The compliance market is becoming increasingly crowded and competitive as both traditional powerhouses and new entrants race to deliver on solutions that will help keep businesses in line with AML and KYC requirements. But is enough being done? Brett Smiley, general manager of Americas for ComplyAdvantage, joined PYMNTS to discuss where industry players are falling short and why strong data is such a crucial piece in completing the compliance puzzle.
Banks and financial institutions spend billions of dollars to ensure they are meeting compliance requirements and properly managing risks.
But is all the money being invested really getting the job done?
Despite a compliance market packed with providers and the investment from companies to ensure they stay on the right side of regulations, instances of money laundering and fraud are still prevalent and not going anywhere any time soon.
In fact, Brett Smiley, general manager of Americas for ComplyAdvantage, shared that only 3 to 5 percent of money laundering that happens around the world actually gets identified.
“The system isn’t working,” he told PYMNTS. “It’s satisfying key regulatory requirements, but at the end of the day it’s not providing the insight around managing your risks that it should.”
For this reason, ComplyAdvantage is out to disrupt the market by delivering on solutions that does more than just check the compliance box. Instead, the company’s modular compliance platform marries technology and strong data to help companies manage their risk better.
ComplyAdvantage will soon go head to head in a competition against other startups and emerging FinTech providers at NACHA’s PAYMENTS 2017 conference in Austin, Tex. Participants in the Innovator Row Pitch competition will present their products, and attendees will vote on the best one.
“People are realizing that the current tools and ways of doing things, although they satisfy some of these compliance requirements, aren’t giving the insights needed to truly make the most out of these processes,” Smiley explained.
He said ComplyAdvantage recognizes this and is building out the scale to not only understand the risks involved with their clients, but also go beyond just looking at the base level of data available in order to help businesses make more informed risk decisions.
The Data Differentiator
Smiley explained that the ComplyAdvantage offerings were built up around the gaps that people were still dealing with in their experiences with legacy compliance providers.
He said that the anti-money-laundering (AML) and know-your-customer (KYC) world as it stands today is not equipped and functioning in a way that is reliable for actually understanding where the risks lie as businesses deal with various counterparties.
“What we’ve done is come to the market with a solution that’s very different around the technology and the data — both in how we collect it as well as the way we present it — with the intention of identifying more of the financial crime and risky business that go on in the market than the legacy providers have been able to do,” Smiley noted.
But traditional players aren’t the only competition ComplyAdvantage faces. The compliance market is also flooded with new entrants looking to capitalize on the latest buzzwords floating around the industry — artificial intelligence, machine learning and natural language processing.
The main differentiator between ComplyAdvantage and others in the market is that in addition to utilizing technology that covers all of those areas, the company also relies on its own database.
Smiley said that it’s an important differentiator for the company because a lot of legacy providers in the industry have a lot of problems around integration that limits the results they can provide back.
“The way that ComplyAdvantage has been able to build both the technology and the data concurrently gives integration from the ground up, which is something the other providers don’t have,” he explained.
Not having to rely on third-party data also provides more scalability and flexibility to ComplyAdvantage’s clients, Smiley added, because the company isn’t limited to the same defined structures that other providers are.
Filling The Compliance Gap
With a focus on data first and foremost, the ComplyAdvantage solution is really intended to be a disruptor in the market.
Smiley said that delivering on the right data really comes down to three things: the frequency, breadth and depth of the information.
ComplyAdvantage utilizes automation and machine learning to increase the speed and frequency at which it’s able to gather data. For example, Smiley confirmed that the company’s sanctions lists are refreshed every 15 minutes.
The solution is also learning the decisions and building in the cognitive thinking and intelligence into the program itself, which Smiley said opens up doors for new information and finding more profiles and data.
This is in stark contrast to the other providers in the market, which are only focused around strict inclusion criteria.
“We are learning from the decisions that are being made to source new and interesting information that is relevant and reliable in the decision-making process around AML and KYC,” Smiley said, adding that this is where ComplyAdvantage is able to pick up where other providers leave off.
The company is making it about going beyond just the stock standard open source data information.
ComplyAdvantage also enables API functionality for its clients, creating the ability for its offerings to be built into existing protocols and platforms. The amount of that which is able to be tweaked through the APIs is very extensive, Smile noted, but also low-cost and has quick turnaround times for implementation.
“We’re looking to give you all those things in a very clear and simple fashion, one that doesn’t require a degree in neuroscience to work out or a degree in computer science to use effectively,” Smiley said.
“We come to the table with not only checking off the compliance rules and regulations, but giving the client the ability to get automated insights and using that to feed back into the solution while being able to keep the flow of money and transactions going more efficiently.”