Stephen: This is your host, Stephen Sargent back at the Around The Coin podcast. We are lucky to have Brandi Reynolds. She's the Chief Growth Officer and also the senior managing director at Bates Group. We talk all about US crypto compliance, policy regulation. We talk about her early days working in the traditional financial sector and what's changed in crypto from 2016 all the way up to today where the momentum is just going absolutely crazy for digital assets, especially in the us. We talk cbdc, we talk stable coins. This is one of the best podcasts to listen to when we talk about crypto policy and regulation, and I hope you enjoy it.

Stephen: This is your host, Stephen Sergeant Around The Coin Podcast. We have a special person today because they know crypto extremely well. They also know compliance extremely well, and they fly planes for fun. I don't think you can get a better guess than that. She's the Chief Growth Officer and the senior managing director at Bates Group. Brandi Reynolds, welcome to the show.

Brandi: It's a pleasure to be here.

Stephen: I would love to start off with your background. We left some notes here. I was gonna ask you some questions about your background, but then you, you made something that caught my attention that you started off in the subprime space with, specifically with payday lenders. I don't know if many people know my past.

I did collections for 12 years. We collected mostly from payday loan companies, furniture, payday as you go, pay as you go, companies one 900 numbers. So I know the underbellies of collections and payday loans, so I'd love to know where you were in that space. Especially when it's subprime has like a, a tinge of that still hurts people when they hear that word.

When it's tied towards things like mortgages.

Brandi: Yeah, it's funny because you know, it's still such a bad word in the industry, right? It's like, oh, you work for a payday lender. That's horrible. But no, actually, I mean, I spent over 11 years in-house. Compliance officer at Advanced America. So now, purpose Financial, and I mean, it was honestly a great company to work for.

The only reason I left was because there's no more opportunities in the space. But I mean, they, they did fantastic with, you know, setting the stage, trying to get good regulations and yeah, I learned a lot from, from that position.

Stephen: What were you doing from a compliance angle? Like usually when you think about those type of payday lenders, like compliance was probably not the, the thing they were investing their money in. It was trying to buy debt for pennies on the dollar usually. What were some of the regulatory, you mentioned reg regulations.

What were some of the regulatory compliance things do you remember dealing with back at that time?

Brandi: Yeah, so actually I first started out with consumer compliance. So everything from, you know, just all the consumer protection, I was there when CFPV got its start. I. So I literally was the lucky recipient of one of their first onsite 12 week examinations, a horrible experience. So we can table that one for another time.

Then I moved into a ML that's where I've started learning everything about anti-money laundering. Found my niche there. And yeah, I still go back to my roots with consumer compliance, but I fell in love with a ML in that position.

Stephen: I would love to know, like, when did you touch on crypto? 'cause you have, you know, a pretty diverse career when it comes to crypto companies and risk management. Something you didn't name on your LinkedIn. I, I would love to know, like, what was your first entrance into crypto blockchain technology? Do you remember where and when you heard it for the first time?

Brandi: A hundred percent. It still sticks out to me till this day. So I was recruited to a consulting firm, so left Advance America went into the crazy world of consulting and it was there where a colleague. Introduce me to crypto. She literally asked if I was interested in helping to conduct an independent review for one of the top exchanges still to this day, and I was like, sure, what's crypto?

She's like, go do some research, figure it out. Come back and I'll shadow. You can shadow me. Learn everything you need to and I'll teach you. I'm like, deal. It is like sealed. From that point, just fell in love with everything that there was to offer about crypto blockchain compliance. She was a great mentor for me and so I think that's where, from that point I've also tried to use my experiences to help other people, you know, interested in, in getting into the space.

Stephen: Was there a concept you were struggling with? I can't remember. Like when I first heard it, I was coming from the FinTech lens. It was funny. This was the first podcast that I'm hosting now. I listened to almost 10 years ago, and they were talking when I was like, Hey, like let me find the FinTech podcast.

And they mentioned Bitcoin for the first time. I was like, that's something I've never even, you know, imagine hearing something that you've never, ever heard about and having really intelligent people talk to talk about it. You're like, hold on. Why is this not being conversed around, you know, the hundreds of people I see every week.

I still had the understanding that like, no one's gonna actually use this or need this. Especially, I live in North America, as do you what was like a concept that was hard or a struggle for you to understand or comprehend, or what made the most sense when you heard about blockchain and cryptocurrency?

I.

Brandi: So, so this is literally back in 2015. So, you know, people tell me I'm an og. I think they're just saying I'm old. Whatever. Been around for quite a bit. For me at the time it was really trying to grasp the different. Of the different tokens and you know, just the, the operational background to how do you get to where you are with it.

And so for me, I was really trying just to put everything together so I could understand not just the compliance side, but the operational side of it. And that's where you get into a lot of technical nuances. That took, you know, a little time for me to figure that out.

Stephen: I love it.

What were some of the risks, the financial crime that you were seeing in those early days working from the crypto platforms? Was it still like ICO scams or did you see. Some real typologies, probably around dark net markets is what we saw a lot early on. What were some of the financial crime typologies you were seeing?

Brandi: Yeah, so it was unfortunately more around the Darknet markets a lot regarding, you know, child, child exploitation. So a lot of dark things on that side, and that's really when it opened my eyes to, you know, how bad you, the, the industry could be if the criminals were having their way with the technology.

And so really trying to focus on how do you find, and what do you do with these typologies? So how can you. You know, create rules and alerts and how can you report. So that's where that really opened my eyes to, you know, what you could see in the, the market that was different from, you know, early days in Advance America, you know, you had structuring, you had romance scams.

You're totally different typologies than some of these new things happening on the, the web, or excuse me, on the, the dark web.

Stephen: Yeah, dark web was always very interesting to me. It was like heavily used, especially with those early transactions, you know, before the chain analysis and elliptics of the world caught up to it, and then you can see how many people were actually interacting with it at the time.

You're now part of, you know, a group working on working groups when it comes to compliance with the blockchain association.

Now there's so many different blockchain associations. It would be really great to explain which this is feel, I feel like this is the OG Blockchain Association, but don't quote me on that. What is the blockchain association and like, what are your main, you know, mandates, especially in the working group that you're contributing to?

