Ripple Labs would like to welcome Karen Gifford, our recently appointed chief compliance officer. Karen, who admits witnessing “grown men cry,” brings to the team decades of experience at the forefront of financial regulations—from her stint at the Federal Reserve in New York to her time at Promontory Financial Group, one of the world’s leading consulting firms in the space.
Tell us about yourself!
I studied economics at Vassar. My first job out of college was at a financial technology start-up on Wall Street. That was an interesting experience! I did everything from getting sandwiches for the CEO to doing all the accounting and financial projections for the company. From there I went to law school at Yale.
After a few years in private practice, I moved to the Federal Reserve Bank of New York, where I spent about 8 years in the litigation and enforcement group. My time at the New York Fed coincided with the passage of the Gramm-Leach-Bliley Act, which eliminated some of the rules that had been in place since the 1930s that prevented banks from having trading operations. Understandably, some shops weren’t yet adept at supervising their new trading floors and the many new financial products created at that time. As a result, my work at the Fed involved some fairly significant enforcement actions.
As it happened, I was one of the lead attorneys on the Fed’s investigation of the complex leveraged derivatives desk at Bankers Trust. That investigation led to a whole series of enforcement actions, and in the end, Bankers Trust wound up paying a $60 million fine, the largest levied against a US financial institution at the time. (It wouldn’t be eclipsed until Goldman Sachs’ recent $550 million fraud charge in 2010.)
How did you get into payments?
The Federal Reserve occasionally files what are called amicus or “friend of the court” briefs. An amicus brief is essentially how the Fed expresses its views on a specific topic that might be at issue in private litigation but that it views as important. I wrote a number of amicus briefs while at the Fed, including some that had to do with the rules governing wire transfers. So that’s how I initially learned about payments —expressing the Fed’s view on what rules should apply when a payment is in dispute.
After the Fed, I worked at Promontory Financial Group, a boutique consulting firm that provides advice on regulatory issues and crisis management. Promontory’s clients are most of the major global banks and financial services companies, and, of course, payments and payments technology are central to what they do. My work there included consulting on regulatory and compliance issues, including Bank Secrecy Act and AML compliance, while also conducting investigations for clients. Most of the work I did at Promontory is subject to confidentiality agreements, so I won’t say any more about it, except that I worked with really nice, smart people, traveled all over the world, and did see grown men crying in conference rooms on more than one occasion.
Greg Kidd [Chief Risk Officer at Ripple Labs] and I met at Promontory. He had been at the Federal Reserve Board in DC working in the payments area before coming to Promontory, so we bonded over our common backgrounds. I ended up working with Greg later at 3taps, an exchange-based startup. Greg introduced me to Ripple.
What did you think of Ripple?
When Greg showed me Ripple, I was amazed and impressed. Anyone who knows anything about money or payments can only be fascinated by what Ripple does. It’s just so revolutionary and so needed.
Can you elaborate?
Ripple has so much potential to reshape financial products. It’s so simple and so flexible we can’t entirely predict what its impact will be.
Having said that, everyone in the payments world knows that there are obvious issues with the current payments system, which is slow and unnecessarily costly. The Federal Reserve recently issued a public consultation paper calling for specific improvements to the payment system; Ripple could clearly play a role in helping those improvements come about.
One of the things that impressed me about Ripple is its potential to make wholesale prices available to the average person doing financial transactions. What I’ve seen in my career in financial services is that innovation has often failed to benefit the average person. So to finally see a significant financial innovation that could help ordinary people is really exciting to me.
What will your role be at Ripple Labs?
My role is to build a compliance function to support the development of the Ripple network. That includes creating compliance systems and processes internally that will help Ripple meet its regulatory obligations. It also includes consulting on functionalities that can help Ripple users meet their own regulatory obligations.
In addition, I hope I can be a bridge to the regulatory community. I understand that community’s concerns and outlook. Ripple Labs has been very open with the regulatory community and made an effort to engage regulators in constructive dialogue—I intend to continue that.