In episode 17 of Kinectify Conversations, Sean Topchi hosts Arpita McGrath, Chief Compliance Officer at Sporttrade, diving into her multifaceted career path that led her to the forefront of regulatory compliance and AML within the gaming and betting industries. Arpita begins with her auditing roots at Deloitte, transitioning to advisory roles that deeply engaged with BSA/AML auditing, system validations, and consulting, particularly during the nascent stages of cannabis legalization banking compliance. Now at Sporttrade, she spearheads the development and implementation of AML and Responsible Gaming Programs, facilitating the company's expansion into new states while maintaining robust compliance and regulatory frameworks.

The conversation also explores the nuances of engaging with regulators and the importance of clear, consistent communication to navigate the evolving legal landscape of sports betting, especially concerning exchange wagering and its regulatory implications. Arpita and Sean deliberate on the significance of proactive compliance strategies, the need for formalized information-sharing mechanisms within the gaming industry, and the potential for future FinCEN guidance to address current gaps in AML regulations and practices.

As the episode concludes, Arpita advocates for a collaborative approach among industry leaders to propose rulemaking that better aligns with the specific needs and complexities of the online sportsbetting and gaming sectors. This proactive stance aims not only to enhance regulatory compliance but also to drive the industry forward in a responsible and transparent manner, ensuring its sustainability and integrity in the face of rapidly changing technological and regulatory landscapes.

Click here to listen on Spotify.

Transcript

[00:04:13] Sean Topchi: Arpita, thank you so much for joining us. I'm really glad to have you on today. I've been following Sporttrade's journey, really excited to talk to you about it. For those people that don't know you that are listening to the podcast, do you think you could introduce yourself, kind of your journey into the industry, and then we'll talk about Sporttrade as well.

[00:04:33] Arpita McGrath: Absolutely, and I am honored to be here, Sean. Thank you for inviting me on here. A little bit about myself, I'm the Chief Compliance Officer at Sporttrade. And my background actually started in auditing. I was an auditor about 15 years ago at this point at Deloitte, where I did external financial statement auditing with Deloitte for a couple of years. I left there and went to a smaller regional firm, Mercadian, who at this point is at the National level.

But with them, I worked with them doing BSA AML audits, system validations and tuning and optimizations and consulting. On the consulting side, it was everything from creating or enhancing their BSA AML written program, building out their customer risk rating models, doing risk-based transaction monitoring models, creating and enhancing their KYC CDD programs, conducting trainings on SAR narrative writing, EDD of high-risk customers, look-back reviews, much more. And the clients that we typically worked with were financial institutions or credit unions that were under regulatory scrutiny and needed help putting out the fires, strengthening their programs, to address the items that were either under matters requiring attention, so MRAs, or consent orders.

And with that experience, it was really being entrenched in FinCEN BSA AML guidance and constantly working with regulators to understand and discuss all the interpretations and applications of BSA AML. And then through that, I had the opportunity to be in the beginning of the cannabis legalization and the BSA AML application for that industry in order for banks to accept and open accounts for marijuana related businesses.

I've been in the startup world now for a while and currently as the Chief Compliance Officer at Sporttrade, I've had the pleasure and opportunity to develop and launch the AML and the Responsible Gaming Programs, which has gotten us into multiple states to right now we're in New Jersey and Colorado and growing.

And I also work with teams to tackle the compliance and regulatory requirements as we continue to grow and launch in more jurisdictions. In addition to that, I am also on the board for the Association of Certified Anti-Money Laundering Specialists for the Greater Philadelphia Chapter. And I am also on the board for my Alma Mater Drexel. I'm on the board for their LeBeau College of Business' Accounting Advisory Council.

[00:07.20] Sean Topchi: Holy smokes. I don't know how you handle all of that on your plate, but no, thank you for that introduction. And I mean, you've really had the whole gambit of AML, especially when you talk about consulting and the advisory work you've done. I'm sure that's an incredible asset to Sporttrade. How did we get from advisory and working with banking and credit unions to jumping into a very different world. Obviously you've been in the startup space, but Sporttrade I would say is a little unlike anything you've worked with before, to be fair.

