Fighting Fraud and Money Laundering With New Technology

Photo of Filip Sobiecki

Filip Sobiecki

Jun 1, 2021 • 10 min read
Fighting Fraud and Money Laundering With New Technology

What does it take to fight financial crimes like fraud and money laundering?

In many cases, these are crimes that are not reported to the police. They often go by unnoticed. This makes them harder to detect in the first place and even harder to investigate.

However, companies like ComplyAdvantage are here to save the day. ComplyAdvantage is a team of people dedicated to fighting financial crimes with modern technology.

Arshi Singh, Head of US Product at ComplyAdvantage, joined Disruption Talks to discuss her role and ComplyAdvantage’s role in fighting financial crime.

Filip Sobiecki: Could you give us an elevator pitch for ComplyAdvantage?

Arshi Singh: ComplyAdvantage is essentially a data provider for compliance purposes. We provide information about individuals and companies across the world to help solve financial crimes. We work with know-your-customer (KYC), onboarding, transaction monitoring, and transaction screening.

Can you give us a little personal introduction as well?

I have around 17 – 18 years’ experience, which I would break down into three different sections - the first being technology. I started as a software developer in India. The second section is finance. I moved to the US and went to business school before working in corporate finance and treasury. The third section of my career at this point, which I’ve been in for about seven or eight years, is fintech.

Fintech feels like home to me. I worked as a money transmitter, which involves working with compliance because it’s such a heavily regulated industry, moving money across the globe or converting currencies. That’s how I was exposed to the world of compliance.

My current role as Head of Product involves transaction monitoring and screening. This involves figuring out how we unleash the power of technology to solve financial crime. We use artificial intelligence or machine learning and apply that to catching bad guys.

I think what’s really exciting about this line of work is that we’re working for a bigger cause, trying to halt the funding of terrorism or human trafficking.

How is ComplyAdvantage different from the rest of the industry?

One focus for ComplyAdvantage is the compliance officers at fintech companies. They’re usually struggling to keep up with the constant pressure of regulators and the different regulations for each jurisdiction across the globe. If they don’t comply with the rules, they can go to jail, so they constantly have to balance this pressure internally from the business.

The business, of course, wants to grow and service more customers, which makes everything more complex. We’re really trying to solve that problem to make compliance officers’ lives easier.

We do this by supplying good quality data that the business needs to grow and remain compliant. We differ from other larger incumbent players in this space because we have a lot of data from different parts of the world. Our usage of technology and APIs is how we keep our data fresh at all times. For example, with sanctions data processed by governments or regulators around the world, we can refresh that data in minutes.

Our competitive advantage comes from being the first global company to build a connected database of people and companies across the world. Beyond that, we give customers the tools they need to solve financial crime, which can cover sanction screening or transaction monitoring, for example.

Would you call ComplyAdvantage the Swiss Army Knife that protects companies from financial crime?

Yes, there are a lot of elements in the compliance world that we help solve, fraud being a key one. With ComplyAdvantage, I focus on key areas such as anti-money laundering (AML) and knowing your customer (KYC).

In the near future, we will see every company acting like a fintech, with embedded payments in their system. When we get to that stage, it means that every company will need to think about compliance with money transmission regulations.

Having good, automated tools can make that job a lot easier for us, so there’s no need to spend so much time and effort in doing research. These automated tools can track down billions of sources of data, multiple websites across the globe to tell you any negative news about an entity, whether it’s a company or a person.

We then pass that information over so compliance officers can make an informed decision about whether to serve that customer.

How does ComplyAdvantage deal with competitors, either large incumbent institutions or newer companies involved in the compliance space?

We’ve been doing this for around seven years now. We’re beyond the start-up stage and are in the scaling stage. There are advantages to being a more agile, younger company. We can move faster than some of the older organizations. We’re dealing with newer tech and are not burdened by legacy infrastructure.

Where we’re also ahead is simply with the branding. We are starting to have an equal voice when compared to the incumbents. Regulators are aware of us and have confidence in the tools we’re creating.

Then there’s the threat of newer start-ups who may be able to do things much faster than us, so we have to strike the right balance. We need to ensure that the technology we built a few years ago is keeping pace and can scale with our clients. We constantly invest in technology to make sure we’re always scaling upwards.

However, this is still a big industry. They say anywhere between $800 billion to $2 trillion is being laundered in US dollars which is a huge percentage of global GDP. It’s going undetected, so there’s clearly a big gap for solutions like ours.

How do you find a balance between increased customer friction and increasing compliance costs?

I think it has to be a risk-based approach. We have to balance the cost with what the company’s risk appetite is.

Depending on their risk appetite, they can classify certain geographies, entire regions, or certain industries as risky, such as gambling or gaming. Some companies even qualify crypto exchanges as risky. It all depends on each company's appetite for risk.

Once they have that defined, it's about the operational side. How do you make sure that you have the procedures and processes in place to allow you to work on it? That’s where the tools like ours come into play.

It’s a complex data problem to solve. To keep it operationally efficient, you can either have a human-centric approach where you hire more analysts, or a tech-centric approach focusing more on automation and AI. The latter is more cost-effective and easier to scale, and it also reduces the issue of human error.

Money laundering is a big problem, but if it’s so hard to detect, how do we know about it?

Fraud is much easier to detect because, after a while, the victim will call and notice that money’s missing or their credit card is gone. With money laundering, it’s much more difficult because there’s no one to tell you about it when it happens.

Occasionally, the regulators will catch financial institutions that get fined. In 2020 alone, $14 billion worth of bank fines were applied by regulators. There are also data leaks and lapses in compliance that the regulators catch. That’s the only real hard evidence we have to go on, but I agree. It’s not black and white, so it’s hard to know.

What do you think the future of financial crime will look like?

I think there will be huge amounts of data generated in today’s age of information technology, and it’s about being able to consume that data fast enough. There are tens of thousands of websites everywhere with suspicious activity that gets reported, so it’s about us finding the best, most efficient tools to try and eliminate this. We have hired a bunch of data scientists who are working on this problem.

We’ll also see greater regulations. We’re already seeing US regulators apply restrictions on cryptocurrencies because they’re the equivalent of money transmitters.

What does your decision-making framework look like?

It comes down to prioritization and time management. We look at the most strategic things first and allocate our time across those. For our long-term view, having well-defined metrics and KPIs upfront helps us define our goals more clearly so we can work towards them.

If you had a magic wand and could give every 12-year-old the gift of knowledge, what skill or piece of knowledge would you pick?

I’d say coding. It’s the language of the future. We need to learn this language to understand artificial intelligence and machine learning because that’s what’s going to do a lot of the work in the future.

This discussion is part of our Disruption Talks recordings, where we invite experts to share their insights on winning innovation strategies, the next generation of disruptors, and scaling digital products. To get unlimited access to this interview and many more, sign up here:

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Filip Sobiecki

Senior Executive at Netguru and host of Disruption Talks
Developing and refining a payments app design  Read more about the successful cooperation with Careem  Check the case study

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