How to Get Key Person Liability Insurance in the Financial and Crypto Businesses

Working with digital assets, high-value transactions and strict compliance requirements leads to high liability of functionaries in the financial and crypto business. Violation of regulatory standards, operational errors or actions of employees can result not only in multimillion-dollar losses, but also personal liability for directors, AML officers, traders, and board members.

In such a reality, professional liability insurance (D&O, PI and similar products) is no longer an option - it is a key element of legal and financial security. Antwort Law experts understand the risks that key functionaries face on a daily basis and know how to turn these vulnerabilities into manageable and legally protected areas of responsibility.

There are two main types of insurance that are critical for crypto and fintech companies:

1. D&O (Directors and Officers Liability Insurance)

Protects directors and top management from losses associated with:

- violation of legislation or regulatory requirements;

– Maladministration;

– Lawsuits by investors, clients or regulators;

– Errors in decision-making that lead to damage.

2. PI (Professional Indemnity Insurance)

Covers:

– Errors in the provision of financial or legal services;

– Loss of client funds as a result of employee actions;

– Negligence and professional miscalculations.

According to the insurance industry, in 2023, more than 38% of all D&O insurance claims in Europe were related to crypto companies. And what’s most alarming is that in 62% of such incidents, the personal assets of directors were damaged. This says a lot: even if the company stays afloat, the director himself is at risk. We strongly recommend that professionals working in the crypto and fintech environment take the issue of liability insurance seriously. Here's why:

• Crypto is still a "gray area" of regulation, and even good faith actions can be interpreted as violations.
• Account blocking, transaction freezing, data leakage, hacking - all this can lead to lawsuits and investigations.
• Regulators are becoming stricter and the level of responsibility of AML officers, for example, in some countries is already comparable to the responsibility of the CEO.
• Mistakes in the millions: one incorrectly sent stablecoin or an error in the logic of a smart contract - and you are at risk.

Not every employee of the company bears the same level of responsibility. Those who make strategic decisions, manage client assets, monitor compliance with the law and control critical processes are at the greatest risk. According to Antwort Law, these positions are the ones that most often become the subject of claims from regulators, clients or partners:

• CEO / Managing Director: the head of the company — the person who is responsible for literally everything and even if the error occurred “somewhere below”, it is the CEO who will be mentioned in the regulator’s letter or subpoena. Especially in the crypto and fintech environment, where the chain of responsibility is strictly tied to the corporate structure.

Risks: strategic mistakes, managerial negligence, unauthorized actions of subordinates, regulatory claims.

• Chief Legal Officer or Head of Compliance (CLO / Head of Compliance): the key line of defense between the company and the regulator: one unaccounted regulation, missed risk or formally “not so formalized” KYC process — and at stake is not only the company’s license, but also the professional reputation of the lawyer.

Risks: Misinterpretation of the law, formal non-compliance with procedures, participation in audits or investigations.

• AML/KYC officer: the most vulnerable position in the crypto business; in some countries, such as Estonia, Lithuania or the UAE, the AML officer is personally responsible to the state, including criminal liability. If a transaction that violates the sanctions regime is carried out, he will be held responsible.

Risks: Missed suspicious transactions, poor customer verification, lack of evidence of due diligence.

• Board members: Even if you are not involved in day-to-day management, as a board member you are legally responsible for the overall direction of the company.

Risks: Class action lawsuits, sanctions from regulators, accusations of inaction or oversight.

• Chief Financial Officer (CFO): the point of control over client and corporate funds. The CFO is responsible for the transparency of reporting, the correctness of transactions, compliance with tax and accounting regulations. Reporting errors can lead to tax claims, loss of licenses, and even criminal cases.

Risks: financial errors, incorrect reporting, tax consequences, penalties for violating payment discipline.

• Smart Contracts / DeFi Infrastructure Responsible: This is a new category of specialists with colossal responsibility. An error in the smart contract code can lead to the loss of millions of dollars - and no one will figure out whether it was intentional.

Risks: bugs in the code, leakage of funds, vulnerabilities in protocol logic, hacker attacks through unfinished functions.

• Custodians, wallet operators and traders: anyone who works directly with clients' assets, especially within custodial services and trading platforms. One wrong address when withdrawing funds, an error in order execution or unauthorized access to a wallet - and the damage can be irreparable.

Risks: operational errors, loss or blocking of funds, claims from clients, suspicions of money laundering.

Financial and crypto business is a highly dynamic environment with growing regulatory risks and constant attention from supervisory authorities. And if earlier liability insurance was more of a formality for corporate image, today it is becoming an integral tool for risk management and protection of both business and personal interests of its key representatives.

It is important to understand: even if your company operates honestly and transparently, this is not enough. If your company does not have a properly selected D&O or PI policy, the consequences fall directly on the shoulders of directors, traders, compliance officers and other responsible employees. The Antwort Law team knows which insurance products really work, how to adapt the terms to the specifics of the financial and crypto business and how to legally correctly issue a policy so that it does not fail at the most difficult moment.

Contact Antwort Law - we will select a solution for your real risks.

Lidia Ivanova

International lawyer
Antwort Law