Brandi: Yeah, so I've actually, I've had the, the privilege to work with the blockchain Association out of dc. Since about 2018, so when I was a compliance officer in an interim role for aro, that's when I first became aware of Kristen Smith and what she was doing with that association. It was fantastic because they were trying to bring, you know, education, they were trying to bring thoughtful legislation and, and bring the industry together with government, right?

And so it was just very fascinating. And so I really started trying to be involved from that initial perspective. And then kind of fast forward I just recently became the co-chair of the compliance working group. Which is, you know, amazing 'cause you get to work with so many, you know, smart people in the space and get you early, look at, you know, what's happening from a legislative perspective.

I mean, how do you, you know, incorporate new, you know, legislation into your compliance program and your risk controls. So you just heads a whole new perspective to compliance.

Stephen: What are your thoughts about the current state of digital assets in the us? You know, Trump's kind of putting his, you know, foot on the gas. We're seeing stablecoin regulations, multiple stablecoin regulations pop up. We're seeing a lot of people visiting DC all of a sudden. What are your thoughts on what's happening both from like an industry's standard?

And maybe even from a compliance angle.

Brandi: Yeah, I mean, there's definitely a, you know, not a shortage of things happening, right? So I've done many webinars just this year on, you know, trying to stay on top of what's happening from a legislative perspective also from just the, the banking side and the banking expectations. And so I. It's very interesting to see from you last year under the Biden administration to this year with the Trump administration.

And one of the things that really stands out to me is trying to turn away from the enforcement regulation perspective and actually trying to get some thoughtful legislation in place. 'Cause you, I've had the, the privilege to work with so many great companies and part of where they're handicapped is really just, they're wanting to be compliant.

They don't know what the rules are to comply and so that's been, you know, hard for some of them.

Stephen: And they don't wanna go through a three to four legal battle and, you know, hundreds of thousands of dollars to figure out which side they're gonna be on. At the end of that debate. I'm curious. I just saw recently that, you know, the Department of Justice disbanded their national crypto enforcement team.

You know, to your point, which is like kind of criticized for its regulation and prosecution on investigations into like tornado cash and Binance and other exchanges. What's your opinion on things like this where there are some benefits to these enforcement teams, but because of maybe the last regime they, they may have overstepped their bounds when it came to regulation.

How are we gonna draw back without drawing too far back? The other way I.

Brandi: And that's where I really think that you have to have the balance between your regulation and enforcement, and hopefully what you'll see is you less of the just. Enforcement trying to make an example and steering some of the, the need for the regulation under the appropriate, you know, maybe other groups or other departments.

So I know they just disbanded the one that you mentioned. The intent, again, I think time will tell if that will hold true. Will there be more of the enforcement or oversight by you, the cyber crimes use sector, if you will. So I don't know. It'll be very interesting to see, but definitely what the industry really needs is the balance between the two.

Stephen: What are some of the things that are top of mind to your clients? You don't have to mention who they are, but I'm assuming a lot of them, especially in the US, are talking to you about stable Coin regulation. Or, you know, even maybe Mika and regulations that impact o other jurisdictions that they might be globally involved with.

Or even things like the travel rule where we have a little bit of an interoperability issue. What are some of the things that are top of mind for your clients when they're kind of calling you?

Brandi: So the one is, is most definitely just use how to stay on top of all the legislation. Slate of changes, so the federal and then also the state layer also. So those that you know may need state level licensing, how to stay on top of all those changes. How will that intersect with, you know, any type of maybe, you know, new federal requirements as well.

So that has a lot of people very concerned. Also just the banking that has been an issue for quite some time that you and I, you know, lived through, you know, paid lending back in the day. So operation choke 0.1 0.0, and now what's perceived as, you know, 2.0 at least in the prior years. So trying to free up some opportunity for banking in the space.

But otherwise you hit on a couple of other key topics too, which is. You know, stable coins, you know, everyone is looking for opportunity with stable coins, you know, is that a, you know, a, a good driver for the industry and where will that take things? Does it have, you know, impact with, you know, your your government coins, you know, issue like by China and others?

So there's a lot, but it just really depends on the business model of those clients. Depends on what they're asking.

Stephen: Stable coins. You have to think two thirds. I believe every crypto transaction is, you know, stable coins. We're seeing more use cases. I'm in Canada, you know, whether you wanted to donate to Ukraine or, you know, donate to the the truck. The, the truck convoy that we had here in Canada, you probably had to use stable coins because GoFundMe wouldn't allow you to make those kind of transactions without heavy scrutiny from the government.

I'm curious, you mentioned you kind of brought cbdc, which are Central Bank digital currencies. What are your thoughts, do you think this, you know, the government should leave this to the private sector like Tether and circle, or do you think they should be also issuing their own digital assets?

Brandi: So my, my personal thoughts is leave it to the private sector. I think you'll see, you know, an interesting take depending on the country. Also, I, I don't see China putting the brakes on, you know, if you will. The US I think it has started putting the brakes on, you know, you need discussions there, so it'll be interesting to see what other countries do in the space.

But, you know, for the US I think you'll see, you know, a slow down in discussions and topics there, and it'll be more towards the private side.

Stephen: And you know, it's funny that you said leaving it to the private sector, I think it was Dante Des or Jeremy Aire there at Circle that kind of said like, you don't want the governments building the airplanes. You want the governments putting in regulations about how the airplanes should be built and operated.

And that kind of hit home. It's like, yeah, I may not want the government to be, to be building the airplane, but I definitely want them regulating the space. You've been, you've been in crypto for over 10 years or approximately 10 years. You've worked with many licensed crypto platforms, where do you think the regulators should be focusing their attention?

Especially 'cause you, as you say, you come from like a consumer protection background. Where should regulators be focusing their attention? Is it thing like siloed funds, like what we saw with FTX? Is it things like offering certain amount of yield you know, we saw that go downhill with things like Celsius.

Where do you think they should be? Or is it like financial crime compliance and. Ransomware or national security, where should they be focusing their attention as there's so many balls in the air when you start thinking about digital assets in.

