The issue of money laundering has been a hot topic lately in the UK, where it is under pressure to make more stringent rules to find the origins of the money invested in large assets within the country, such as real estate that is of the highest quality. The capital city has been described by certain people as the “London laundromat,” but as a result of the recent sanctions against Russia, it is now actually implementing the rules.
Today, a London company known as Thirdfort that has created an online platform that helps professional service companies conduct more rigorous due diligence and identify the suspiciousness of something has announced a funding round totaling PS 15 million (about $20 million). The money will be used to keep growing its services and specifically to develop an infrastructure for payments directly to the platform.
The funding, called a Series A, was directed by Breega; the company’s B2B fintech-focused Element Ventures also invested, as did the founders of ComplyAdvantage, Tessian, Fenergo, R3, Funding Circle, and Fidel.
MD Olly Thornton-Berry stated that the duo of him and Jack Bidgood first came upon the concept of ThirdFort following the loss of a friend of theirs who was robbed of PS25,000 when he bought a house in London because of an attack that was phishing. Fraudsters had gathered data concerning the purchase and had created an identical domain to the one of the law firm that the friend was working with for the purchase. They sent an email that impersonated the friend’s lawyer, soliciting the money to be transferred using an online hyperlink. After a couple of weeks, the victim was being asked for the same amount, and they began to suspect that there was some foul play. The victim never got the cash.
The incident, as Thornton-Berry stated, revealed how little information professional service firms need from their customers prior to concluding a business transaction and the lack of protection the customer has against frauds that are more sophisticated.
The result was ThirdFort, which offers a big-data toolkit that incorporates multiple sources like information from LexisNexis, ComplyAdvantage, Companies House, and many more, which can be combined (and chosen by the client) to give different details about people and their money sources. ThirdForte created tools to meet the requirements of firms that operate in the legal and property markets.
The product is available today in two different parts. There are “risk engines” or the “risk engine” designed for business customers, which can be used to conduct KYC (know who your customers are) checks in order to assist companies adhere to AML (anti-money laundering) rules. There are about 700 companies already on the platform, which includes the law firms DAC Beachcroft, Penningtons Manches Cooper, and Mishcon de Reya; and property companies Knight Frank, Strutt & Parker, and Winkworth.
There is also an app designed specifically for the customers of these companies. This is developed on the open banking infrastructure that connects those companies with their customers’ banks through the use of banks’ banking apps that allow for payments and other transactions to be completed securely. The app has been downloaded 500,00 times.
Similar to Alloy U.S. (which could potentially be a competitor if one expands into the market of the other), the argument in the case of Thirdfort lies in the effort required to be involved in similar origin-of-funds and identification research, which could have been a long-drawn-out process that was mostly manual and expensive to conduct in the first place if it was executed at all.This is because, unfortunately, it’s typically in the interests of businesses to complete a transaction in the shortest time possible, which creates a huge disincentive to conduct thorough diligence, beyond ensuring that the money actually comes in. This is why regulations to ensure that the process is followed are crucial in this case.
While a stronger regulatory framework has been on the agenda and delayed numerous times throughout the years in the UK, it is clear that times are changing due to global events and with a lot more open scrutiny and severe criticism. The bottom line is that companies are and will continue to be compelled to carry out more work, and it offers a chance to businesses such as ThirdFort.
An ID verification and then checking that it matches information in one of the largest identity databases have done the trick. If a bank statement was required, most professional service firms only required a fax or PDF copy.However, fake versions of these documents can easily be sourced on the Internet (I will not link to these websites below).
“Now all we need is more” Thornton-Berry said.”They must conduct exhaustive due diligence, which includes looking at bank statements to see what’s being transferred between banks and asking customers specific questions, as well as conducting diligence checks on gifts if the money is described as an offer.””This is a completely new type of process that’s been brought about because AML is increasing.”
While Thirdfort is currently focused on detecting fraud (as Thornton-Barry stated, it has been able to stop about a dozen fraudulent transactions for its clients), it is also designed to meet AML efficiency and conformity requirements and could become a major player when these processes are implemented more broadly, particularly for transactions involving large amounts of foreign currency.
“For both consumer and professional services, the threat of fraud as well as the necessity to comply is a huge expense,” Maxence Drummond, the principal at Breega and Breega, stated in an announcement. “Consumers need to be verified every when they purchase, and professionals who are subject to regulation are spending a significant amount of time making sure compliance and verification of customers.”
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