Building Trust in Digital Finance: Compliance and Stablecoins with Cristina Palladino (Part 1)

Cristina Palladino: Foreign,

Rob Sarnie: um, sarny. And you're listening to what the heck. Fintech, where you'll experience and learn that fintech is fin life. Let's get started. Welcome everybody. We, we have an unbelievable guest today. We're taking to take things at a total new angle with, with Christina Palladino and wait till she does and how she does it. It's an area that needs um, to be talked about every single day, but it's not and it should be.

Cristina Palladino: Right.

Rob Sarnie: So, and Christina will explain what that is. So, so Christina's done so much. She's, she's um, so focused in the fintech area but you know, and digital currency. So we'll hear a lot about that. But also so focused on regulation compliance and helping companies figure this all out because what is all, you know, all because it's hard. This is hard stuff. Right? And, and, but she takes that hardness out for all the, all these companies off at Wolf and Company. So I can't wait to hear these stories. I'm going to learn so much. We'll get ready to rock and roll. So Chris, Christina, you know, how about a little player profile? Walk us through your journey. Because I mean you didn't, you know, in elementary school you weren't doing regulation. So I mean how do you get to this point? And compliance and digital currencies. How do you grow up in this space? Uh, so I'd love to hear that story and then we'll get into some other questions. And off. That's off. Those stories sound good.

Cristina Palladino: Sounds good. And thanks Rob for having me. I'm excited to be here. So I'll um, jump in and tell my story. I started in banking almost by accident. Like a lot of people, I was just looking for a stable job through high school, transition into college, what fit my schedule with my college classes. Um, I knew banking had great benefits so I decided let's start there and see what I could do. So started at a, uh, really low profile job as a peak time teller to be able to fit my schedule. And I uh, just stayed in the financial system and was able to work my way up kind of as my uh, education kept going up. Right. So uh, once I was there I realized that it wasn't really the money part that I liked and that I loved. It was really the people part. Right. Talking to the customers, getting to know their lifestyles. And when you're in the branch and you're having these conversations, you quickly find out that every financial decision is tied to an emotional event in a person's Life. So things like someone's buying their first apartment, they have a business dream that now fast forward aligns really well in the fintech space, but someone just trying to get out of debt and really just move on with their life. So fast forward a decade, fintech exploded and suddenly the same financial problem existed. And instead of being in the branches, it was in the apps, right? So you have your cell phone in your pocket and you have all these apps you're using. I really got obsessed with how to protect people in that digital footprint in that app environment. And so some of the same basic things that I learned while being in the branches, I wanted to see how I could apply it to the digital space. And so that's how I ended up uh, in compliance in fintech and really just trying to find, you know, what those human needs were and what the guardrails are to keep the innovation trustworthy and building that rapport with, with customers.

Rob Sarnie: What was your education background? Was it, was it finance? Was it something else?

Cristina Palladino: Was it why you would think I started, uh, my bachelor's is in criminal justice with a concentration in forensic science. So when I was in school I wanted to be the next, you know, Lauren Orda Olivia in the crime scenes trying to figure out what happened, you know, how I can help people and solve all these, these crimes. Uh, that didn't happen. So when I graduated with my bachelor's in science, I decided how can I tie in my financial background to this criminal justice degree? And you know, when I was in school there wasn't a lot of the forensic accounting, uh, there wasn't a lot of this kind of investigative work in the financial system just yet from a digital perspective or from just like there weren't classes offered in forensic accounting. So I had a hard time at first trying to figure out what I wanted to do because I didn't have the experience in criminal justice to find a good career and land a job at that point. But I quickly learned that I could move up in accounting from the business ethic and compliance side of it. So not doing all the math, not learning all the CPA information, but learning really how to stand up a, ah, framework in compliance in business, learning the ethics around it, learning the law around it. I applied to a, uh, college here in Boston and got my master's in business ethics and compliance and then a couple years in got a concentration in forensic accounting when that program launched. So I was able to tie it all together in the end. But it definitely was not an easy, you know, lane to that that failed in, in that study.

