Quantexa’s software chases Russian sanctions evaders

ByLance T. Lee

Mar 15, 2022

Hello and welcome to Protocol Enterprise! Today: how financial investigators hunt down people and companies trying to evade Russian sanctions, Intel goes to Europe, and only the most worthy can take on the Cloud Quest.

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How Network Analysis Detects Sanctions Fraudsters

The war in Ukraine has been devastating to human lives in that country and the surrounding region. But its ripple effects are felt around the world, including inside complex analytical systems used to determine exposure to financial fraud and money laundering.

Companies are scrambling to determine if they are at risk of financial fraud linked to the dozens of Russian nationals and oligarchs recently added to the US Treasury Department’s sanctions list, said Clark Frogley, head of financial crime solutions at Quantexa. Hint: They don’t usually use their real names.

The Treasury Department issued a alert on March 7 advising financial institutions to be on the lookout for efforts to evade US sanctions implemented in connection with Russia’s invasion of Ukraine.

  • As a result, a financial institution used Quantexa’s entity resolution technology to identify companies in Cyprus and the British Virgin Islands that were owned by a person on the sanctions list.
  • To identify them, the organization’s sanctions team performed a search for sanctioned entities in its customer database, identifying two of them.
  • The Quantexa system uncovered more clues when an entity linked to a sanctioned person attempted to make multiple international wire transfers using accounts in jurisdictions associated with Russian financial flows, but without a clear economic or business rationale.
  • In such cases, the banks involved have likely attempted to stop transactions, filed a suspicious activity report with regulators, and assessed whether further action should be taken.

Some traditional fraud detection approaches tend to focus on isolated incidents, but Quantexa’s approach uses network analysis to give context to individual actions taken by bad actors.

  • The system automatically generates a contextual network, a graph indicating the connective tissues linking the target entities to other operations or suspicious individuals.
  • Frogley described a typical scenario: “When you walk in and look at the exhibit, you see this person is not just a sanctioned person, this is the company our clients have been doing business with. [and] he owns 100% of this company. But guess what? He’s also the major shareholder in those other three companies that they did business with or those other two clients that we weren’t even looking for,” he said.

To enable entity resolution, the software – used by customers on-premises rather than in the cloud — quickly analyzes customer and transaction data, but also finds clues from other sources.

  • Data from SWIFT bank transfer messages is extracted to reveal account numbers and transaction types (think mortgage payments or payroll payments).
  • The system also uses third-party data sources such as private company data and risk data from Orbis and Bureau van Dijk’s RDC Grid.
  • But even the financial records data revealed by journalistic investigations into the Pandora leak and Panama papers can help provide corroborating evidence.
  • “It’s nothing you’re going to make a decision on,” Frogley said. “But it may be a reinforcing piece of information that this is an individual I am concerned about.”

In general, the company believes that providing more context to fraud detection can reduce false positives that catch the wrong people or stop legitimate transactions, annoying businesses and consumers.

  • Frogley said false positives are so accepted in the financial industry that they fail to stop the problems they are meant to stop.
  • “You don’t stop human trafficking. You don’t stop wildlife trafficking, you don’t stop money laundering. You’re just ticking the box from a regulatory standpoint to do what you’re required to do, but that doesn’t really get to the heart of the matter.

-Kate Kaye (E-mail | Twitter)

A MESSAGE FROM DATAIKU

Dataiku is the only AI platform that connects data and actors, empowering anyone to turn data into real business results, from the mundane to the moonshot. Because AI can do so many things, but there is no soul in the machine, only in front of it. Without you, it’s just data.

Learn more

Intel’s European adventure begins

Intel on Tuesday outlined the scope of its new investments in the EU, committing up to 80 billion euros ($87.7 billion) in funding to a new factory site in Germany, a new research facility and French development, additional manufacturing in Ireland – where it already operates a factory – and investments in Italy, Poland and Spain.

Unlike Intel, TSMC has been less eager to commit to a big new fab project in Europe. During the company’s latest earnings call, Chairman Mark Liu said the company was still evaluating a potential site. To make it worthwhile, TSMC likely also needs an ecosystem of businesses, talent, and supporting infrastructure, like it has in place in Taiwan.

But the Taiwanese government is very interested in Europe. He recently announced a commitment of $1.2 billion in technology investments in Lithuania, spread over a $200 million investment fund and $1 billion in loans for various projects.

— Max A. Cherney (E-mail | Twitter)

A MESSAGE FROM DATAIKU

Dataiku is the only AI platform that connects data and actors, empowering anyone to turn data into real business results, from the mundane to the moonshot. Because AI can do so many things, but there is no soul in the machine, only in front of it. Without you, it’s just data.

Learn more

Thanks for reading – see you tomorrow!



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