• Serial technology entrepreneur Charles Delingpole already knew that starting a company – any company – was hard. He started his first firm when he was 16.
• But he also realizes that when building a firm from the ground up, keeping the budget lean and mean, focusing on growth and wearing many hats is an unstated requirement – even when it comes to a field as complex, nuanced and demanding as anti-money laundering (AML).
• Delingpole did exactly that when he started his second company, Market Finance, literally jumping in the deep end without knowing how to swim by taking on the “statutory money laundering reporting officer role despite having no experience in that area.” Think trying to build a rocket after it has already taken off.
• But rather than shirking and shedding the fincrime compliance yoke as quickly as possible, the data-driven Delingpole saw something other than fear: he saw opportunity.
• “I felt that no set of tools on the market could give me the insights I needed to make appropriate risk-based decisions and therefore I started on my journey to start ComplyAdvantage,” where he became the Founder & CEO of the rising regtech firm in 2014.

Push for effectiveness, challenges of crafty criminals spur AML tech growth

His risk to counter risks in financial crime, though, could be rewarded.

Even though the AML software market has established, entrenched companies being lauded as “market leaders” and “technology leaders” – think firms like NICE Actimize, Refinitiv, SAS and others – Delingpole is also cognizant the sector is primed for growth.

The global AML software market size was valued at nearly $880 million in 2017, and is projected to more than triple to breach $2.7 billion by 2025, with an estimated annual growth rate of 15 percent from 2018 to 2025, according to a report by Allied Market Research.

The reason?

Banks must somehow balance budgets, resources and expertise to create counter-crime compliance programs that adjust quickly to new and updated domestic and international rules, creative tactics by criminals, fraudsters and launderers, law enforcement needs and rising regulatory expectations.

Delingpole is also aware of a very sobering reality in the AML technology space – a cutting truth just as sharp for the large companies in the sector as the smaller ones – and it is this: no one has figured it all out. No one has solved AML.

No one has crafted a way to stop all the fraudsters. No one has forged an impenetrable shield against sanctions evaders, corrupt powerbrokers and greedy gatekeepers.

While viewed from one perspective, this means that all parties in fincrime compliance – AML teams, regulators, investigators, auditors and third-party technology providers – are failing to seize less than a percent of the trillions in illicit finance swirling around the globe.

Conversely, this means new companies with new ideas, tactics and technology have the potential to upend established, staid and static firms, breaking paradigms and capturing more market share.

Historic fincrime compliance ‘disruption’ provides opening for new players

The timing for Delingpole is also particularly good.

The fincrime compliance space is currently spasming in what can only be described as a historic degree of disruption.

This is chiefly due to the coronvirus pandemic, with banks looking to more aggressively augment scattered AML teams with artificial intelligence and automation, and concurrent adjustments to prioritize investigative outcomes over rote regulatory tasks.

For the United States, considered a global leader in fincrime compliance rules and enforcement, one of the few positive outcomes of 2020 was Congressional and U.S. Treasury updates under the Anti-Money Laundering Act (AMLA) and a sister advanced notice of proposed rulemaking (ANPR) that retools and refocuses the entire regime.

In those updates, banks are pushed away from pleasing federal examiners to creating “effective” intelligence reports with a “high degree of usefulness to law enforcement,” with investigative agencies reciprocating those efforts by sharing insight on larger criminal trends back with the private sector.

When an entire industry goes through a monumental inflection point, while painful, it also opens the door for operations with innovative technologies to better arm the compliance teams considered the new vanguard of the fight against financial crime.

“While I do not have the honor of being on the front line and deciphering patterns and risks, I do go to great lengths to make sure that everything we do is with the Compliance Officer in mind,” Delingpole said.

Delingpole was kind enough to share his insight in our latest ACFCS Member Spotlight.

We recently had Robert Mazur speak at the ComplyAdvantage Conference. Working in compliance can sometimes remove us from the impact of the work we do.

We can sometimes feel withdrawn – working in compliance can sometimes make you feel connected to money laundering but not the crimes that make the dirty money.