Rob Sarnie: Wow. And back then, right? I mean, yeah, friends accounting, you know, has been around. Right. But. But it was probably more about, you know, audits and figuring out things. But now it's all about the data. Right. And protecting that data and who, who messed around with that data and who's hiding stuff in the data. Right. So, I mean, so with. With that forensic background you have and, you know, the compliance side, you must be having a blast now. I mean, it's. It's all about that now. Like, like what, what's. Like, so since you're so into it. Right. And a lot of people aren't. Right. Unless they have to be. Right. They got hacked or something. Right. Um, or in, you know, compliance is everywhere in big companies, because I have that fidelity, obviously, compliance and regulatory is huge. Right. So what, what are the things that know some stories like, and how do you. What do you see going on in other companies that you help them with? Because obviously you're in there deep and a lot of them aren't in there. Like, you're in there.

Cristina Palladino: Yeah. And. And again, it's. I think a lot of people are looking to, to help and solve problems. Right. So in the digital space, there's many companies out there that want to. A new app is downloaded, you know, every day, every hour, probably, and there's, uh, a new problem that's being solved with that app. So the way I look at it is how can I help those founders and those apps become trustworthy, but also not end up in headlines? Right. We don't want bad actors getting into our financial system. And in today's world, what's scary is there's a lot of AI that's also trickling in on top of the fraud that's always been around. So the AI is turning into, you know, deep fakes with voiceovers, or someone's picture is being altered online to, to make it look like they're doing something that they're really not doing. And so that's, that's the hardest part today. But I think really just remembering my roots and remembering where I came from to help someone, somebody solve a problem is how I kind of look at today's financial landscape and then how I can jump in and be like, okay, do you have, you know, these things in place? Are you able to speak about these things? Do you understand it? And if not, that's where my, you know, interaction starts on explaining why they need it, what's the background, what. How it actually will help them almost scale in the market

Rob Sarnie: and you know, with the whole forensic. That's all after the fact. Right. With a forensic. Forensic. Data. Forensic. But you. I assume I could be wrong with this, that you do a lot of coaching and I'd love to hear, you know, how much do you coach startups, uh, and then also kind of big businesses of being proactive on those items. Right. So forensics, the damage has already happened. Now you're just figuring out what really happened, which is important, don't get me wrong. But it's also like, how do you prevent this? And what guardrails do you put in there?

Cristina Palladino: Yeah. And a big piece of my job is being out there on the circuit educating anyone from even a student, because how are they going to enter this workforce? But founders and companies on compliance is a culture. Use that as your playbook and use that from day one of, um. How am I going to instill this culture of compliance versus. It's a checklist, check the box product. Because if you're thinking in it as a product line, you may not think of it until a couple months down the road where it's already too late to be like, oh, what controls do I have in place so that someone can't hack into my new system? Or, you know, what controls do I have in place that will prevent fraud? And fraud's already happened. So it's. If you're thinking about it at day one and you're thinking about it as a culture, you're already, uh, you're already ahead of the game in understanding why it's important, understanding what guardrails to put in place before it happens. And then also from a founder fintech perspective, if you're trying to launch a partner and you have these guardrails in place, it's only going to make you look stronger. And that trust is going to be instilled from day one because the bank is going to understand, oh, they know that this is a risky environment, but they have these controls in place. They thought about it. So that's the perspective I have from what I've done in my work with some of the, you know, the cohorts, we work with, some of the schools that we work with and accelerator programs. Just compliance as a culture.

Rob Sarnie: Yep. Yeah. And, and I'll give you, I'm going to give you a little personal story myself. I, you know, as I was a project manager and a pmo, um, especially more definitely on a. As a project manager, I used to bring audit and compliance into a new project. I was doing day one, they were Part of the team. So that way, because so many people, uh, like a lot of the systems I was doing, I needed an audit letter before I could even go live. It was a requirement, so I might as well. Why would I scramble and do that at the end? I want this happen naturally. And they're also looking at not just what we're delivering, but like how we running the project, how are we getting the right approvals, who's part of the steering committee and the stakeholder meeting. So you have the right people to get the right feedback so you don't, you know, step in something later. Right. Why I bring and I. And even in my classes, from a culture standpoint, I tell the students, audit is your best friend. Remember that. It's not something you avoid until the end yet something you do up front and you bring them along for the ride because it makes everything so much smoother. Now that little story, do you see that a lot? Do you see that a little. Depend on the different level of industry you're working with. But I'm a firm believer in that. Wait until the end, you're going to get burned bad.

