RISKS AND OPPORTUNITIES FACING THE DIGITAL ASSETS INDUSTRY

Matt Broniarek’s journey to becoming Head of Financial Crime at BCB began with a rigorous interview, but at that stage the prospect of a job was not on the table.

Broniarek was Head of Operations at Swedish crypto exchange Safello and had approached BCB about opening an account. BCB’s onboarding process had thrown up a few issues and wanted some detailed clarification.

“I happened to be in London, so I swung by the BCB offices,” says Broniarek. “They really grilled me. We got everything sorted and we parted great friends, but it really planted a seed in my mind. I thought they were a great team, doing the right things
without cutting corners. We had a really similar mindset as companies and as individuals in tackling financial crime and compliance.”

When the job of Head of Financial Crime came up at BCB, Broniarek felt it would be a natural fit for his skills and his approach. BCB agreed.

Before Safello, Broniarek had founded a number of companies in Sweden and Poland applying technology to a range of business applications in real estate and for branding and marketing. By education he is very much rooted in the real rather than the virtual world having studied to be a civil engineer, but from a young age had already channelled this engineering passion into building digital systems, starting at age 13 designing websites for local businesses.

Financial crime “comes in waves” Broniarek argues, and changes rapidly. Today, he says, the bullish market in crypto is itself a risk.

“Right now, you can go to the barber and he will talk to you about crypto and the money to be made. It is at times like that when people are very receptive to bad actors who want to convince them to part with their money. It’s peak season for the scammers,” he says.

And Broniarek himself has recently been targeted (unsuccessfully) by scammers who called him to say the police had seized a cache of personal data on crypto investors from a traveller at Sweden’s Arlanda airport and that his details were included. The scammers wanted him to transfer his crypto to a new wallet they would provide. Broniarek spotted the red flags and a direct call to the police confirmed there was no such case.

Regulation will sift the market.

Broniarek’s arrival at BCB in June this year coincided with the digital assets industry coming to grips with The European Union’s Markets in Crypto Assets regulation (MiCA), which BCB has fully embraced and which Broniarek believes will sort the sheep from
the goats across the industry.

“It will bring a lot of changes in the industry – mergers, bankruptcies, legal letters. From the perspective of stopping financial crime, it’s very good, because it will sort out all the insufficient operators that don’t have their controls in order,” he says.

A key advance under MiCA is the rules on anti-money laundering and KYC requirements for Crypto Asset Service Providers (CASPs) and Broniarek argues those rules, and the wider efforts of the industry to clamp down on bad actors, will make the
channelling of illicit funds through crypto far harder and, in the long run, will help rid the industry of that historic reputation.

“We do also have to be realistic and recognise that reputation will hang around for a long time, but that is why welcoming regulation is so important,” he argues.

AI – a financial crime risk and a solution.

But as well as regulation, Broniarek believes technology will play a major role in rooting out bad actors who wish to exploit the power of digital assets for nefarious ends.

“For the last two years at least, I have been thinking a lot about AI. On the one hand it does pose a big threat – deep fakes, generated speech the ability to impersonate people – and bad actors are very quick to jump on any new technology. Those of us on the good side need to be less reluctant to use the same technology to defend ourselves.”

As Broniarek points out, machine learning is already widely used in the financial sector, including at BCB, to scan transactions and red flag anything that looks anomalous, but he says there is potential to go much further. However, rather than seeing AI as a way to remove the human element from tackling financial crime, he argues that automated systems will empower the human fin crime busters.

“Financial service companies can have anything from 10% to 40% of their workforce in compliance of some kind. A lot of that is people looking at screens and generating suspicious activity reports (SARs). I think we will get to the point where the mundane
aspect of these tasks can be handled by technology tools and the people can do much more to use their human skills,” he says.

“BCB has such brilliant people, and I want to use all the brains we have as effectively as possible.”