ComplyAdvantage founder is on a ‘moral mission’ to stamp out financial crime

ComplyAdvantage’s technology sits behind the scenes of many of the fintech sector’s best-known startups, helping them to weed out dodgy transactions.

In a personal capacity, founder and CEO Charlie Delingpole plays a similarly discreet yet influential role in the industry. He has invested in no less than 110 startups, of which more than 95% are fintech firms.

Since 2016, Delingpole — who co-founded the fintech lender MarketInvoice earlier in his career — has invested £1.7 million of his own money in startups. On paper, he has had some big wins. He backed Codat, a small business-focused startup that recently raised $40 million from Tiger Global. In theory, Delingpole’s portfolio is today worth £4.3 million, but he is yet to see a single pound of that realized.

So why does he bother? “You have to enjoy it as a sport. It has to be an end in itself rather than a means to an end,” he says, over a Zoom call.

But there is another reason. For Delingpole, angel investing is also a means to connect with some of the industry’s most influential figures — and even to generate sales for his own business.

He gave the example of his investment in Ramp, the Polish crypto startup that’s nearing a $30 million raise. A who’s-who of angel investors associated with big-name fintech firms participated in Ramp’s $9 million seed raise in June.

“If you want to understand what’s happening, if you sit down and talk to people like this, you learn far more than you would looking at a website — because often there’s a really frank, simple reality that exists,” says Delingpole. 

His goal, he says, is to get a better picture of fintech firms’ pain points.

Scanning for red flags

The main pain point at which ComplyAdvantage has taken aim is money laundering. 

Founded in 2014, the company has laid a challenge to the likes of World-Check, a more-than-two-decades-old rival owned by Refinitiv and founded in the wake of the 9/11 terrorist attacks.

Delingpole says ComplyAdvantage has stripped manual processes out of its own systems, relying instead on algorithms. To begin using the tool, companies must offer up their complete customer database. At present, ComplyAdvantage holds information on 160 million people. Every day, that entire repository is scanned for signs of danger, and clients are pinged if any of their customers draw red flags.

Broadly, there are two types of risk that the system tries to weed out. The first is customer risk — those with links to criminal groups or politically exposed persons — and the second is transaction risk, such as multiple $9,999 payments, which may reflect a scheme to circumvent reporting thresholds in the United States.

Delingpole is fond of particularly dramatic illustrations, the sort that probably wouldn’t take a very sophisticated system to detect.

“If a payment says, ‘thank you for the heroin Kim Jong-un,’ that’s bad on two fronts. Firstly, because it mentions heroin, secondly because it mentions Kim Jong-un,” he explains. “The fun thing about what we’re doing — one fun thing — is that it’s always going to link to geopolitics.”

Of course, the reality of unraveling money laundering operations is anything but straightforward. One challenge that Delingpole outlines is mapping out subsidiaries. If Kalashnikov Concern, the Russian small arms maker, gets sanctioned by the U.S. (which happened in 2014 after the annexation of Crimea), its subsidiaries must also be treated by law-abiding companies as sanctioned — meaning compliance software must be able to trace those linkages and flag them accordingly.

Another challenge is language. ComplyAdvantage has fintech clients as far afield as China, Israel and Indonesia. “It’s really critical for that team to have a great Chinese name-matching algorithm, or a great Arabic name-matching algorithm,” says Delingpole.

Moral missions and technical problems

On the surface, those efforts seem to be bearing fruit. ComplyAdvantage topped up its $50 million Series C raise in May with another $20 million from Goldman Sachs, the investment bank. It has grown its ranks to 350 people this year.

The startup has also signed new clients like TransferMate, although Delingpole is quick to point out that many of its biggest clients either don’t announce that they are using the service, or may not even know that they are.

He says ComplyAdvantage “powers” a host of software tools, such as Onfido, Jumio and Verif, which consumer-facing fintech firms use to verify their customers’ identities. Once they confirm that someone trying to open an account actually exists, ComplyAdvantage then confirms whether that person raises any red flags.

ComplyAdvantage has seen strong demand from crypto companies in particular. The firm works with both eToro and Gemini, for example — both of which it won from World-Check, according to Delingpole.

But like most fintech firms, the company is trying to ramp up its own crypto capabilities. It recently announced a partnership with blockchain analytics firm Elliptic. By integrating Elliptic’s wallet scanning technology into its systems, ComplyAdvantage hopes to make it easier for crypto firms to detect and stamp out money laundering.

This may not be a top priority for all crypto firms, however. Delingpole tells tales of early crypto clients touting signed contracts with ComplyAdvantage to other potential partners — namely, those that could facilitate the conversion of currency — as evidence of their commitment to stamping out money laundering. But some of those crypto clients never actually implemented ComplyAdvantage’s systems or ran any searches using them. It was all for show, in other words. 

Delingpole suggests that such discoveries are a historic phenomenon rather than an ongoing thing, perhaps because of the steady rise of more stringent regulation of crypto globally. The stablecoin issuer Paxos, for example, is a client — meaning that by extension Facebook’s crypto wallet Novi will also be linked to ComplyAdvantage’s systems. Few projects in finance and technology have drawn greater scrutiny from regulators in recent years.

ComplyAdvantage has big plans beyond crypto, too. Its investor Goldman Sachs is not currently a client, but Delingpole says the two companies are in “active discussions” to change that.

ComplyAdvantage is currently working on a product — which may be ready by the first quarter of 2021 — that will help private banks and investment banks identify hidden risks associated with high net-worth individuals. Delingpole gave an example of a person appearing clean, but drawing alerts due to their involvement with an entity whose other directors are linked to sanctioned entities.

Such a tool seems especially relevant as banks and their executives continue to deal with the fallout from the Jeffrey Epstein scandal. The saga is an ongoing reminder of the reason companies spend so much time and energy on the sometimes dry matter of compliance.

“The reason for our company is to solve the problem of financial crime. If that was a solved thing, there’d be no point in us existing, and we wouldn’t have raised $100 million,” says Delingpole.

Eliminating financial crime would also mean reducing sex trafficking, drug trafficking and gang murder, he says. “Hopefully everyone in the company thinks they’re on a moral mission to improve society by solving this technical problem.”