Brandi: There, there are so many, and really it's the, the general theme of clarity, you know, among the different regulations. And so you touched on earlier you mentioned the travel rule. So that's just to me one example because it's not, I. Easy and neat to be able to comply with the travel rule if you are a crypto based company, right?

And so there's nuances there, but you don't have a lot of clarity for these companies that really want to comply, but they don't really know fully how to. So you can also extend that over to, you know, other regulatory requirements in the us you know, whether it's, you know, regulation E and consumer protection.

There's a lot that companies really will, you know, follow suit if they have some more clarity on the how to.

Stephen: You know, you mentioned something there and I was just thinking about the regulations and where can we go, especially as around compliance officer. Travel rule, you know, many complaints about Mika have been around smaller crypto exchanges, not having the funding to con, you know, to con complete their compliance programs.

Right. You think about the travel rule, the TFR rule there in the eu, you know, you know, heavily regulating when it comes to val verifying that and other counterparties. What do you think is going to happen in the US do you think, you know, compliance might price out some of these smaller exchanges in crypto companies.

Brandi: I think you will. I think you'll see some consolidation. 'cause despite what the, the industry and the news indicates, I do see there being more clarity on the regulations, whether it's more, or just maybe rules or again, you know, some type of you know, memo if you will about how to comply with it. But we'll get some clarity.

But what I think is the, the concern too, it's, you know, from some of these companies that are very small, you know, how do you actually have the resources. Especially aside from the regulations perspective, you have these non-mandatory requirements from banking partners as well that want to treat, you know, these FinTech companies or these crypto companies as if they are a banking financial institution.

And so I think there's a general disconnect in the industry, you know, between fintechs, especially crypto fintechs and you know, just the traditional financial institutions.

Stephen: You raise a great point. Banking relationships, as we both know, have always been, you know, one of the holy grails. In crypto, you can have as many customers, but if you can't find a way to process their payments or on and offboard them, you're pretty much out of business. Have you seen the banking relationships get better in the last 10 years, especially now banks and you know, we have BA Now banking as a service, we're banks.

Are working along with fintechs and sometimes even crypto companies and other intermediaries, have you seen that banking relationship get better? Are we still seeing a lot of de-risking or you know, just higher requirements? They always joke that banks are the de facto regulators because it doesn't matter whether regulators say, if you can't meet your banks' requirements, you don't have a bank account to operate.

What are your thoughts on the evolution of banking relationships with crypto companies?

Brandi: I think in the past 10 years it's went from, you know, better to worse, and now I think you're starting to see, you know, maybe a little bit of upside. And, and just to give a few examples of that, you, the banking crisis really hit and that's when you saw a lot of de-risking, you know, with crypto companies.

We saw firsthand with many of our clients you've been given a two week notice that your bank account will be closed. You know, that's very difficult for these companies that have, you know, many thousands of accounts and the, the, their clients have no way to offboard. And so it creates a real problem in the industry.

I started seeing you some more kinda opening up to how do we successfully and from a risk-based perspective, bank crypto. And so there are still a few really good banks out there that are willing to bank crypto. Unfortunately, there's still a lot of hesitation about crypto startups you know, based upon you the funding.

And just a lot of you can you jump through all the hoops, which again, it takes, you know, a lot of, you know, time and effort and funds to be able to jump through all those compliance hoops.

Stephen: You know, as someone that works and, and enjoys working. With startups in the crypto space, and for listeners of this podcast who are usually in payment tech, crypto, many of them are startup founders, any words of advice or anything that they should be thinking about as they're approaching the US they see, you know, the gates open up, but there's always some hesitancy about, you know, what is actually behind them.

Those gates, once you get into the country and start the process, what are some, you know, high level advice or suggestions or things that they should look out for if they're looking to, you know, bring their startup operations to the us?

Brandi: So I would say first it's about, you know, ensuring that you do have great legal counsel. So understanding your business model, you know, do you need. Money transmitter licensing, for example. You know, are there banks that are still willing and open to banking as a service or you know, what are your specific requirements so that you can have those in place or you could be working towards those as you're looking to get a bank partner so they can see that you're serious.

You actually know what the regulatory requirements are and start looking at the best way to, to manage that. Whether it's your transaction monitoring, blockchain analytics, make sure that you have your full story. At the very beginning. And so we oftentimes are asked to help create business plans, for example.

You know, we can help with the shell of that, but the best person to be able to create the business plan and present that to a bank, it's the ones that are involved day to day. You know, it's the CEO that can tell the story and you really convince the bank that they have the controls, they have the people to be able to ensure success.

Stephen: What are the banks most worried about? Do you think that, like we saw with a couple issues with BAS compliance, you know, the, the bank accounts weren't, you know, like there was confusion around whether the money was in the bank accounts or who owns the bank accounts, whether it's a FinTech or the bank's responsible kind of for those accounts.

Is there any concerns that, you know, you hear over and over or you know, choke points where they're like, Hey, you need to provide us this, or they, they dive down on a specific thing. That's, you know, made it really challenging to get and maintain banking relationships in the us.

Brandi: Yeah, and hopefully this will get better with some of the guidance from like the FDIC and the OCC, you know, saying to, you know, to manage banking accounts appropriately or, you know, do not be afraid to bank crypto, for example. But some of the concerns you have been, I. What is the bank's obligations for understanding their client and their client's client?

So how far do they need to drill down, whether it's on the onboarding process or the transaction monitoring. And so there have been concerns because there's been several of our clients that have heard very directly from an examiner. That they must be able to have the blockchain analytics in-house at their financial institution.

They can't rely on the FinTech or the crypto to do it. And so that's concerning because many of the banks, they just do not have the resources or the education to be able to do that themselves.

Stephen: Was gonna be my next question actually. Like with traditional institutions now getting into digital assets, we've seen Bitcoin, ETFs. We're seeing payment companies acquire stable Coin companies. Do you feel that the everyday compliance officer has to upskill when it comes to crypto? Is there, is there a point that we can, you know, not afford to be upskilling and continue to get educated on crypto?

Especially if you're in compliance.

Brandi: Yeah, I think it's a, a must have because you, for for me, it's not, you know, will crypto stay around anymore? It's, it's mainstream now, right? It's, it's here to stay. And so traditional financial institutions have to get comfortable with that. They need to determine, you know, what their comfort level is, what their ability to bank crypto, whether it's direct or if it's, you know, you know, hands off where you have an indirect relationship.