Cristina Palladino: Right, right. Unfortunately, it's not something we see more often. More often than not, you have great founders, great, uh, engineers, but not, uh, compliance experienced or compliance focused people from day one. Right. So you kind of have to look at who you're working with. Do we need to, to uh, hire somebody in compliance or consult with a firm for that compliance background? I think it's becoming more the norm now, but I don't think it's still not like, oh, I'm a founder of a company and I know compliance is important. It's really somebody telling them that compliance is important. So I'm really excited to hear that you're saying that in your classes because I think the more we get that message out, the more it will become normal behavior. But I think from a founder perspective, I can't speak to 100% because I am not a founder myself. But I think it's just, you know, you're so excited to get the product launch and to get partners and to get things moving, get the process going. That what you don't know, you don't know. So it's really just trying to find those right people. And the one message that I would love to get out there too is regulation is an enabler. A lot of people look at regulation as a roadblock and more often than not it's going to get you further if there's guardrails in place you're again building that trust sooner and faster. If that trust is broken, it's really hard to get back to a place and pick up, build from there and get your customers to trust you again to get your um, regulation in order again. If that trust is built from day one and you're compliant from day one, that's when you start to soar. That's when the product launch is going to go faster. You know, your partners are going to go faster, the process is going to go faster, sales will go faster. So yeah, but if that's one message I can get out, there is definitely regulation is not a roadblock. If anything, it's going to help you get to the place you want to get to.

Rob Sarnie: Now I'd love to hear this take too, your take on this question too. That is that I mean it's an Alphabet soup of regulators. Right. Federal level, state level, might be M at the municipal level. Right. Um, especially with finance, you know, you're dealing with people's assets and it's movement of money and how it's happening. Do you notice um, people thinking and bringing in regulators or do you, do you actually bring regulators in? Because they, the regulators I've talked with, um, is that they want to be brought in early because they don't want that new startup to run with scissors and they break them. The bad news, like, no, you can't do that. Like, no, you just, you gotta, you gotta revamp everything. It's like, do you bring them in or do you just coach them to go reach out? Plus, who do you reach out to? There's so much overlap with the state and federal. Well, from a layman, like I thought they were, you know, you know, like this, but you gotta, which one do you go for? And it's probably both.

Cristina Palladino: It's true, it's true. I think it depends on a few things. It depends on what lane they're going in. So for instance, in cryptocurrency digital assets, certain types of digital assets actually require you to reach out to the examiner, the regulators first and get an approval, uh, to work in that, that lane. Um, different levels of digital currency vary. So stablecoin, if it's certain types of stablecoin, you may not have to reach out to the regulator first. You can build your framework, build your compliance program, and then once you get going, they'll come in, audit you and hopefully you pass, uh, flying colors because you've spoke to compliance people, uh, to coach you on. However, it just depends on what you're trying to get into what service offering we definitely, from an auditor and consulting perspective, we definitely do recommend that. Even if it does say that, you don't need to reach out to the regulator, send them a little note, send them an email, hey, we're looking to start offering, you know, maybe it's uh, uh, a stablecoin product or a tokenized backed product. And this is what we plan to do with it. And here's what we're planning to do for compliance. The regulator is only going to give you a lane to work in with some recommendations on. Did you think about A, B and C? Or, you know, maybe that, does that fit your profile? Is that too risky? And they're just going to give you more pointers to think about. They're not going to completely shut you down. Most regulators are open to innovation at this point. They want to see financial institutions use technology to be able to offer more products to their customers. So I think from that perspective, I think they're open. I think it's a great idea to reach out to them. I think you just have to have a plan, right? So don't just reach out to them and be like, oh, I think it's a great idea if we do this product. But you don't have a plan behind it and you don't have a compliance, uh, program behind it where you can't explain to them like, this is how it's going to work, this is the service offering we're going to give and you know, ask uh, for their feedback, ask for what they think about it.

