It's been two years since Anchorage Digital, a San Francisco technology company that provides custody of digital assets,
So it's not surprising that Anchorage Digital announced Tuesday it is restructuring and hiring to step up risk management and compliance.
"We're leveling up," said Rachel Anderika, whose role is shifting from chief risk officer to chief operating officer at Anchorage Digital, pending supervisory non-objection from the OCC, in an interview. "We're taking that next step. We're growing and we are moving into the next phase of what it means to be a federally chartered bank."
Putting a risk executive in charge of operations is part of putting risk management first, Anderika said.
"We have a risk focus because we're a regulated platform and that's part of our value add," she said.
Mark duBose has been hired as chief compliance officer, pending supervisory non-objection from the OCC. He previously led compliance and risk departments at Centre, Circle and several banks.
"He has a very strong understanding of the crypto space, but he spent many years in traditional banking," Anderika said. "Most notably, he was at Santander, and before that Bank of America, so he brings that blended perspective to us."
This is important because people who have experience only from the traditional banking world can have trouble adjusting to a company like Anchorage Digital, which is still a tech company at heart while also being a financial services company, said Georgia Quinn, chief counsel at Anchorage Digital.
"For a traditional banker to come in, it can be jarring," Quinn said. "But someone who is just a crypto person may not understand all of the heightened requirements of being a bank. We don't have to teach him one or the other."
DuBose will take on the leadership of ongoing projects to build infrastructure around compliance, Anderika said.
"That's been a huge focus of his, making sure that we have a highly talented team and a pipeline of talent," she said.
Anchorage Digital has also hired a new head of financial intelligence, Daniel Sankey. He was previously head of financial crimes compliance at Brex and has served in BSA compliance, reporting, and crimes investigations roles at Coinbase, Square and Wells Fargo
"That's an area that is much different than traditional finance," Anderika noted. "The way that you detect suspicious activity and the tools that you use are a little bit different. So we really needed somebody with a very strong crypto background who is attracted to Anchorage Digital."
Dustin Palmer has been hired as interim Bank Secrecy Act officer, and will be further developing anti-money laundering controls. He currently also serves as managing director of Berkeley Research Group's financial institutions advisory service, where he focuses on digital assets and cryptocurrencies. He has also served as managing director of financial crimes compliance at Promontory Financial Group, as a senior advisor at the Treasury Department and as an attorney for the Department of Homeland Security.
Frieder Weichelt will join Anchorage Digital Bank as Chief Information Security Officer. Weichelt previously served as chief risk officer at institutional crypto platform BitGo and as an advisor on privacy and information security matters at Promontory Financial Group.
And Anchorage Digital has hired Mo Abdoolraman as interim head of know-your-customer compliance; he was previously senior manager, financial crime and identity at Chime and vice president in compliance at Goldman Sachs and Citi.
In 2021, the OCC told Anchorage Digital it needed to improve its compliance controls and procedures for Bank Secrecy Act and anti-money-laundering requirements. In April 2022, Anchorage Digital entered into a consent order with the OCC that said the bank had failed to adopt and implement a compliance program that adequately covers those areas.
"For Anchorage, it's the price of being first," said Todd Baker, a senior fellow at the Richman Center for Business, Law & Public Policy at Columbia University and the managing principal of Broadmoor Consulting, in a tweet at the time.
"Since the 2021 findings, we have taken concrete steps to strengthen our compliance operations," Quinn said. "From scaling our team to bolstering internal controls to automating certain processes, Anchorage Digital Bank has reinforced our commitment to best-in-class regulatory compliance."
The new hires announced Tuesday to the leadership and compliance teams "are the latest move in our longstanding commitment to exceed the high bar for regulatory compliance set by the OCC," Quinn said.
Anchorage Digital received its bank charter under a presidential administration that was more amenable to crypto as an industry than the current administration, noted Julie Hill, law professor at the University of Alabama, in an interview.
"They now find themselves in a regulatory environment that might not be quite as friendly to their business model as the one they were approved in," Hill said. On top of that, dealing with anti-money-laundering and know-your-customer compliance is harder in the crypto world than it is in traditional banking, she pointed out.
Anchorage Digital is among the first businesses "trying to think about how you build out a robust compliance framework on top of technology that is new and a bit different from what banks are used to," Hill said. "So I think the trouble for businesses like Anchorage Digital and other crypto-related companies that want to operate in this space is that there aren't enough of them and they're new. And so nobody is really a hundred percent sure what state-of-the-art looks like. And I think that includes the regulators."
The OCC has said in several recent consent orders that it wants to see more compliance personnel, more robust compliance policies and outside directors that have oversight and responsibility for AML concerns.
"But what exactly they're looking for is a bit of a guess," Hill said. "It's hard to know exactly what they're looking for and what level of compliance personnel and policies and practices are seen as good enough."
Anchorage Digital is still a private company; it closed a series D round of financing at the end of 2021, raising $350 million. Its initial financing came from crypto-friendly VC funds and Andreesen Horwitz. Now it's getting money from more traditional financial players like KKR, Goldman Sachs, BlackRock and Apollo.
The company has had significant growth, according to Quinn.
"Some of that has come organically, and some of it has come from the flight to quality we've seen lately with respect to these other institutions, and people realizing the need for a regulated qualified custodian," Quinn said.
Clients are typically institutional investors such as hedge funds, VC funds and family offices. Anchorage Digital has billions in assets under custody, she said.
"Our mission at Anchorage Digital is to create a regulatory path forward for a safer, more secure digital asset economy," Anderika said. "With our technical platform and regulatory status as the first federally chartered digital asset bank, we are fully committed to providing safe, secure and regulated crypto for institutions."