But right now there is still a disconnect with traditional financial institutions from the board down to your, you know, upfront, you know, in-person tellers if you will, that, that they don't understand. What the risks are. And so there's still a huge gap in being able to educate, even if it's not on the blockchain analytics, but you know, how do you know you are vast?

You know, what are the risks of, you know, maybe onboarding of Binance versus eToro versus Kraken. You know, they're, they're different.

Stephen: Very, very different. I think many people are probably giggling like very, very

Brandi: Are very different.

Stephen: Yeah, very different.

You're now with Bates Group and before we jump into exactly what you do at Bates Group, which is grow the Business and as well as. You know, managing director, I saw on the website that you had, you know, a big subject matter expertise around data and data analysis.

That seems to be like a huge word. At the Chain Analysis conference in New York, everyone was talking about data, whether it was blockchain data, whether it was data, you know, within their internal systems and operations. Can you talk to me a little bit, maybe that's not your expertise area, but like how much is data being brought up in conversations that you're privy to?

Brandi: So, no, I, I think it's being brought up, especially for the past year, more than ever. And I think a lot of that has to do with, you know, more push from like, you know, regulators, New York for example. They have an expectation that you know, the data that you fully understand what it is and how it's being used.

We've started to see more and more state examiners from the state, money transmitter level, ask questions, poke holes and they expect the compliance officer to be able to speak to it, not just we have this, you know, person on the tech team and you know, we can bring them in to speak to it, but we have no clue.

That's no longer acceptable. And so for us, we're trying to educate our clients that, you know, just because you have a compliance hat on doesn't mean that you can pretend to be dumb when it comes to the numbers.

Stephen: That's super interesting and yeah, like it's, it's the compliance folks at the tip of the top and close to the executive level is the one that's telling me like. Data's important, especially when it comes to automation and bad data in is bad data out. So it impacts the whole workflow for most of these teams.

Maybe if you go in and explain some of your core services, what's like Bates group known for? You know, if you ask anyone on the street, what's the one thing that I think Bates Group is known for or that your organization really thrives in you.

Brandi: Yeah, so it's, it's very interesting that you asked that because, you know, base group has been around for over 40 years with a, a legacy model of, you know, handling expert witness testimony, large data ana analytics, and so forth. And then the newer, you know, side is, you know, hello, welcome to FinTech and banking.

And we have, you know, another team that does a lot with broker dealers and RIAs. And so I would say data analytics is something that base group is very much known for, but also outsource compliance. And so that's where my fund comes into play, where I get to, you know, have these, you know, interim compliance officer roles and working, you know, embedded with these companies as if I'm an employee, but still having the benefit of, you know, being a consultant.

Stephen: You've, you know, you've worked with some of the top crypto firms and crypto exchanges. What do you think is top of mind when you go into a company right now? What is top of mind for you? Like what are the first two or three things that you would do if a startup's like, Hey, we need to bring you in internally right now.

What are the first three things that you're doing?

Brandi: So first I wanna understand what the risk profile is. You know what the risk tolerance. To see if those match up to see if also if I'm a good fit. As you know, my background, right? I'm not risk averse. I've been in very high risk industry sectors for quite some time. But also just understanding, you know, if there's a match there.

You know, do you wanna balance, risk? Compliance shouldn't be a no department. It should be able to facilitate the business but in a very thoughtful way. So that's my first opportunity is seeing where the risk is and then just really trying to do a gap analysis and assess. Where the problems are and yeah, I, I'm brought in, I'm told it's a fixer, so that's where the fun begins.

Stephen: I, I love that. And it's funny 'cause I used to do some recruitment for senior level professionals and there was two camps. One from like the more traditional side like. Gimme the cushy, corny, coroner office, and let me just do the traditional stuff. And there are people that are like, gimme the, gimme the bonfire and let me come in with a gas can and a whole bunch of water.

We're gonna have to blow some stuff up, but we'll eventually put it out. And I feel like, yeah, you come from a, a fixing background. You worked at eToro eToro, I think most notably known for being one of the few companies to get a bit license in New York. Maybe talk about the BIT license. Nobody talks about it as much more, they say it should be a little bit more lenient than maybe when you started with Bit Toro with eToro.

What are your thoughts about the Bit License and will we see a revised version in the future, or, or we think we're gonna see very much similar to the same as what we see now.

Brandi: Yeah, so unfortunately I don't think we we're gonna see a revised version. If anything, I think we're seeing repeats in other states, like California, you know, Illinois has something similar that's being proposed now, so I think we'll see more of the same. If anything, I think New York may, you know, just turn up the, the requirements on the examination side of it.

Maybe not necessarily on the application side. And so, you know, for me, the, while it was a very lengthy process going through the, the Bit license, you know, application questions and due diligence and so forth, it wasn't as horrible as I thought it would be based upon feedback. And the reason that I say that is that, you know, New York definitely has high standards.

If you come prepared and you have, you know, the, the right answers, you really want to, you know, see it through, then I think it's a different experience as opposed to maybe those who are not well prepared.

Stephen: Would you suggest companies starting in New York where it's extremely hard making it easier for them to like get licensed in the other states? Or do you think they should at least tread water a little bit before they go into, you know, before they pass that? The tidal wave of what would be the New York licensing

Brandi: Yeah, we, we never suggest New York first because it, it's just. A very long process. And most companies that are in that phase, they're wanting to get operational as soon as possible. And so we do suggest going for some of the easier states first. That also allows some of those state regulators to start looking and they're like, oh, well you've already been approved in this number of states.

We know Texas is a hard state. You have a license there, so maybe we can, you know, leverage some of that work. And so we have seen that as, you know, a, a key opportunity to take it slow and put New York towards the end.

Stephen: You talked a little bit about risk appetites. I've been close enough to some risk assessments. How easy is it, especially for some of these mature crypto exchanges that you might be consulting for? How easy is it to do a risk assessment? Because once again, data, like they might have. A hundred thousand accounts, but you know, the majority are dormant.

