SymphonyAI acquires NetReveal to try and fight financial crime differently

SymphonyAI, an SAIGroup company backed by a $1 billion commitment from entrepreneur and philanthropist Dr. Romesh Wadhwani made a bold move and acquired NetReveal, BAE’s financial crimes software business. This acquisition offers a differentiated approach to the inertia and lack of creativity that has plagued the rules-based anti-financial crimes market for decades.

Only stupid criminals are caught by AML rules

HFS’ research over the years has shown extensive uptake of automation and artificial intelligence (AI) by financial services firms. It’s permeated across operations, IT, and various lines of business, helping to beat down manual tasks and make humans better at their jobs. Given an established baseline, HFS assumed that with the passage of the Anti-Money Laundering (AML) Act of 2020, which enhanced the permissibility of automation and AI technologies in identifying financial crimes, the crime fighters and risk mitigators in banks would be all in. We were right, but upon further investigation, we think they may be going after the wrong problem. Anti-financial-crime programs spend an inordinate amount of time attacking the problem of false positives—alerts spit out by their highly-tuned transaction monitoring systems (TMS) that, after diligent investigation, prove to be erroneous.

The root of the challenge is rules-based systems. Way back in the early 2000s, after the Patriot Act required the establishment of AML programs, firms had to define policies and procedures to recognize suspicious transactions and to ensure customers—individuals and entities—are who they say they are. The past two decades of technology-enabled financial crime-fighting have focused on trying to fight crime based on defined and understood rules based on defined and understood crime.

Sure, rules have evolved, and there has been great progress with name science (how to use data science to identify correct names more accurately in the correct context), dynamic entity resolution (data analysis to detect relationships), and all the good tech-enabled efforts to determine faster and more effectively if transaction monitoring alerts are real or false positives. But it’s a closed-loop system with the machine learning training data coming from the same data that caused the false positives to begin with. There will always be false positives with rules-based systems. And perhaps of greater concern is the changing nature of financial crime. As one Chief Compliance Officer recently shared, “Only stupid criminals are caught by rules.”

SymphonyAI tries something different — data-led AI plus rules

SymphonyAI is trying to attack fincrime based on finding hidden relationships in high-dimensional data—not from the output of rules-based systems. It’s spent the past couple of years investing, proving, and advocating for a data-led AI approach, applying AI to data across transactions, accounts, customers, and wallets to support the broad purview of fraud, AML, and KYC (“FRAML”) with its AyasdiAI Sensa platform.

Despite the potential for massive cost savings and increased transparency, breaking the status quo of the rules-based TMS-led approach is hard. The firm has led with its “augment” approach, running its Sensa platform alongside whatever existing TMS tooling clients have and typically showcasing a high caliber of accurate and very different results. Despite results, ripping and replacing TMS systems or continuing with an “and” proposition yielded the slow progress so typical of change in the financial services community.

So rather than continue to burn through cash and work lengthy sales cycles, SymphonyAI made a bold move and acquired NetReveal, BAE’s financial crimes software business, as a channel for its innovation. NetReveal is exactly the type of system SymphonyAI has been augmenting. SymphonyAI will join forces with NetReveal and its 200 global clients in a “working disruption model” to harmonize rules and models to identify and fight financial crime differently. This acquisition offers a differentiated approach to the inertia and lack of creativity that has plagued the anti-financial crimes market for decades.

The Bottom Line: The combination of NetReveal and SymphonyAI has exciting but unproven potential

HFS is not sure this will work, but we applaud the chutzpah. SymphonyAI is making it inordinately easy for NetReveal clients to approach fincrime prevention differently. Not all will bite, but some will. And should in an effort to drive a potentially more effective data-led approach to financial crime prevention. As financial crimes gets more sophisticated so, too, should your crime fighting approach.