Economic and financial crime is on the rise all across the world. Economic crime costs the UK government and taxpayers billions of pounds each year. To address this issue, banking institutions adopted know your customer (KYC) policies. When a bank or financial institution onboard a new client, KYC steps are performed to assess the level of potential risk the consumer may offer.
Meanwhile, Financial Crime Intelligence startup Schwarzthal Tech which uses AI to fight financial crime by gathering publicly available information and building an individual’s network to support investigations into potential criminals has secured £150,000 in pre-seed funding round from a UK seed investor SFC Capital.
Ed Stevenson, Investment Manager at SFC Capital says, “Financial crime is becoming increasingly sophisticated and difficult to fight. The work Schwarzthal Tech is doing is already helping tackle financial crime and we are proud to be a partner on their journey. Marius-Cristian’s vast knowledge on the subject and incredible experience in financial crime research puts the company a step ahead of others in the sector: he already knows what needs to be done.”
Founded by Marius-Cristian Frunza and George Emelyanov, Schwarzthal Tech’s know your network (KYN) methodology provides financial institutions with a multidimensional and comprehensive view of their clients’ connections, allowing them to assess risk holistically. The platform’s technology employs algorithms to allow users to examine potential clients’ ties to criminal or questionable networks and do in-depth analysis.
The company’s platform collects publicly available information in various languages from databases all over the world – political exposure and sanctions lists, company registries, social media, and so on – to build an individual’s network and create a visual presentation of the network to present to the customer. Users can then do in-depth assessments on potential clients’ ties to criminal or dubious networks. Furthermore, the platform’s AI is trained to connect information discovered in databases, media, and other public sources in order to develop connections and keep networks updated on an ongoing basis.
We asked co-founder and CEO Marius-Cristian Frunza some questions about how they got started, the inspiration, and how the funding will help it develop.
Give a sneak peek of your professional background before coming up with Schwarzthal Tech ?
My career started with working in the financial services industry for over 15 years, where I specialised in financial regulation and risk management. This was before I launched Schwarzthal Tech. After finishing my PhD in Mathematics from Sorbonne University in Paris I wrote four books on financial crime, which were published by Routledge. The books spoke about VAT fraud and the analytical tools for financial crime investigation. I also started lecturing a course on Alternative Finance at Dauphine University in Paris and working as an expert witness in criminal matters in British courts, which I still do.
What is Schwarzthal Tech? Who will it help the most?
Schwarzthal Tech is an innovative London-based RegTech startup building an AI-driven platform that provides financial crime intelligence. We use Artificial Intelligence to gather publicly available information and build an individual’s network to support investigations into potential criminals.
Schwarzthal Tech aims to revolutionise the way compliance works in the financial sector by bringing a paradigm shift from the traditional Know Your Client (KYC) towards a new concept: Know Your Network (KYN). This methodology introduces a multi-dimensional and comprehensive view of a clients’ connections to give financial institutions a holistic risk assessment. Our AI-driven platform aims to provide better and faster tools for investigators and compliance professionals and to democratise the fight against financial crime. The platform’s advanced technology uses algorithms to enable users to assess potential customers’ connections with criminal or suspicious networks and perform in depth assessments.
Schwarzthal Tech’s product is in high demand from banks, fintechs and law firms. Our mission and long term goal is to democratise the fight against financial crime by supporting investigative professionals around the world and to help combat a growing trend globally.
What was the rationale behind launching a financial crime intelligence startup?
During my time working in the financial services industry and conducting investigations on cases of financial crime, I understood that there is a massive gap between the approach taken by banks to tackle financial crime and the way criminal networks operate. This gap works in favour of the criminals, who end up getting away with their actions.
The overwhelming majority of solutions used by financial institutions are static box-ticking exercises aimed at making the bank compliant with established regulations and frameworks. Criminals, however, operate in very dynamic and fast-adapting global networks. Seeing this first hand made me realise the financial sector’s urgent need for a solution that is able to capture not only the individual actors involved but also the mechanisms of financial crime and global economic crime trends globally.
How did you manage to receive the £150K pre-seed from SFC?
When I thought of fundraising, I did my homework a bit by doing some research and found that SFC Capital was one of the most active SEIS and EIS investors in the country, so I reached out. Ae help an introductory presentation of ST to SFC and several Q&A sessions where we spoke about our business model, product and roadmap of where we saw ST mid to long term.
Then went the due diligence phase, where SFC assesses ST’s legal,financial and strategic aspects. We signed shortly after. It was a seamless and easy process which was completed in a short space of time.
Tell us about your company’s futuristic goals?
As per my experience, I found that there is never only one person or firm involved in every case of financial crime. There is always an organised network of companies and individuals behind the individual we are looking into. This is why traditional approaches such as KYC are not efficient: They fail to assess criminal networks. Our new KYN concept KYN includes this knowledge in its methodology and leaps ahead of KYC by bridging the gap between financial crime intelligence, compliance and risk management.
Schwarzthal Tech’s mission is to increase awareness about the financial crime endemic and empower both companies and individuals to better qualify risk. Our goal is to arm banks and corporations with the right weapons to disrupt the rampant economic crime we are witnessing.
In the long term, we want to grow Schwarzthal Tech into the leading global KYC/KYN platform through further investment providing us with the backing for high growth to achieve the goal.
How AI is revolutionising the financial crime intelligence market?
AI has the potential to totally change the financial crime intelligence market, both for compliance and investigative processes. Especially with straightforward cases, AI can help process automation and scale of rules-based inference that is used in investigative work.
By far the most valuable addition AI can bring is when it is capable of inferring new reasonings, recommending new checks (for the human to make) and determining new connections that would have taken individual weeks or even months.
The absolute game changer for the fight against financial crime will be when we manage to train AI to emulate the behaviour of organised crime. This would provide priceless insights into a criminal’s behaviour and reasoning, identify potential trends and allow law enforcement to stay one step ahead by recommending new checks and determining new connections.