You know, like how easy is it to get a good assessment of risk when you're dealing with a crypto exchange versus a bank, you know, a bank where it takes a lot longer to set up your bank account usually, versus a crypto exchange where you can feed an email address and at least get started on a couple hundred dollars of crypto right off the bat.

Brandi: I think that it, it very much depends upon the business model. If there's been one from the very beginning that you can build from, or if you're, you know, jumping in, there hasn't been anything you're operational for quite some time. The, the good thing is that, you know, most people, you know, have a good working base of, you know, the Fs, you know, guidelines.

You kind of always use those as a standard, but the problem comes where you have so many different nuanced risk areas that you need to incorporate into a crypto risk assessment versus even like a traditional money services business. And so there are unique differences. And that's where, you know, part of that education gap comes in.

If you've always been in traditional finance, then you don't necessarily understand the risks related to, you know, you adding a new token listing. Right. And what you need to consider for that type of risk.

Stephen: Have you seen some of that? I think in crypto's very notable about policies and procedures. People might be taking templated procedures from, you know, the traditional lens, adding in a little clause about cryptocurrency and then trying to pass it off as like a full crypto compliance program. Have you seen that or not so much?

In the

Brandi: yes, we, we have, and just because Chad GP GPT is there, doesn't mean you should use it for your policies and procedures. Maybe, you know, AI bots and things like that. But you know, all kidding aside. The regulators are really stepping up their game as well as bank partners and saying, you know, this is a template.

It does not actually represent your business. And so what we've tried to to recommend is that you take the time, like have a cookie cut cutter policy, if you will, but the procedures need to actually be what you are doing. Also because, you know, our team is very good at finding procedural violations.

So you may have this pretty procedure document that you know, a friend gave you, or you know, a friendly competitor, but it doesn't match what you're actually doing. And so companies get tripped up so often because they're not doing what they say they will do, even if it's not a regulatory requirement.

Stephen: Do you see that more documentation than actual implementation? 'cause I feel like the policy and procedures are like, finally we've done this. Yeah, yeah, yeah. We say we do that, but in practice they're not doing the, you know, the, the EDD on clients. They're not doing, you know, look backs on certain remediation projects.

Like where is the struggle and actually following the policies and procedures.

Brandi: The struggle is real. And I would say that where we see that a lot of times is because, you know, someone hired, you know, this great consulting firm or a law firm to create these pre policies and procedures and they have no clue what they say or no clue to, you know, how to actually operationalize it. And that's where get in trouble.

And so you, it can be very expensive policies and procedures that you paid a lot of money for. That now has gotten you in trouble because you don't understand them.

Stephen: When you're going into some of these startups for the first time, if you find that you're a good match. Where's the area that they're missing? Maybe not the area that they're doing wrong, like the policy procedures. Where's the area that they just could, don't know about? They don't know what they don't know, and they haven't even thought about that.

Whether that's privacy regulations like GDPR, whether, you know, like where's the area that they're like, hey, like you're like, do you have this? And they're looking at you like you have eight eyes. Like, what's that?

Brandi: That almost always is consumer compliance. And I mentioned earlier, you know, going back to my roots on the consumer compliance side. And so for me, that's just a natural thing I look for. But most of these, you know, startup companies, whether it's, you know, crypto, FinTech, MSB. You know, they look at you like you have two heads.

If you mentioned, do you have a customer complaints policy or do you know what Reg E or U dap or any of these consumer compliance regulations are? They're like, it's not applicable. I'm like, it's, and so we have to start from the very beginning.

Stephen: Can you give us a high level of like what these consumer compliance regulations like require, like you said, the complaints, which is interesting 'cause that wouldn't be the first thing that comes to mind usually when the, the market's hot. Right? But when the market goes down, I, I find that consumers don't blame themselves.

They blame the advertisers. They blame the crypto shit. They blame everybody else. Which would fall under, you know, the GI of your clients. I'm assuming that they're coming back and complaining to them that they weren't warned enough or there wasn't enough prompts. Where's the areas like, can you give us a high level of what this consumer compliance looks like?

Brandi: So, you know, consumer complaints is the big one, right? And so it doesn't necessarily have to be that you know, there's a problem or that you know, or whomever was bad. It could be that, you know, my account was hacked and now. It's not my problem, it's yours. You're ignoring me. Things of that nature, right? So that's kind of the easy one.

You do have the privacy concerns as well. So in the US you have GLBA, but you have also various different state regulators to have their own privacy requirements. And so that's kind of, you know, forgotten or overlooked by many. You can also consider you know, U dap. So anything from a advertising or marketing perspective, you know, is it, you know, unfair, deceptive to the clients.

Are you, you know, giving the impression that you buy crypto and, you know, all your problems will go away, you're gonna make a lot of money retire tomorrow. You know, things like that. So those would be the, the big ones. You can also get into just various different consumer disclosures for like customer receipts.

So should you be sending customer receipts? You know, do they need to be compliant with regulation E? Depending upon, again, the business model. So you can go into all kinds of boring requirements on the consumer compliance side. I think that's probably why people wanna forget about them. 'cause it's not the exciting, you know, a ML and stuff like

Stephen: Yeah, it's not, it's not the look at who we. Caught. It's like, it is like, look at all the things we did

Brandi: people are glazing over. Yeah. They're board of tears.

Stephen: You know, we talked quickly about the evolution of banking relationships with crypto. What have the conversations been like over the last 20 years? How have they changed? I know even up to like maybe five years ago, maybe before the pandemic companies would be like, Hey, we just need someone that knows chain analysis.

Like that's what we need for our compliance program. It's like we. I think you might need a little bit more than that. You might need to do a job description. It was very, very like Mickey Mouse Fisher-Price, my first compliance program. How has that changed? Are you still educating as much as you are providing your services?

I.

Brandi: Yes. So to many we, we do still educate quite a bit, especially on the startup side. 'Cause oftentimes you as the CCEO that has, you know, as we've been told many times, you know, a dream of my head in a, my. And they are the CEO, they are the compliance officer. They are the one in everything. And so we have to really start off, you know, educating from the one you need, legal counsel 'cause we're not legal.

