Tell us more about Neotas, including what makes your company and your vision unique?
Neotas is an enhanced due diligence company setting new standards in Compliance, Staff Screening and Due Diligence through the power of open source intelligence. Set up by Co-Founders Vipul Mishra and Ian Howard in February 2017, the team brings together a unique blend of experience and expertise across government, finance, law enforcement, fraud prevention and cyber-security.
Previously CISO at a leading hedge fund, Vipul Mishra, CEO & Co-founder of Neotas, was struck by risk and control processes being reactive rather than proactive in nature; costly and counter-intuitive for organisations. This was the main driving force behind the Neotas proposition; large-scale due diligence checks that reduce time and costs drastically, identifying people risk quickly.
Since 2017, Neotas have built an advanced intelligence platform that helps organisations mitigate risk, evidence compliance and enhance existing due diligence processes. Our client base includes law firms, consultancies, FS institutions, investment houses and private equity firms and we are passionate about adding a layer on top of existing due diligence processes to protect organisations.
Neotas claims to be able to reach the deep and dark webs, penetrating most of the online world. How does Neotas achieve this?
Through a combination of methodologies developed and implemented across cyber security, law enforcement and the military, blended with natural language processing and machine learning, Neotas penetrates the online world deeper than the surface web.
Search engines only index 4-6% of the data online, leaving a vast amount of information to be found below the surface web and uncovered through the Neotas platform.
We understand how websites and online communities work, utilising technical expertise to interrogate open sources methodically, uncovering trails that individuals leave behind and connecting the dots, rather than simply consulting a list of databases.
People are often creatures of habit utilising consistent email addresses, usernames, and aliases or interacting with their interests and contacts. Each of these actions can be traced and connected to them regardless of whether the content exists on the surface, deep or dark web. It is the power of human analytics, proprietary methodologies and our platform that allow Neotas to achieve this with ease.
Due diligence and KYC processes are currently top of mind in financial services too. How does Neotas help banks, FinTechs and other FS firms? Could you provide an example to demonstrate this?
Recent industry news has brought the exposure of financial crime and money laundering to the fore amongst financial institutions and marred reputations at a company and individual level. There are numerous cases where our enhanced due diligence is helping people to make better more informed decisions. We are providing additional flags in over 30% of the cases that we look at; supporting evidence for the fact we are improving decision-making processes.
We conduct enhanced due diligence as part of our clients’ KYC processes. In one particular case, we investigated a UK based entity cleared through traditional processes for a lender. By following the digital trail, we discovered the company was in fact headquartered in Eastern Europe and the company director was involved in a significant amount of criminal activity.
The director in question had been arrested by Interpol previously for his suspected involvement and leadership in illegal drugs and arms smuggling networks. By connecting the dots in digital trails further, we identified employment inconsistencies, multiple aliases and modern slavery concerns. The lender was unable to recoup its losses in this instance, but it was clear that Neotas would have uncovered numerous risk factors that would have prevented the loan from being made in the first place.
It comes back to banks and other institutions knowing who their clients really are and by not being afraid to use all available tools (including open source intelligence) to help build a profile and the full picture of their networks.
The KYC and AML regulatory landscape is globally diverse and ever-changing. How do you see this area evolving in the future?
Companies need to be doing more. Financial crime, money laundering and other forms of crime will always exist, crossing borders on a global scale.
Currently, only 1% of criminal proceeds are estimated to be detected. This is a ridiculously small number. We all have to play a part in improving this. Laundered money comes from the proceeds of crime including fraud, drugs and human trafficking, so there’s a real human element that we need to respond to in order to improve detection rates.
Overall, what needs to change is the way in which organisations collaborate and share data with each other in order to be able to tackle the problem of money laundering more effectively, however there are steps that can be taken today which will help identify the bad apples and that is what Neotas is currently helping companies achieve.
We believe it is as important as ever to have open discussions about the issues and the risks at stake. We don’t see why regulatory bodies, associations and global FS institutions can’t share more openly crime data and stats, working with NGOs to tackle the issues through coordinated and global efforts. But also companies need to understand there are new ways of doing things. From our perspective there is a lot of information that’s out there, in the public domain, that’s simply not being used to inform decision making.
Regulation is a major driver of innovation in this industry. Are there any regulatory changes that you expect to have a significant impact on the banking and insurance industry? If so, why?
All existing and upcoming regulatory changes are going to have a big impact on the market. Banks have been dealing with this for the last few years and it shows no sign of lightening up. We have also witnessed over the last few years that it’s quite often the unintended consequences that have the biggest impact. 5MLD (The Fifth Money Laundering Directive) is coming plus the SM&CR (Senior Managers and Certification Regime) is being rolled out to all FCA regulated firms shortly. In terms of KYC and AML, there is now a requirement to understand your client on an ongoing dynamic basis. The regulator’s expectation that you should ‘know’ your clients, also includes understanding their business. This requirement will take a technology solution in order to satisfy it. At Neotas we understand that we can add an additional intelligence layer to a company’s current processes.
Legal redress comes at a huge cost to organisations, but until regulatory bodies come knocking on banks’ doors with fines or sanctions, it seems there needs to be more work on raising awareness. For instance, the impact of the SM&CR on personal liability that directors and senior managers have is a regulatory change we expect to see fall-out from.
KYC and AML are often grey areas for businesses. Are there any misconceptions held by businesses about KYC and AML processes?
A common misconception we see is that these processes are only a burden to the organisation!
Doing KYC and AML well and using efficient processes and systems to supplement their existing due diligence processes will help to ensure trust and transparency with the customer / client base, ultimately leading to better client retention and revenue.
All it takes is for a company to be hit with a fine or sanction and the tower of trust that it has spent so many years to build up will swiftly topple down.
What would be the one piece of advice relating to KYC that you would give to banks and FinTechs?
For us, one piece of advice comes back to the idea that KYC checks are a “tick box exercise”. This just isn’t the case anymore, and we strongly urge banks and FinTechs alike to consider the power of open source intelligence in being able to put the “Know” back in Know-Your-Customer.
About the Author:
Co-Founder & Head of Business Development
With over 30 years’ worth of experience across financial services and investment banking, Ian’s industry knowledge is extensive, ranging from credit derivatives to capital markets, from trading to hedge funds. His previous roles have included Head of Credit Business at a Canadian bank and Head of Business Development at a London consultancy.