimes you see seasonality as an issue, right?

It's like maybe maybe you're living somewhere that doesn't celebrate Christmas, right? I'm just going to give a very simple example and then suddenly you see all this money moving around Christmas, right? To me, it doesn't seem strange at all, right? Like my grandmother used to send me money all the time on Christmas. I love it, you know?

Um, but what if I'm living somewhere where that's not a thing and then because you see this odd behavior, you decide that everyone who's sending money at uh at Christmas is is doing something nefarious. Right now, the way the re the way I reason this is that when you're running a global company, a company that services everyone or has a potential to service everyone, you're going to have people who are going to do things where it's like, why is this money being sent to this time? you're like, "Oh, it's like that person's grandmother. It's that person's grandmother's birthday.

There's only one birthday. There's only one well, two grandmothers, you know." Uh, so I think that this is like one of the powerful pieces as well. The transparency piece is the powerful piece. >> Yeah. >> Transparency and like maybe also like the auditability and understanding like having the big picture and the details at the same time.

>> Yeah. Um and as I say like everyone's talking about AI obviously >> right now you're talking about this auditability and transparency. Um how do you measure the ROI of AI? Like how do you measure the ROI of of that? For instance, >> my my reaction to that question would be the amount of time I have to the amount of time I have to spend at the desk after 5:00 on the weekend.

Yeah. Um that's for me personally. Um but ultimately I think that you we look at maybe a discreet example uh I think your company right has literally removed uh I think three three job wrecks for the lowest level like I'm sorry the uh not lowest level but for the onboarding team your company's done that. Yeah. Now that sounds great.

Yeah. But you know what's really awesome? the fact that now we have some individuals who are able to develop an expertise in reviewing and understanding and they have great examples of what the what the the onboarding would look like and we're having them work in a way that creates more complexity in their job of course but interests right like no one I have I haven't really met anyone who enjoys looking at the same thing every day for 40 hours a week not at all right and that's what kind of that's what kind of was, right? And I know your AI agents will never complain about that. >> No, they will never, >> you know.

Yeah, they'll never complain about that. >> They'll never be sick, never take a day off, and sick. >> They won't have a birthday to go to. >> Exactly. Exactly.

Um, so some of our guys have very have very much enjoyed it. Um, it's freed up their time to do more complex work, which I think has engaged them better. And again, the human the human element. Um, staying engaged, staying curious, staying uh innovating. Get some great feedback.

So, it's been wonderful. >> Great. Love it. Yeah. >> I'm curious.

Do you expect AI specific regulatory guidance soon? Do you think like regulators? >> Yes. >> How so? >> 100%.

Um on the flip side of AI uh it's a black box. Yeah. >> Yeah. >> And it can kind of do anything uh and search out for uh use procedures to to reach any any like uh any result. Yeah.

It lacks empathy. Uh it lacks um what am I trying to think? Like it doesn't respect privacy, you know? Um this is a very dangerous thing >> when you think about it. Yeah.

>> Like it doesn't have feelings, so it doesn't really give a You know what I mean? >> It's a little bit like I always use the analogy of um the way. >> It's like it will be 10 times more safe than a real human driver. >> Um but if there's one accident, it's over. like Cruz had one uh guy get run over by an autonomous car >> and that was it.

Company stopped operating and now they GM shut it. But do you think we're at risk of the same thing with AI? Um everything looks good until it's not and then AI winter or something that comes around. >> I think it's always a risk. Yes, there is a risk that something catastrophic could happen and then we're going to have a group of individuals who say this thing happened therefore will always happen or you know we have to protect so therefore it's like this all or nothing thing where it's like no more of like XYZ whatever thing.

Yeah. Uh I think having appropriate guard rules and maybe I introduce this now like AI compliance right uh would be the thing to consider right so maybe there's a I don't know maybe there's like a commission so I think that yes like we have to control AI in some way but maybe there's a commission that says we're going to make sure we build in these safeguards if we see certain things there's like cuz maybe you can deploy I don't know maybe you can deploy AI compliance agent for AI. I don't know. I don't know. Um >> it's going to happen.

>> It it should cuz I don't think a human is going to be able to like keep up with it. So, you know, ironically enough or interestingly enough, we'll use AI to >> AI >> to monitor AI. >> Yeah, for sure. >> Um >> Yeah. >> Okay.

So, you've led teams across banks, exchanges, startups. Just like general question, what's your leadership philosophy as a chief risk and compliance officer? >> Managing the human and let letting and really leveraging the people around you. This is like my my my thing for everything actually. >> Um whether I'm teaching a class or and you you've been in meetings with me.

Yeah. Yeah. >> I say yes a lot. Yeah. because it doesn't really matter.

I think that one of the things like you have to empower people around you and and let them know that their ideas are good ideas as well, right? So, I'm not sure if you know this, but like it use Carlos as an example. Carlos and I don't always agree. Um, and but I think that when we're having a conversation about an ultimate goal that we have, my idea doesn't have to be the right idea. Like, I don't care about that.