But then from beyond that, you know, just from the, the high level, you know, federal side, you know, have you registered with Vincent? Are you a money services business? You know, so we can get you an A ML program or you know, get you registered to file suspicious activity reports. So all that very basic initial program and policies and procedure building training we still see quite a bit of gaps there.

Then even more so when it comes to terms that someone needs to be licensed as a state money transmitter. So that just, you know, turns the world upside down.

Stephen: They have to do that in every state.

What are your thoughts about state regulation versus federal regulation? You know, we produce podcasts. Which analysis? Leslie Chakin from Paxos came on talking about, you know, the possibility of like, a federal stable Coin regulator, like similar maybe to what Vara has in the Dubai with their virtual asset regulator authority.

What are your thoughts about state versus federal and does this leave, you know, crypto kind of in the same gray area that cannabis is in where it's legal? In some states, like I believe it's federally criminal. I could be wrong for how much, you know, marijuana smoke. I smelled in New York when I was there two weeks ago.

So maybe just educate us a little bit about the nuances between state regulation and federal regulation when it comes to crypto.

Brandi: Yeah, so I, I don't foresee there ever being just one federal legislation. I've had this conversation with a lot of really great, smart people from just even like new Flushing Association. You know, various different attorneys, no one will ever believe that there's gonna be one federal oversight at all.

With that being said, you know, can, can there be some more synergies between either the states or what is needed from a federal perspective? Possibly. The most difficult part, it's not from, you know, a fence in or a federal, I mean, money services business perspective. You know, that's pretty easy in the grand scheme of things.

The, the nuance and the the difficulties come when you have 50 different state regulators, and depending upon your business model, you know, you may need 40 something, your different licenses, 40 something different regulators, different expectations, different requirements, and so navigating that process is extremely difficult.

And so that's why it's also very costly. So get started and time consuming. So the regulators have, you know, tried to come together to have you some streamlined processes where you can, you know, go through one application, get licensed in many different states. There's still a lot of holes with that, and so it's still not perfect by no means.

So that's just some of the, the issues there.

Stephen: And is marijuana legal in New York? Or like, should we have been doing some citizens arrest while we were there? What? What's the deal with New York?

Brandi: So, I don't know about New York specifically, but you are correct in that, you know, many states have legalized it. But the problem is that from a federal perspective, you can't bank it. And so those companies in the cannabis space, they're required to look for, you know, state charter banks or credit unions or those that can, you know, take the funds without it going through a federal banking system.

Stephen: I see.

So speaking of banks, you know, banking as a service has been hot. You know, they went through a little bit of a tumultuous time. I'm curious, what are your thoughts or what are the warnings that banks, fintechs, and startups, crypto companies, all that are in your preview of services that you've dealt with over the last 10 years?

What are some things that they should be cautious about before entering into these BA relationships?

Brandi: Yeah, so I mean there's so much difficulty there that I think you're starting to see some. Some good headwind, meaning that banks are starting to realize that, you know, they do have a very important, you know, part of the role, meaning that they have an education piece. You know, what are the requirements for these fintechs coming on board?

They have to treat them as if you know, they are a liability in a way, so they have to take it responsibly. And the banks that have been in the space for quite some time, and, and we work with many of them. One I'll just kind of throw out Lead Bank is, you know, a very good example in the space of them having great controls and they know how to manage the relationships.

For the, the actual FinTech or the crypto side, you know, it's understanding that, you know, they do need to have mature programs, you know, they cannot skirt compliance and that it's a partnership with the bank. So I think both sides are starting to realize that more and more because the FinTech no longer wants to just check the box or get a very quick bank account.

They want one that they know will be there next year. So they're not de-risk. And so you're starting to see them be more willing to go through a longer due diligence process for a very thoughtful and long lasting bank relationship.

Stephen: Yeah, bank, bank relationships is something that you need a few of, and they need to be long term.

Brandi: Redundancy is.

Stephen: It's like the poli, the polygamous relationship of the financial, of the financial world. You need a lot and you need them for a long, long time. I'm curious, there was an AI agent article highlighted there by Bates Group around the use of AI agents, especially in crypto markets, and the impact this has.

What are your thoughts? Are any of your customers doing anything interesting with ai? You yourself maybe.

Brandi: Yeah. So, no, I think it, there's still a vast, you know, array of how companies are using it. So you're getting some, they're very interested on the. Side where you might have a crossover between crypto trading as well as you know, securities and so forth, and trying to use it in the, the trade process.

You're also seeing some companies wanting to utilize it to more so clear rules and alerts. So not just you having a certain number that, you know, kind of go past your fuzzy logic, but then actually having a different thoughtful process of, you know, removing some of the human interaction. So I would say those are probably the most.

Frequent use cases that we've seen or that we have been asked about and how to incorporate good AI governance controls.

Stephen: I'm curious, you just sparked something into me, especially around the AI conversation. I was thinking about, you know, the crypto and AI czar that we have here in, or that you have there in the us. David Sachs, who seems like a really intelligent person by the way. I'm curious, what are your thoughts about pandering to the administration?

Like we saw Solana with a very pro US commercial that, you know, maybe have some controversy around it, and then like, the administration's only lasting for four years. So how did these crypto businesses, you know, deal with, you know, to, you know, operation Chokehold 2.0 and now like, Hey, we're gonna be the most innovative, stable Coin crypto company in the, in the world.

Country in the world with Trump, like how do you balance this and could this shift back if you know the Democrats or another party takes over or another thinker within the same party takes over within three and a half years, do your companies come to you with those concerns or is they just kind of ride the wave as it comes?

Brandi: They absolutely do. And so that's, that's definitely a concern for many of them, especially the ones that you can tell they want to be a long lasting, thoughtful company, right? They don't wanna just ride the wave and then, you know, pull the plug and get out, make a lot of money. And so that's where I think there's a, a shift right now in the mentality and the mindset.

And it seems that the, the hope, if you will, is that this will be a long lasting change where both sides, you know, depending on, no matter if you're a Democrat or a Republican side. That both can see the benefit of thoughtful legislation. You know, being able to have innovation in the space and letting the US be able to take control of being the place where companies want to come to innovate and that it can foster, you know, more ideas and just bring more opportunities to the us.