Rob Sarnie: Yep, yep. Now, do you, do you see a lot of sandboxes being built? So there's, it's a nice play area so you can't, you know, you can't run with scissors. And the data is all, you know, synthetically created so it has no PII or any problems going on there. Are you seeing that more or maybe in bigger companies, but are you seeing that or even helping them figure that out?

Cristina Palladino: Yeah, we're starting to see it. Uh, I think the biggest step there that's missed sometimes is testing the ins and outs of the system before going live. So whether that's internally or externally, there are ways you can test data flows, there are ways you can make sure that thinking Core is talking to a fintech technology provider, uh, an AML system, or maybe it's a middleware that you're using to on ramp to blockchain. Right. There's ways to test those. Um, there's also ways to make sure that uh, AI governance is in place or an API is working the right way. And I think oftentimes you don't think of that until that live date is already gone and passed and thinking about it ahead of time. Although right now there's really no, you know, there's some regulation on certain aspects of it. If it's a model, if it's uh, in, you know, if it's digital currency versus a fintech versus SaaS, there's different things out there. Saying, you know, you should test it or you don't. It might not be a regulation to test it, but it's highly recommended to test it. I say just test it. Right. It's not going to hurt you. It's going to only make your product better if you find something that's not translating right or not moving over to the next system right. If you catch it now, it's only going to make the product stronger. So sometimes I think it's just thinking outside of the box of what is out there for regulation and then maybe applying it to what you're actually trying to implement and have a service offering in. So we are waiting, you know, more on more regulation for digital asset in the stablecoin area, but doesn't mean there isn't other regulations or other guidance out there that are suggestive to that lane and you could apply to it and make sure that it's working. Right, Right.

Rob Sarnie: Yep, yep. Yeah. When I talk to some startups too, it's interesting. Like, I remember one time a startup was saying, you know, we're trying to collaborate with banks, but, you know, we might be our own bank. I'm like, you don't want to be a bank? You know what regulations on that? I'm like, oh. Because they don't know. They don't know what they don't know. Right. I mean, not that I'm an expert in regulation at all. Like you're an expert. Um, and uh, but I'm like, you don't want to be a bank, so. But then I collaborate with banks though, so they don't know what they don't know. They're super smart. You know, they're, they might be young, they might, you know, they're just skinny in the field. They get a great idea, but they're not thinking the whole thing through. And that's where you come in.

Cristina Palladino: Now.

Rob Sarnie: Do a lot of startups come, come to you and then you get to talk to them before they even run the scissors.

Cristina Palladino: Yeah, I have a, uh, uh, great connection with Mass fintech Hub and fintech Sandbox and where lucky to be able to talk to some of these, you know, students with these great ideas that uh, are launching brand new products. I always look at them and I'm like, I was not thinking like that when I was in college, like, how did they even get into this? Right. But we're lucky to be able to partner with organizations, you know, within the ecosystem to be able to educate, be able to learn from them as well. Because, you know, again, we're only as good as what we know on the regulator side and on the examiner side. And a lot of it's coming from experience. We're learning with everybody, right? We don't know what the next step in digital assets going to be and we're going to learn that with everybody else who's building in that ecosystem. So, uh, I think it's great that we're able to offer some educational panels. We're able to work one on one. We're able to um, put our contact information out there to be able to say, hey, if you have a question in the future, contact me. Maybe there's something I can help you with, maybe there isn't, but at least I can suggest, hey, go talk to this person, or I know somebody here that might be able to help you. And I think that's a, uh, big step to understanding. Okay, well I know there's some type of guardrail compliance regulation out there that needs to happen and we need a framework in it. Maybe it's not me specifically you need to talk to, but hey, talk to the tax team, talk to the privacy and lending team. Maybe they have some fair lending questions to ask you. And again, state by state, it varies so they can drill down what you know, what state are you working in? Here's what you need to know and take the next step from there. So, um,

Rob Sarnie: that's great. Please come back to part two with Christina Palladino as she simplifies and explains stablecoin, the Genius act, how fraud is happening and the human behavior behind it all. Thank you for listening to what the heck? Fintech. Make sure you tune into our next episode as we continue to interview FinTech leaders and share real world stories from across the across the fintech ecosystem so you can fully understand that fintech is fin life.