Dangerous crimes can feel disconnected from the reality of compliance work, especially from behind a screen.

Robert Mazur helped bring down infamous drug lord Pablo Escobar and his Medellin Cartel, lifted the lid on bank collusion in money laundering and risked his life undercover

ComplyAdvantage has the potential to eliminate a range of very serious predicate offenses – human trafficking, wildlife trafficking, cybercrime, property theft, fraud to terrorist financing.

One of the things that surprised me in the past month was that fraud rates were 40x higher in new, online banks rather than traditional banks, and I assume also the risk of money laundering as pronounced.

When I started my second company, Market Finance, as well as having to run a range of other functions, I also took on the statutory money laundering reporting officer role despite having no experience in that area.

As a completely new start-up with a completely new model, the risks were immense and I doubt that the same risks would be allowed today.

I am the Founder and CEO of ComplyAdvantage. ComplyAdvantage is the financial industry’s leading source of AI-driven financial crime risk data and detection technology.

I spend a lot of my time talking to Compliance Officers and feeding back pain points and wishlists to our Product and Engineering teams.

I was introduced to the world of financial crime when I co-founded my last company, Market Finance. I took on most of the operations which included the role of the Money Laundering Reporting Officer.

In the UK, if something were to happen not only would Market Finance be liable, but I would also be liable. This was a huge wake up call for me.

I felt that no set of tools on the market could give me the insights I needed to make appropriate risk-based decisions and therefore I started on my journey to start ComplyAdvantage.

Focus on having the best data. Our competitors build data manually with researchers, whereas ComplyAdvantage uses algorithms and technology to make the data deeper, broader, richer and more connected. That has been our focus since day one and it has proved to be great advice.

The best advice you receive can be the worst advice you receive if given at a different time or a different company.

When we first raised venture financing in 2016, we aggressively scaled the technology investment because we knew that there was a real need for what we were building. Having now raised $88m to accelerate growth, we think we have invested that money wisely.

Some people thought we should not raise the money, which I think [now was] not good advice.

Trust your team. If you hire people who are smart and hardworking and buy into the mission and vision of the company, you have to take a step back and trust them to complete the mission.

Stay educated. Anti-Financial Crime touches so many fascinating areas. There is the practical application and use of technology but there is also the intersection of regulations, innovation, politics, and the industries that move illicit funds.

The application of Machine Learning has been fascinating to me. Regulators are pro-innovation but they expect everything to be explainable.

We have used Machine Learning in a very specific way to solve the underlying problem of incomplete and inaccurate data. When people see Machine Learning, some lean into it, others are turned away.

Watching the conversation evolve over the years (and continue to evolve) is something that I have thoroughly enjoyed.

Matching a customer’s identity with identities in a risk database is hard work. While technology has been created to ease some of the challenges, the global digital economy compounds the underlying issue.

The challenge has always been that names can be written in different scripts, words can be in different orders, there can be cultural variations and regional spelling differences.

When you add legitimate errors like typos and deliberate attempts to deceive the system, compliance officers are stuck having to make decisions with incomplete or inaccurate information and limited context to how a name was assigned to a set of data.

Until the underlying data is solved for, this problem will never go away.

I didn’t start my career thinking I would build a company focused on financial crime detection, but I have always sought to use technology to make other people’s lives easier.

While I do not have the honor of being on the front line and deciphering patterns and risks, I do go to great lengths to make sure that everything we do is with the Compliance Officer in mind.

Over the years we have had the luxury of working with many interesting companies. I still get excited when we are able to uncover more risks for our clients than their previous provider. Every sanctions match matters.

How often people overlook their source of data.

There are hundreds of amazing workflow technology companies that are designed to meet each organization’s unique needs, but there are only a handful of AML data providers in the world.

Too often I find the conversation is on the workflow level and not looking at the root of the problem.

There are so many paths that one can take and I cannot stress the value of a community enough. Build up your network to keep your doors open.

You may find that you want to switch from one segment to another or that you may want to move to a vendor or a consulting firm. Engaging with and extending your network is one of the most valuable things you can do.