What I care about is making sure that I develop uh individuals in a way where they they're confident, they're competent, um they believe that I will back them up 100%. Right? So if we make a mistake uh actually this I don't even believe in wrong or right. I believe in reasonable. So like if something we've decided to do uh goes wrong for whatever reason like has like a negative outcome, we all own it.

It's no problem, you know? So what do I think? I manage a human. Um, I try to make sure that they're they're able to voice their ideas and the idea that wins in terms of what we do, everyone is all in on it. >> Yeah.

100%. Yeah. >> Love it. Um, we're going to finish this with a quick lightning round of, you know, rapid fire. >> Sure.

5 seconds a piece. Let's go. >> Yeah. A sentence a piece or something like that. Um, what's a hill you'll die on?

>> What's a hill I'll die on? Uh, when something's a no and it's as a consequence of like some really great research, I'm not budging. >> Good. >> Yeah. >> Most overhyped crypto or fintech buzzword.

>> Oh, it's most overhyped. I don't know. >> Or principle or >> principle? Uh, that there is a it's a solution for everything. >> Yeah.

Yeah. Yeah. >> Most underrated compliance practice startups ignore. interacting with your other business units. >> Why?

>> Because I think that sometimes people believe that you have to be in like this this silo and you have to be like a police officer. Uh we're not that. We're we're like protectors, right? So in order for me to protect you, I have to know you. >> One regulation you rewrite tomorrow.

>> Oh my goodness. One regulation tomorrow. Uh I'm not prepared to answer that one. >> Okay, good. The regulars will be happy about it.

Hardest part of explaining crypto to a regulator. >> It's it's so vast. It has too many applications. Um this is like a a product idea. Yeah.

Like anytime uh you I see crypto all the time so I understand this. It's like we're looking at the same thing over and over you get to understand it more and more. But when you try to explain to someone else they're like but it it you can send value but it it can be this it like what is it then? And that's like that I think is the hardest part. So, we've been automating a few things for you, but if you could automate another compliance task, what would go first?

>> Oh, I was thinking this the other day. Risk assessments, man. Risk assessments. I was thinking about the other I'm going to do the I'm going to renew our risk assessment. I was like, it would be great if uh I could kind of just have some inputs and have someone do this.

Yeah, >> we'll have a chat later. >> Yeah, please. >> Any hobbies that keep you grounded or shape how you lead? >> Uh jiu-jitsu. >> Oh, lovely.

>> Yeah. Yeah. Yeah. Um, I think that jiu-jitsu is possibly the most honest sport that I have ever participated in. I get on the mats and you know, no one asks me my age.

No one asks me about uh what I studied. They just mop the flow with you if they can, right? It is like skill versus skill and I love it. >> Yeah. I I'm I used to be an amateur boxer.

So >> So you know Yeah. >> I know. It's the best thing ever. You just go in a gym and then don't ask any questions. Go hit a guy and then you become really good friends.

>> Yeah. That's the other part. Yes. Yes. Yes.

>> Yeah. I I love that. Um has spending years thinking about risk changed your personal life? >> Yes. >> How so?

>> How so? Um you know like thinking about risk and jiu-jitsu actually requires you to always have perspective thinking like you have to put yourself honestly in someone else's shoes. And it's actually kind of overwhelming very often. But when I started looking like using that principle like with my parents, with my my niece and nephew, uh with my sister, it starts to really illuminate things like it's like it's this weird thing where huh, you're not thinking how I'm thinking and you did this uh and I thought it was for a bad reason, but it's actually for a good reason from your perspective. You know, like people aren't out here trying to hurt you necessarily.

They're like everyone's thinking they're doing a good job. And if you change your perspective, then you realize that like the conversations become easier, less tense, like you know, I love it. Yeah. >> And last one. If you weren't in risk and compliance, what would you be doing today?

>> If I wasn't I'd be I I I You want to know what I really would be doing? >> Oh, yeah. >> I'd be a farmer. >> Yeah. Yeah.

I think about it all the time. Um I'd be out here trying to like create food forests and you know, like I found out Yeah. I I Yeah. And I'd be a city planner like like in still in farming, right? plant fruit bring trees everywhere like you know I thought about uh this is going to be a longer I I want to tell you this but it'll be a long um >> yeah if you were >> when I say when I say farmer I mean farmer like in like the most pure sense and I was thinking about what would be a luxury experience if you were a farmer and you know what I was I was thinking like you know what would be cool if you really started here as the farming piece and you like came up with some other skill I was like you What if you had someone, if I'm farming sheep, I'm farming sheep and I say, "You can come to my farm and you can choose the sheep that will get the wool that will make the suit that you want." That's a luxury experience. >> Maybe we'll automate compliance enough for you to be able to do that. Uh, in the meantime, >> dude, if you make that dream come true, I'll be ever in debt, too, you know. >> Well, Francis, in the meantime, it was great having you here. My pleasure.

Thank you so much. And uh yeah, thank you for everyone for listening. >> Thank you. >> All right. >> Thank you.

>> Cool. >> Thanks, man. Appreciate it.