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compliance

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Overview

Parthenon Fi's compliance infrastructure operates at three layers: custodian-level screening (pre-transaction), protocol-level monitoring (continuous), and legal-level enforcement (event-driven). This multi-layer approach ensures compliance without relying on any single point of failure.

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KYC/AML

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Custodian CDD (Primary)

All KYC/AML verification is performed by qualified custodians as part of their Customer Due Diligence (CDD) processes. This includes:

  • Identity verification (individual and institutional)

  • Beneficial ownership identification

  • Source of funds verification

  • Enhanced due diligence for high-risk counterparties

  • Ongoing monitoring and periodic review

Custodians (BitGo, Anchorage, Zodia) are regulated entities subject to BSA/AML requirements (US) and FATF Recommendations (ADGM), meaning their KYC processes meet institutional standards.

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Platform Verification (Secondary)

Parthenon maintains an independent counterparty registry verifying:

  • Known Lender / approved Borrower status

  • Jurisdictional eligibility

  • GMSLA execution status

  • Active custodian account confirmation

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Sanctions Screening

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Pre-Transaction Screening

Before any transaction, custodians screen counterparties against:

  • OFAC SDN (Specially Designated Nationals) list

  • HMT (His Majesty's Treasury) Sanctions list

  • EU Consolidated Sanctions list

Transactions involving sanctioned persons are blocked at the custodian level before reaching the protocol.

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Continuous Monitoring

Parthenon monitors Chainalysis and TRM Labs feeds for:

  • Newly designated sanctioned persons

  • Wallet addresses associated with illicit activity

  • Changes in counterparty risk profiles

  • Emerging compliance alerts

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Post-Designation Response

If a party becomes sanctioned during an active loan, the following actions are taken:

1

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Custodian freeze

Custodian freezes collateral and suspends all transfers

2

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Platform notification

Platform notifies all relevant parties

3

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Regulatory cooperation

Parties cooperate with applicable regulatory authorities

4

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Contractual consequence

Loan is treated as an Event of Default under the MLA

This replaces on-chain sanctions escrow mechanisms (used by protocols like Wildcat's Sentinel system) with custodian-level compliance enforcement — cleaner from a regulatory perspective.

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Travel Rule Compliance

FATF Recommendation 15/16 (the "Travel Rule") requires originator and beneficiary information to be transmitted with virtual asset transfers. Parthenon's compliance:

  • Custodians handle Travel Rule compliance for all asset movements

  • Canton Network's privacy architecture ensures Travel Rule data is shared only with relevant parties

  • Cross-border transfers include required originator/beneficiary information via custodian compliance infrastructure

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Regulatory Reporting

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ADGM FSRA

  • Periodic regulatory returns as required by FSP conditions

  • Suspicious Transaction Reports (STRs) via custodian compliance

  • Annual compliance audit

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US

  • Regulation D Form D filing with SEC

  • BSA/AML compliance via custodian infrastructure

  • CFTC reporting if applicable under CLARITY Act

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Audit Trail

Canton Network maintains an immutable audit trail of all transactions, accessible to:

  • Supervisory nodes (for regulatory examination)

  • Platform compliance team (for monitoring and reporting)

  • Custodians (for their own regulatory obligations)

The audit trail records: transaction timestamps, party authorizations, LTV calculations, margin call events, liquidation actions, and settlement confirmations.

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Compliance Architecture Diagram

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