[00:07.53] Arpita McGrath: Yeah, no, absolutely. And honestly, I say it's being at the right place at the right time. So when I left auditing, and I decided, you know, I would like to do something a little different because at Deloitte, I also had the opportunity to be in forensic accounting, as I entered the whole AML world, I really enjoyed it. I liked learning about all the risks and how to mitigate them and monitoring customers. Now fast forward with building out the whole experience and working in a lot of, I would say different industries, but really financial institutions, the cannabis world, etc. When I had the opportunity for Sporttrade, I saw that as a really fun challenge of being able to take everything that I've done and apply it into, I'd say kind of still a fresh industry and one that isn't as structured or highly regulated with BSA AML guidance or as visible as it should be or will be in the future. So it really is, right place, right time and really having that opportunity presented, which I'm thankful to have and now be where I am today.

[00:09.04] Sean Topchi: Yeah, I mean, it really, I think you're right in that, you know, there hasn't been as much visibility to BSA and AML. I mean, not by the industry's choice really. I think there's been a lot of calls from the industry obviously, but it is an interesting space to be operating right now from a BSA AML requirement standpoint and what requirements actually are.

You know, with you sitting in that CCO role, obviously it's not just BSA AML that's under you, right? You have the full gambit of regulatory requirements from the states, the RG, things that come with it, obviously the federal BSA AML. With Sporttrade and what they are, both exchange and sportsbetting, what has it been like from talking to regulators and educating and getting to a place where there's an understanding of support trade and how they function in the market?

[00:09.57] Arpita McGrath: Yeah, so Sporttrade is an online sportsbetting operator that offers exchange wagering. And in expanding and getting in additional markets, the education piece is not really education, but it's more so awareness that there isn't that much of a difference between what the exchange piece is and then the regular standard online sportsbetting operator.

We have the ability in New Jersey where we do offer the exchange piece for our patrons to set limit orders, which means they can name their own price. But outside of that, the only differentiating thing other than the exchange wagering as a sportsbetting operator for us is our prices are unbeatable, our services for betters to be better betters, and it doesn't look like a sportsbook, but really we're a sportsbook.

[00:10.52] Sean Topchi: Yeah, absolutely. And I mean, in so many ways it functions, to me exactly the same. I actually wish we had those same services in the Vegas area. Now working with regulator to regulator, as you talk about awareness, what have those conversations been like? Because I don't think, whereas maybe we've seen this model in Europe before, right? There's a bit of a, it's a bit new, the term at least, if not, you know, the services within it to some of the regulators you're working with. So as you guys target new states and obviously roll out in new states, what have those conversations kind of been like at this point?

[00:11.32] Arpita McGrath: Honestly, at this point, the conversations is really explaining that one difference. And aside from that, there is not, based on the interpretation of the reg, any other difference. The conversations are ongoing, and I think that is something that is going to continue with really just that awareness piece of limit orders and setting your own prices. And for us, we're able to turn that on and off. In New Jersey, we offer it. In Colorado, we don't.

We may not offer it if that is something that the regulators, you know, if we are still in the conversations of talking about what that nuance is and what the differentiating factor is. But it's something that can be turned on and off and we have launched in Colorado as an online sportsbook without the exchange wagering piece.

[00:12.25] Sean Topchi: So to be fair, the exchange wagering piece, more than a whole separate product or market or anything like that, it's just a feature within the sportsbetting market or the sportsbook that you're able to offer. And I guess that's where kind of that nuance and conversation comes in.

[00:12.40] Arpita McGrath: Yep, that's exactly it.

[00:12.53] Sean Topchi: Perfect. I do want to switch gears a little bit. You obviously alluded to that you sit on the Greater Philadelphia ACAMS board. As a fellow, ACAMS board member, we really do see a lack of gaming specific AML education, especially at the national level at this point and around the industry in general. So I wonder for you, as your team starts to grow, how do you address that with your team, because the typical trainings we offer as organizations to our frontline operations and client services and people like those aren't the same level of training that our analysts and AML managers and BSA officers require. How are you tackling that right now?...

Listen to the full episode on Spotify.

‍

ABOUT KINECTIFY

Kinectify is an AML risk management technology company serving gaming operators both in the US and Canada. Our modern AML platform seamlessly integrates all of the organization's data into a single view and workflow empowering gaming companies to efficiently manage risk across their enterprise. In addition, Kinectify's advisory services enhance gaming operators' capacity with industry experts who can design and test programs, meet compliance deadlines, and even provide outsource services for the day-to-day administration of compliance programs.

To learn more about Kinectify and book a demo, click here.