Risk & Compliance Director at SALVUS Speaks on Compliance, Licensing and Crypto Assets

SALVUS Funds​ is an advisory that carries vast experience in all matters of licensing, operations, compliance, risk management and internal audit for Electronic Money (EMI) and Payment Institutions, investment firms and investment funds.

Evdokia Pitsillidou is the Risk & Compliance Director at SALVUS, who joins Fazzaco today and speaks on compliance, licensing and crypto assets.

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Fazzaco: Thank you for joining Fazzaco. First, could you please tell us more about you and Salvus Funds?

Evdokia: Well, my name is Evdokia Pitsillidou, based in Cyprus and I am the Risk & Compliance Director at SALVUS Funds.

SALVUS is a boutique advisory firm specialising in obtaining licenses for regulated activities in the field of investment services, as well as payment services. Think of brokerages, neobanks, and asset management companies as being our clients. We help them establish a licensed, regulated entity and then we support them with post-licensing compliance and internal audit.

Fazzaco: SALVUS Funds provides regulatory and compliance services, what is your opinion on the compliance reporting of cryptocurrency assets?

Evdokia: First of all, our team at SALVUS has chosen to use the term, Crypto Assets, instead of cryptocurrencies. This is in line with the anticipated European regulation titled Markets in Crypto Assets (MiCA). Secondly, we believe treating these as assets instead of currencies is part of the solution towards removing their involvement with them from the grey area.

Now, for us, compliance in the crypto asset space is not different from any other asset class or investment activity and the answer is straightforward. KYC checks, AML checks, proper disclaimers and appropriateness tests will be the foundation of any regulation, including the aforementioned MiCA, carefully and patiently waiting for their introduction.

Fazzaco: There are no standard regulations on compliance reporting of digital assets yet, posing challenges against crypto brokers and liquidity providers. In what ways does Salvus Funds help these firms?

Evdokia: As already discussed for us at SALVUS compliance for crypto assets is not different from any other asset class. Based on that logic, we prepare and support our clients by advising them on how to adhere to the highest standards of AML while performing proper KYC and suitability tests.

Therefore, we design strong anti-money laundering policies and procedures, and on behalf of our clients are connected with the leading firms in the space of wallet monitoring, and know-your-transaction (KYT) technology.

Fazzaco: How do you view RTS 27/28? RTS 27 has been suspended by FCA, what message did it convey to us, in your opinion?

Evdokia: The scope of the public reports of RTS 27 & RTS 28 is to provide guidance and disclosure to clients (retail and professional) how the firm is complying with best execution and its practices. The firm has to disclose information such as the execution venues the firm cooperates with, the firms to which orders were routed, and the quality of execution of all transactions.

The scope of the summary statement of RTS 28 is that the firm shall disclose information to clients on how they achieved best execution to clients in the preceding year and what are the arrangements in place. I am in favor of such disclosures, yet more tangible outcomes shall be drawn for this report.

The scope of the RTS 27 reporting is that the firm shall disclose explicit information of the quality of execution of the transactions. This reporting obligation resulted to create a cumbursome procedure and increased costs for investment firms, without providing real value to clients. While saying this, I believe that the idea is very good and such disclosures are necessary, however these information shall be made with the view to provide investors insights for them to make informed decisions for the products about to purchase.   

Fazzaco: You have licensing service as well. Now as ASIC and EU take measures to deleverage, what trends do you see in terms of the licensing of brokers and other financial firms?

Evdokia: The first wave saw brokers running towards offshores jurisdictions for a sort of regulatory arbitrage. While this still happens and we have several applications for clients of ours in different places of the world, we see another trend rising. We see brokers investing in improved user interfaces both on mobile and desktop, we see brokers investing in customer support and great user experience, aiming to increase the lifetime value of the clients, in addition to improving their conversions. We consider this a healthy and admirable path.

Fazzaco: Could you share your idea on the concept of offshore regulation with us?

Evdokia: As long as it is not used for tax avoidance, money laundering and it is used to only onboard clients from legally compliant jurisdictions, we consider them a fair tool in the arsenal of a global or aspiring to be a global broker.

Fazzaco: Certain brokers possess multiple licenses (e.g. having license from FCA and VFSC at the same time). What they do is they talk customers into it under the name of FCA, and then put them in a VFSC-regulated account. What is your opinion on this?

Evdokia: Having multiple licenses is fair and maybe even necessary for several reasons. However, approaching a client as regulated entity A and onboarding that same client under a regulated or unregulated entity B is misleading. This is a practice we would never accept from any investment brokerage working with us.

Fazzaco: What is your idea on virtual show after the Covid outbreak?

Evdokia: There is no better way to do business than through building new connections and nurturing your network. We consider virtual shows as necessary tools and platforms to achieve just that. We are excited to participate in panels, virtually and physically, and we are looking forward to seeing how the space will evolve to make the experience as close to real-life events as possible. Discussing regulation and compliance for investment firms and crypto assets, is something extremely important and enjoyable for us. The fact that we were able to participate is so many events during the Covid pandemic was solely because of virtual events such as BrokersShow, connecting the dots for us and giving us a stage to voice our opinions and expertise.