Blockpliance is a New York-based data analytics company that specializes in blockchain compliance for cryptocurrency transactions. Their target industries include financial services institutions, national governments, cryptocurrency exchanges, and law enforcement agencies. The company was co-founded by Guillermo Fernandes, who emigrated from Venezuela to the United States to pursue a dual major in economics and finance at Bentley University in Boston, MA. Fernandes invested in stocks on the side to make money for school and to learn about the market. Due to governmental restrictions, the only way to send and receive money from home in Venezuela was Bitcoin, so he taught himself about the emerging world of cryptocurrency. Fernandes' education and experience led to an internship with Citibank in their investment banking division in New York City.
After college, he was asked to take over a small family-owned retail business that needed restructuring to be saved. Fernandes turned the business to profitable again. He was recruited by Ocean Bank, South Florida's largest independent community bank, to create a wealth management unit which grew to $1B in assets under his management.
Necessity Creates Blockpliance
The increased adoption of cryptocurrencies led plenty of financial institutions to worry about their clients’ use of accounts to originate or receive transfers to unregulated digital asset service providers. Guillermo’s employer was no exception. The compliance team suspected some of the crypto-related transactions could be related to suspicious activity but was puzzled in understanding how to determine the risk associated with such money movements. Guillermo explained, “We started looking for a solution that could help us quickly and easily understand the client risk, where the assets had been, if the usage was legal or illegal, if we needed to file a suspicious activity report and so on, but however such a tool did not exist at that time.”
Recognizing the need for this kind of tool in the financial services industry, he started working on a prototype solution. Guillermos revealed, “I didn’t know enough computer science to scale it to a level that could service enterprise clients, so I took a YouTube class by Professor Don Patterson from UC Irvine called Barter to Bitcoin.” Later, he reached out to Don about his prototype, and after a few meetings, decided to take a test run at working together in the summer of 2022. Don and Guillermo, along with a team of college interns, worked for 3 months to craft the first full version of what is now known as Ledger Navigator, and Blockpliance was born. The new company also gained a co-founder when Don asked for a permanent role.
Track 1000 transactions? No problem.
Blockpliance's main service, Ledger Navigator, conducts risk assessment and compliance analysis for crypto activity on the blockchain using a decision matrix based on financial equations. Using machine learning, it analyzes and assesses the possible outputs that could be red flags. It then runs those outputs through an AI equation that understands everything Blockpliance knows about a specific blockchain account.
Financial institutions may not realize the powerful capabilities of tracing crypto transactions versus regular currency transactions. “We can go back, say, 1000 transactions to the origin and see when this currency was mined or created, which you can’t do with traditional fiat (USD) currency.” Guillermo explained. “With fiat transactions, if I send money to you at Bank A, then you send it to Bank B, and from Bank B it goes to a bank somewhere in Bahamas, there’s no record that shows how the money I sent you ended up in the Bahamas. Bank A must contact Bank B, and Bank B must voluntarily disclose where the money was sent, which is extremely difficult and rare.”
Business Accelerator Leads to Big Blue
When Blockpliance participated in an accelerator program called Mass Challenge, they were connected to a mentor from State Street who was also a former IBMer. This mentor connected them with an IBM account executive on the State Street account. “IBM became interested in us as a fintech partner when they saw how we were using their technology to analyze compliance on blockchain.” Guillermo continued, “When IBM learned we ran on the IBM Cloud and we had relationships with countries who are using Hyperledger to power their central bank digital currency projects or CBDCs, they saw another collaboration opportunity. We then started looking at how we might use our technology to conduct compliance analysis on Hyperledger products as well.”
Building Trust and Reducing Onboarding Time
Being an IBM Fintech benefits Blockpliance builds significant trust with financial services clients during the technical due diligence process. It also shaves a significant amount of time off the procurement process for them when it comes to questions and the due diligence process. Guillermo added, “It is a ‘super plus’ when you can say to a client, hey I'm running on the IBM Cloud, the exact same cloud that you have internally.”
Know Your Why
Guillermo would advise companies considering becoming an IBM Fintech to first do some soul searching and understand their why. “I imagine large corporations like IBM have some people reaching out just because they want the logo on their pitch deck or website. If that's your strongest and most compelling reason for wanting to partner with IBM it's not going to work.” Secondly, he suggests they should be patient with the application process because the turnaround time for decision-making with a large company like IBM may take longer than they are used to as a startup.
Finally, he urges fintechs to be very strategic in ensuring their solution is the right fit for IBM. “The amount of support Blockpliance gets from IBM is just unparalleled! We have direct contact with the IBM team via a private Slack channel, where we post if we have an issue. Within a few minutes, we get a response, then we have a call, and things are being worked on.” Guillermo shares this because, “This kind of support is an investment for IBM, so they need to see value in your (fintech) solution to make that investment. Put yourself in IBM’s shoes and think about the value you’re offering from their perspective.”
Connect with Guillermo Fernandes online or learn more about Blockpliance:
LinkedIn: https://www.linkedin.com/in/guillermofernandes/
Blockpliance website: https://www.blockpliance.com