Monthly report: July ’20

July 29, 2020

A North East company using technology to help banks tackle money laundering has taken strategic investment from one of the most important fintech companies in the world – Nasdaq. Richard Dawson speaks to Chris Brannigan, CEO of ‘regtech’ firm Caspian, to discuss the scale of financial crime and how technology and human intelligence have come together to help tackle it

Taking ‘dirty’ money and using the financial system to ‘clean’ it is what sustains criminal operations all over the world.

Social evils like human trafficking, human economic slavery, terrorist financing, drug trafficking and political corruption are all perpetuated by money laundering – the ability to make money look like it came from a legitimate source.

What’s more is the scale of the problem. It is estimated that 6.7 per cent of global GDP – approximately $5.8 trillion – is due to criminal activity, with three-quarters of this then laundered through the financial system.

If money made from criminality was a country, it’d be the third richest in the world and double UK GDP.

The responsibility for investigating the trillions of pounds that are laundered through the financial system each year lies firmly with the banks through which most of these suspicious transactions are made.

It’s fair to say that the banks are having a tough time of it. Most estimates suggest that only around 1 per cent of money laundering offences are captured by the authorities.

The problem banks have is that they are unable to keep up with the sheer volume of transactions that need to be investigated. Lenders can receive hundreds of thousands of alerts every month.

Unable to meet regulatory demands for looking into suspicious transactions, banks have been issued with around $36 billion in fines over the last ten years.

Fortunately, there is a North East company working on a solution to this global challenge.

Chris Brannigan founded Caspian to develop anti-money laundering (AML) technology that would give banks a fighting chance in the struggle against financial crime by combining human intelligence with machine learning.

Chris says: “Our technology platform is highly configured for financial services, particularly in the area of financial crime where there is a lot of human investigation and the decisions humans make are high risk.”

Caspian, which is based in The Core at Newcastle Helix, operates in a subsection of fintech, typically called regtech.

Chris explains: “Our technology is there to serve and solve the challenges presented by regulation because financial crime and risk compliance is a very regulated area.

“There are hundreds of millions of financial transactions going through banking systems every day and regulators put down a lot of things that you need to check for.

Caspian’s AML technology allows banks, which are struggling to keep up with the volume of investigations, to become more efficient. “Some of the banks we work with are getting 300,000 alerts every month that have to be investigated and each one could take an hour for a well-qualified, intelligent human to complete,” says Chris.

“We can investigate this huge volume that’s coming through and treble their productivity.”

Automating AML investigations, which is Caspian’s raison d’etre, could be a game-changer for the banking industry.

“Criminals are very sophisticated, and the banks and regulators are way behind,” Chris adds.

“Our system immediately gives them 60 per cent efficiencies out of the box and allows banks to augment and direct capacity to improving standards.”

What Chris and the team are building at Caspian has attracted the attention of one of the most important fintech companies in the world. Most people know Nasdaq as the American stock exchange where technology companies like Microsoft, Apple, Amazon, Facebook and Intel are listed.

Nasdaq is also a financial services conglomerate, which uses some of the most advanced information security systems in the world to operate capital markets across the Nordic and Baltic regions of Europe.

The company’s investment arm, Nasdaq Ventures, recently took a minority stake in Caspian, starting a partnership that could be huge for the North East’s growing fintech cluster.

“Nasdaq Inc. invests in collaborative new technologies that align with its long-term objectives,” Chris explains. “The company is keen to move into anti-money laundering and has become a shareholder in Caspian.”

Entering Nasdaq’s world-leading fintech ecosystem could be a catalyst for major growth for Caspian and Chris is working in partnership with Durham University to bring in the expertise he needs to take the business forward.

The company is planning on taking on up to 20 staff this year, but if the AML platform can be rolled out to big banks that spend hundreds of millions on investigations and compliance, it could well go on to employ many more.

In these challenging times, it seems the future looks bright for Caspian.

Caspian
www.caspian.co.uk

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