It’s been two years since Anchorage Digital, a San Francisco technology company that provides custody of digital assets, received a bank authorization of the Office of the Comptroller of the Currency. In the meantime, a lot has happened, including the collapse of the FTX cryptocurrency exchange, the knock-on effects it has had on every company FTX worked with, and an OCC consent order and company growth for Anchorage.
So it’s no surprise that Anchorage announced Tuesday that it is restructuring and hiring to step up risk management and compliance.
“We’re leveling up,” Rachel Anderika, whose role is transitioning from chief risk officer to chief operating officer in Anchorage, said in an interview. “We are taking the next step. We are growing and 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 prioritizing risk management, Anderika said.
“We have a risk approach because we are a regulated platform and that is part of our added value,” he said.
Mark duBose has been hired as Chief Compliance Officer. He previously led the risk and compliance departments at Centre, Circle and various 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 at Bank of America, so he gives us that combined perspective.”
This is important because people who only have experience in the world of traditional banking may have trouble adjusting to a company like Anchorage, which is still a technology company at heart and a financial services company at the same time. said Georgia Quinn, Anchorage’s senior counsel.
“The input from a traditional banker can be jarring,” Quinn said. “But someone who is just a crypto person may not understand all the lofty requirements of being a bank. We don’t have to teach them one or the other.”
DuBose will take the lead on ongoing projects to build infrastructure around compliance, Anderika said.
“That’s been a big focus of his, making sure that we have a highly talented team and a pool of talent,” he said.
Anchorage Digital has also hired a new head of financial intelligence, Daniel Sankey. He was previously head of financial crime compliance at Brex and served in BSA crime investigation, reporting and compliance roles at Coinbase, Square and Wells Fargo.
“That’s an area that is very different from traditional finance,” Anderika said. “The way you detect suspicious activity and the tools you use are a little different. So we really needed someone with a deep background in crypto who would be drawn to Anchorage.”
Dustin Palmer has been hired as an acting Bank Secrecy Act officer and will further develop anti-money laundering controls. He currently also serves as managing director of Berkeley Research Group’s financial institution advisory service, where he focuses on digital assets and cryptocurrencies. He has also served as managing director of financial crime compliance at Promontory Financial Group, as a senior counsel at the Department of Treasury, and as counsel at 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 information security and privacy matters at Promontory Financial Group.
And Anchorage has hired Mo Abdoolraman as head of know-your-customer compliance; He was previously a senior manager of identity and financial crime at Chime and a vice president of compliance at Goldman Sachs and Citi.
In 2021, the OCC told Anchorage that it needed to improve its Bank Secrecy Act compliance controls and procedures and anti-money laundering requirements. In April 2022, Anchorage signed a consent order with the OCC saying the bank had failed to adopt and implement a compliance program that adequately covered those areas.
“For Anchorage, it’s the price of being first,” Todd Baker, senior fellow at Columbia University’s Richman Center for Business, Law & Public Policy and managing director of Broadmoor Consulting, said 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 tightening internal controls and automating certain processes, Anchorage Digital Bank has strengthened our commitment to best-in-class regulatory compliance.”
The new hires announced Tuesday to the leadership and compliance teams “are the latest step in our long-standing commitment to exceed the high level of regulatory compliance set by the OCC,” Quinn said.
Anchorage received its banking charter under a presidential administration that was more open to cryptocurrency as an industry than the current administration, Julie Hill, a University of Alabama law professor, noted in an interview.
“They are now in a regulatory environment that may not be as friendly to their business model as the one in which they were approved,” Hill said. On top of that, dealing with anti-money laundering and know-your-customer compliance is more difficult in the crypto world than in traditional banking, she noted.
Anchorage is among the first companies “trying to think about how to build a strong compliance framework on top of technology that is new and a little different from what banks are used to,” Hill said. “So I think the problem for companies like Anchorage and other crypto-related companies that want to operate in this space is that there aren’t enough of them and they’re new. So no one is really 100 percent sure which state- it seems next-generation. And I think that includes regulators.”
The OCC has said in several recent consent orders that it wants to see more compliance staff, stronger compliance policies, and outside directors overseeing and being accountable for AML concerns.
“But what exactly they’re looking for is a guess,” Hill said. “It’s hard to know exactly what they’re looking for and what level of staff and policy and practice compliance is considered good enough.”
Anchorage Digital remains a private company; closed a series D financing round in late 2021, raising $350 million. Its initial funding came from crypto-friendly venture capital funds and Andreesen Horwitz. Now it’s taking money from more traditional financial players like KKR, Goldman Sachs, BlackRock and Apollo.
The company has seen significant growth, according to Quinn.
“Some of that has come about organically, and some of it has come about from the flight to quality that we’ve seen lately with these other institutions, and people realizing the need for a qualified, regulated custodian. Quinn said.
Clients are typically institutional investors, such as hedge funds, venture capital funds, and family offices. Anchorage has billions in assets under custody, she said.
“Our mission at Anchorage Digital is to create a regulatory path forward for a safer digital asset economy,” said Anderika. “With our technical platform and regulatory status as the first federally chartered digital asset bank, we are fully committed to providing secure and regulated cryptography for institutions.”