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In an illuminating discussion with Henzelene Healley of VA Consultants, Dr. Karin Lorez and Jeannette Lehmann from Scale Compliance shared their insights into the evolving compliance landscape, especially within crypto finance in Switzerland and the UAE. Their reflections touch upon the challenges and the strides made in regulatory standards, gender bias in financial industries, and the importance of rigorous compliance measures.
See Video Interview: https://youtu.be/k0Tok4Ba1gw
Reflecting on her experience as a woman in the Swiss financial industry, Dr. Lorez remarked on the deeply embedded gender biases she encountered. “The banking industry is very male-dominated in Switzerland, and it’s very traditional in a way,” she shared. She noted that, as a woman, she “always had to…prove myself,” describing how only by being “much, much better than the men” could she gain recognition. She compared this to her experience in other settings where she found a supportive environment, stating that, outside of Switzerland, “I feel like I’m uplifted.” This difference was echoed by Lehmann, who confirmed that Swiss financial professionals often must “be better” to gain equal acknowledgment and support.
In establishing Scale Compliance, Dr. Lorez drew on her extensive legal experience to build a specialized compliance firm with a global outlook. “I founded it in Switzerland,” she said, describing how the firm serves a distinct need in the Swiss market by providing outsourced compliance services, especially for crypto firms. In Switzerland, regulatory requirements mandate that financial institutions, including crypto entities, have a compliance officer based in the country. “We are the outsourced compliance officer of those companies,” she explained. This enables international firms, which may only have a registered entity in Switzerland, to meet regulatory demands efficiently.
Scale Compliance has also expanded its operations to Dubai, adapting to meet compliance requirements in both Switzerland and the UAE. Lehmann described the UAE’s shift toward regulatory rigor, particularly in recent years: “In the last three years, a lot happened regarding regulation…now the regulator started to issue fines when you don’t comply.” Highlighting the impact of these developments, Lehmann observed that the regulatory environment in the UAE has grown considerably stricter, with fines imposed on non-compliant companies and some licenses even being revoked. “Now the regulator has become very strict…companies even had to return their licenses,” she added. This shift reflects a strengthening of compliance efforts, positioning the UAE as a major hub for financial integrity. She noted that the UAE’s removal from the FATF gray list is a significant milestone that signals the country’s regulatory progress.
The team at Scale Compliance emphasizes the inherent risks in crypto finance, particularly the importance of proactive risk management. “Crypto is risky,” Dr. Lorez acknowledged, emphasizing the need for a “proper risk-based approach” and thorough transaction monitoring. Lehmann further elaborated on the core tenets of risk management within the compliance industry, stating, “Know the risks and mitigate them, and then you can minimize the risks as much as possible.” This sentiment underscores the necessity of understanding both the traditional and unique risks associated with crypto finance to implement effective risk mitigation strategies.
To manage the distinctive risks of crypto finance, Scale Compliance employs a variety of technical tools, including wallet screening and beneficial owner verification. Wallet screening allows them to detect potentially suspicious transactions, while beneficial ownership tests, such as the Satoshi test or message signing, help confirm the actual ownership of a crypto wallet. “We get the risk score of your wallet, and then we can also mitigate the risk when we see that it’s not coming from a criminal source,” Dr. Lorez explained. This level of due diligence is critical to maintaining transparency in transactions and safeguarding against illicit activities.
Lehmann highlighted the differences between traditional finance and crypto compliance, noting that in crypto, “you can still screen the wallet,” which adds a level of transparency not present in traditional banking. While traditional finance requires clients to disclose their source of funds through documentation and statements, crypto compliance entails both checking the source of funds and verifying wallet ownership through technology. “In the crypto world, you can still screen…that’s the interesting part. I think it’s much more transparent,” she added.
The Scale Compliance team’s approach to compliance is comprehensive and forward-thinking, aiming to keep pace with evolving regulations while serving clients in a rapidly changing industry. Their efforts to provide effective compliance services have garnered positive results, even as clients initially questioned the necessity of compliance. “In the beginning, it was very difficult for us to convince companies to buy our services…Why should we spend extra money on it?” Lehmann recalled. However, as the regulatory landscape grew stricter, compliance quickly became indispensable. “Compliance makes or breaks your business,” Dr. Lorez emphasized, underscoring its role as a non-negotiable component of sustainable business practice in the financial sector.
Looking forward, Dr. Lorez and Lehmann remain committed to upholding the highest standards of compliance, recognizing the value it brings to businesses and the broader financial ecosystem. Their work not only safeguards clients against regulatory repercussions but also contributes to the integrity and transparency of the financial industry at large.
