Following the Money with Chainalysis: 7 Questions for Sophie Bowler from Zodia Custody

Following the Money is a Q&A sequence that spotlights how Chainalysis prospects use our merchandise in the actual world — from compliance groups and investigators to pioneers driving crypto adoption.

Sophie is the Group Chief Risk and Compliance Officer at Zodia Custody.

 

What do you suppose is the hottest factor in crypto proper now? 

Right now, the most fun improvement in crypto for me is the fast innovation taking place in monetary crime identification and prevention. The trade is evolving at tempo, and we’re not simply maintaining with TradFi. I genuinely suppose we’re getting forward.

Blockchain analytics is a standout instance. It provides us real-time visibility into threat publicity — one thing we are able to solely dream of in conventional finance. Instead of reacting after the reality, we’re now capable of proactively handle monetary crime threat because it unfolds. I’m additionally seeing some spectacular instruments rising in the DeFi area. These improvements are paving the approach for regulated companies to assist consumer engagement with DeFi in a safe and compliant method. That’s a serious step towards mainstream adoption.

Ultimately, stronger compliance instruments are doing extra than simply maintaining dangerous actors out; they’re laying the basis for protected, scalable progress throughout the crypto ecosystem. This is a transformative second for the trade, and the tempo of innovation is genuinely encouraging. I’m optimistic about the place issues are heading, and excited to see what breakthroughs come subsequent in the monetary crime prevention area.

 

What’s the largest false impression about your job?

Probably two issues.

One: A reasonably (sadly) widespread one is that we’re right here to sluggish issues down — that we exist so as to add layers of course of or say “no” to something that appears remotely advanced or unconventional, particularly with regards to extra ‘unique’ shoppers.

Of course, that couldn’t be additional from the reality. My position, and that of my group, is just to allow the enterprise — full cease. We’re right here to ensure alternatives may be pursued in a approach that’s sustainable, accountable, and aligned with what our regulators, auditors, and shoppers count on. It’s about constructing strong merchandise and frameworks that enable the enterprise to develop with confidence.

Ultimately, if we don’t do this properly, we threat shedding our licences, and with out these, we wouldn’t have the ability to tackle any enterprise in any respect, and to not point out we’d lose our shoppers’ confidence. So sure, we care strongly about efficient processes and controls, however we additionally work arduous to ensure they’re as streamlined and frictionless as attainable.

Two: That I’ve to know every little thing that’s taking place in the enterprise, and be in every single place all the time: completely not — this isn’t one thing I can or needs to be doing as a frontrunner of a worldwide enterprise. For me, it’s about empowering and creating my group such that they’ll lead in their very own proper and have autonomy to take action. This creates a high performing group and finally permits us to be simpler as a threat and compliance perform.

How do you clarify “I observe terrorists and scammers on-line” at dinner events? It’s at all times an attention-grabbing one! For some cause, folks, together with my family, usually assume I’m concerned in fraud investigations or work straight with the police chasing criminals. So, after I do begin speaking about monitoring and tracing illicit exercise, it’s not a complete shock. But it’s the blockchain half that actually will get folks. Most don’t absolutely perceive what it’s or the way it works, so after I clarify how we use blockchain analytics to hint monetary crime in actual time, it sparks loads of curiosity. People at all times wish to understand how we really determine the finish legal and whether or not they get caught. The reply? Not at all times, however we all know we’ve performed a significant position in enabling that final result. And that’s extremely rewarding.

 

What’s one factor outsiders don’t understand about doing this sort of work?

I feel that, regardless of developments in the approach through which digital belongings have gotten

legitimized by means of regulation, societal uptake, and easily by means of the passage of time, there’s nonetheless a notion that it’s the best instrument for criminals to launder cash. Those of us working inside crypto threat and compliance, nonetheless, perceive that the instruments we now have out there to us and the knowledge held on the blockchain enable us to have insights into the dangers, criminality, or any associations of belongings we’re receiving, and even inside the wallets we’re sending belongings to. The actuality of that implies that we’re capable of determine inside a cut up second what in TradFi would take a group of asset tracers days or perhaps weeks to attain.

 

What’s one thing Chainalysis helped you clarify to somebody outdoors your group?

One of the most precious issues Chainalysis has helped us articulate is the monetary crime publicity linked to a consumer’s counterparty — and why, in some instances, we merely can’t settle for funds from sure wallets.

Thanks to the analytics, our group can pinpoint precisely how a lot tainted crypto is concerned and which wallets it’s interacted with. That degree of readability permits us to make much more knowledgeable selections and, crucially, clarify to each our shoppers and inner groups why some funds fall outdoors our threat urge for food. It’s not nearly saying “no” — it’s about displaying the knowledge behind the choice, and serving to everybody perceive the threat we’re managing. This usually makes it extra actual and simpler to elucidate — simpler than I ever keep in mind in TradFi!

 

If you have been onboarding somebody who got here from a trad-fi firm (very similar to your self), what’s the first lesson you’d train?

That the classes you’ve discovered in TradFi — particularly round threat and compliance controls, and the high expectations from companies and regulators — completely apply in digital belongings. The identical degree of rigour is predicted, and generally, the approaches and instruments you’ve used may be tailored to this area. Don’t lose that — bringing greatest practices into digital belongings helps lay a powerful basis. Just be ready to maneuver quicker, be extra nimble, and study the crypto-specific dangers. Use your TradFi data to form and adapt controls that work on this new surroundings.

 

How does Chainalysis make your job as a CCO simpler? 

It’s 100% the hands-on assist we get. Our CSM, Lucas Martino is unimaginable and is at all times there to assist us. Whenever we want assist, have a query, Lucas and the Chainalysis group are there right away. It actually helps relieve the strain at essential instances and reduces our stress in a job like mine, or in MLRO roles like a lot of my group. Lucas and Chainalysis at all times have the solutions, nice insights and nice concepts. It typically looks like they’re in truth an prolonged a part of our compliance group.

 

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This materials is for informational functions solely, and isn’t meant to supply authorized, tax, monetary, or funding recommendation. (*7*) ought to seek the advice of their very own advisors earlier than making a majority of these selections. Chainalysis has no accountability or legal responsibility for any choice made or another acts or omissions in connection with Recipient’s use of this materials.

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