Stephen: Do you. I'm curious, and this is, and not even from a political sense, this, this term of like waste, abuse and fraud in the US government and the spending, do you have thoughts about that? How it pertains to maybe the crypto industry, because the crypto industry is really not servicing, I don't think the government as much as maybe under industry, like national protection and things like that.

Any thoughts around how this like crusade to, you know, not wastefully spend in, in the government and things like tariffs are impacting maybe your customers?

Brandi: I don't think there's necessarily a, a huge impact on just the, the, the broad topic there. Where I do see some potential you know, interest or concern is more along. Along the lines of are there opportunities to showcase blockchain technology and being able to, you know, do away with, with fraud for example, so you can, you know, utilize your blockchain technology for so much more than, you know, sending Bitcoin.

Right? So that's what will be very interesting to see is will this allow for more of that to be utilized on the government side, I mean, and private sector as well. Where we do see some more concern though. You know, just impact with, you know, potential tariffs and you're just, is there an impact generally speaking to these various different countries and you know, by default, their business, their ability to be profitable and be successful?

So I think that's kind of you, a different concern that's not necessarily directly related to just a crypto business model, but just business in general.

Stephen: I love it. That's a great answer.

What are your thoughts on DeFi like? DeFi is not regulated for the most part. I. But just like crypto wasn't regulated for the most part. There were some early adopters of compliance in the area, to your point of trying to build a longstanding business. Just like when I reached out to this podcast, they're like, Hey, it's 2016.

There's not regulations yet, but there will be. We've been in payments for decades. There will be regulations. Trust me, they're coming. It's kind of the same conversation I think many are probably having with. Some of these DeFi platforms, although they've gone some big wins in the court system. What are your thoughts?

Should DeFi, you know, be programs protocols should be coming to you right now? Just seeing like, hey, what's the minimal amount we can put in to be a little bit more on the safer side than kind of like fully decentralized or fully out there? I.

Brandi: Yeah, so you know, I think that there's definitely a place for DeFi. I've been involved for quite some time really back 2018 with Vallas Avalanche and so before their ICO. So this is a space that I, I truly enjoy being in from both the centralized and the the DeFi side. What I find very interesting is the balance of what some of the companies kinda like in Ava Labs is really doing in the space.

They showcase that, that you could still hold true to some of the DeFi, you know, qualities or capabilities, but still have some good controls and best practices in place. And that is what intrigues me so much about them, is that they want to be a leader in showing that you can have, you know, that thoughtfulness.

Still on the DeFi side. But I do think that you'll start seeing just more and more best practices and then you'll see those that, you know, don't want the DeFi that you know, is a, you know, maybe a, a more traditional lookalike, they'll, they'll move away. I do think there's a place for those, for, for people who want the, the true ability to be anonymous.

But, you know, if you wanna interact in the US with banking on rails and off rails, then I think you have to understand that there's a certain amount of. You need to have K-Y-C-A-M-L or you'll, you'll, you'll be the next one with an enforcement action.

Stephen: If you don't need the liquidity of a major exchange and the travel rule being enforced, then if you can find your Coin somewhere else, maybe you don't need the, you don't need to go the compliance route. I'm curious, you had the cool ai, you know, the AI trend that's going around as everyone's making an action figure.

One of the big things I know about you is you fly planes and you know, I think you said you even ride motorcycles. Do you, as you know, so many entrepreneurs listening to this space, there's always quirky things that they do. You seem like you do some really old school cool things. I'm curious, like, you know, tell me about that and do you think that compliance professionals, founders, entrepreneurs, they should all be taking up a little something that, you know, lets a little steam out.

Brandi: Yeah. You know, for me it's, it's always been very interesting that I've, I've liked unique different hobbies. I don't wanna just read a book about something, I just wanna go do it. I wanna experience it. And so, I've been a pilot now for about two and a half years. Something I've always wanted to do when I was younger, finally got the opportunity and it was the hardest thing I've ever done.

Like, seriously, but the most rewarding as well. So yeah, so I, I love flying. Every chance I get ride motorcycles, scuba dive, have a martial arts background. So again, I'm not the, the typical, you know, I sit at a desk, you know, kind of you during the day. Boring compliance stuff. So yeah, I need something fun in the, for my hobbies,

Stephen: I love it. Do you get to like practice any of those things or do any of those things when you're going to conferences? Like maybe if you're gonna Thailand, you're like, Hey, lemme go to a local gym and do some Muay Hai while I'm at it.

Brandi: the, the coolest thing. So I have flown to a couple of conferences. So, you know, being able to just hop in a plane, not go through the, the commercial airlines. That's been pretty cool.

Stephen: That is absolutely awesome.

You know, you sold your company or got acquired, I'm not sure what the correct term is for what you've done to Bates Group. Give us the entrepreneur view of doing that. You know, we talked before the show. What was that like? A lot of entrepreneurs like, Hey, I'd love to get acquired by a large consultancy that's been in business for 40 years.

Talk to me about that process. What were some maybe the hiccups? Did you hire like a business doula or an acquisition doula to kind of walk you through the legal process? Talk to us about the acquisition.

Brandi: Yeah, so it actually, it kind of came out of nowhere. And so I was at a consulting firm for a couple of years when I left being in-house, and then had that crazy moment of, you know, why am I not doing this for myself? And so started my own consulting firm. And it really was a, a blessing because I had a lot of great connections, a lot of great people to help make referrals, intros to me.

So I found that I was growing very fast, and so I, you know, quickly had to bring on contractors to help with the work. Brought my first employee on, and then it went from myself to six full-time employees and one part-time that was helping with some administrative work. Base group came to me more at the time just interested in partnerships, referrals, that sort.

And then they asked if I'd ever be interested in being acquired. And I was like, well, I haven't thought about it, but maybe. And so I'm like, glad to have a conversation. And so you, one conversation led to another. You know, I had just, just before that for curiosity, wanna see what the valuation of my company was.

Always as I mentioned to you, I'm slightly type Bates, so I've always, you know, tried to keep, you know, good books, records, you know, all that I knew, you know, that I was very profitable, had great margins, all that good stuff. And Bates, you know, made a great offer to me and wanted to bring over, literally myself and all of the employees to start their FinTech and banking practice.

And so I had been in business for just at three years when they brought over everyone from my company. So here I am. So it's been about three and a half years now that we've been part of the Bates team.

Stephen: That is awesome. What, like, what were they trading on? Like, I, you don't hear many service-based businesses being acquired in this way. You hear a lot of SaaS products, maybe a lot of technical products. What are they basing it on ebitda? Like what are they, you know, like your Rolodex, your customer portfolio.

What are some, or is it just like straight expertise? And they're like, Hey, this is the amount we pay if you stay in house for this amount of years. You don't have to go into details, but I'm just curious. High level. That

Brandi: absolutely. Because

Stephen: help me. It help me. That's three years old and other entrepreneurs, I'm sure too.

Brandi: Yeah, no, because I mean, to your point, I, I don't make things to sell, right? So, you know, what is it that they're actually buying? And so definitely the expertise they were able to see year over year growth. So we had about 60% growth year over year with, you know, about 60% gross margins. And so they were very excited about just, you know, how well the business was doing.

And also just seeing the type of customers that we had and the long term client relationships recurring contracts. So that was a very, very much of interest to them too. So it wasn't just one off projects, but we had recurring revenue. And so that model was very exciting for them to know if they potentially acquired my company, which is CorpCom.

If they could bring over, you know, a pool of great talent you know, my, my team specifically, and they could also bring over those contracts. And so part of the deal was that they were hoping that at least, I think it was like 90% of the clients would come over a hundred percent came over. So we didn't have anyone that, you know, opted out.

So that was very exciting.

Stephen: For you, what was, you know, you know, I'm sure a lot of consultancies big. Was there any draw that where you're like, I don't mind working within this ecosystem that they've created. Was there a specific draw, the type of, you know, focus they had on innovation and FinTech and banking, or is it like you knew that you would have the autonomy of like setting up pretty much your own shop within their shop?

Brandi: Yeah, so at that point I really knew that I would need to make investments in my business from an infrastructure perspective, know more technology. And so when they came to me, I was about to invest in my company, so additional technology, some more people and things like that. And so they already had build out, you know, technology, they had infrastructure that I did not have.

An in-house accounting team. Yeah. I no longer had to wear them, you know, the HR hat, thank goodness. So they had some, you know, different you know, offerings that I did not have at that point. And so that's why it was actually very interesting. But for me, it's also the people. I didn't want to be acquired by a company that was just, it was very transactional.

And so it just. I felt like I've known these people forever. You know, very friendly. You could tell that they also operate in the same way that I did. You know, putting the client needs first, not trying to, you know, nickel and dime, right? Because it's about building the relationships. And so for me, that's kind of what sold me.

Stephen: I absolutely love a story like that. What was the most challenging thing as an entrepreneur, like building this business? Was it the, was it the accounting? Was it dealing with six people? People think like, oh, I can't believe the crypto exchange laid off a hundred people. When like, do you know what it's like to manage a thousand people?

I don't, I know what it's like to manage three people and you know, I, I'm very empathetic to a lot of these layoffs to a certain point. Because like, I don't even know how these companies A, found the money to hire all these people, but B like how do you manage, like making sure everyone's doing that?

Like how was it for you? Was the people the easy part, the hardest part?

Brandi: No, people are always the hardest part. Literally, I tell people all the time, like people. That's difficult. And so it was really managing everything from an HR perspective, just being honest. I don't mean necessarily people problems 'cause I was very grateful that I've never really had people problems, but people just bring needs with them.

And so as I mentioned to you you, before we, we started talking there are, before we started recording, I wanted to offer health insurance to the employees. So a way to give back. That was a nightmare of a process, figuring it out because I'd never done it before. And so I'm trying to do billable work.

You know, I was working for various clients at the time, trying to manage, figure out, you know, all these different nuances that I had no clue what I was doing, and so figuring out a lot of that stuff, that was just more of a time drain for me. That was what was hard.

Stephen: Looking back, anything that you're like, Hmm, I should have done this different, should done this earlier, should have never done this. Maybe the health insurance. Is there anything, you look back now and you're like, or like, Hey, oh, Bates group does this a way more like, I like the way they approach that.

Anything that stands out to you?

Brandi: So I, I would say that the, the best move that I ever made was hiring an accountant. So that by far was the best idea I ever made. I would say as far as you, anything that I just regretted or wish I would've done sooner or different, I. I would say, you know, potentially just invested sooner in more technology because you time is a real thing and you only get so much of it.

And so just taking more of a proactive stance to be more efficient, you know, using, whether it's like monday.com or you know, like a PENDA Docs or whatever it may be for your company. You know, just taking those moments and really trying to determine the risk re reward factor and the cost. At the end of the day, you can't get the time back.

So if you can add some efficiencies, then that can really change your world.

Stephen: I love it. Thank you. So for going so deep in this, this is like, I think obviously we have a lot of entrepreneurs and you know, payments tech people that listen to this podcast. I think it's helpful to see people that actually, you know, exit or got acquired in a very unique space that's still attached to crypto.

Which is really, really cool.

And as we end the the session, any new practices that base group is getting into, any new areas of expertise that you're like, Hey, wouldn't mind expanding here, maybe into AI times blockchain, or you know, the convergence of digital assets as it pertains to ETFs. What are your thoughts about anything new for you that you're interested in or the practice in general?

Brandi: I'll say not totally new, but more so expanding and that's because, you know, ai, you know, you can say is new, but as we all know that have been in this space for quite a while. AI machine learning is not really new. Just maybe the ways that we're utilizing it is different. And so we are getting more opportunities to have, you know, AI related work, like AI governance policies, procedures, and so forth.

So that's been very exciting 'cause it's something that. It's, it's kind of you a, a different approach than what we've done before. We've also started doing more on the model system validation and testing side, which is also very exciting 'cause we, we do see a big push by regulators as we were talking earlier, to know your data, know your systems, and so we just see a lot of excitement there.

Stephen: I love it. Brandi, this has been one of my favorite podcasts. You're an absolute gem. Every answer was short, concise, and to the point, and packed with, you know, knowledge. We really appreciate you taking the time to. Come by the Around The Coin Podcast and we hope to catch you flying around soon.

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