February 11, 2025 • 38 mins
How is AI revolutionizing financial crime detection? In this informative episode, host Nicole Jansen engages in a deep conversation with Peter Reynolds, the visionary CEO of ThetaRay. As an industry leader in AI-powered anti-money laundering, Peter and his team are on a mission to reshape financial crime detection. Dive into this episode to understand how AI is transforming the banking sector by accurately detecting illicit activities while ensuring financial inclusion in developing nations.
Peter provides a captivating exploration of Theta Ray’s cutting-edge solutions as he demystifies the complexities of AI technology for listeners who may not be tech-savvy. Discover how AI is utilized to streamline processes, reduce false positives in Anti-Money Laundering (AML) compliance, and enhance the way institutions handle financial transactions on a global scale. This episode will equip business leaders and entrepreneurs with the knowledge they need to embrace technology ethically and effectively.
Learn about real-world implications from TD Bank’s case and the inefficiencies of legacy systems and gain insights from Peter’s journey at the helm of an innovative tech company.
Key Takeaways
- Theta Ray’s mission in AI-powered anti-money laundering.
- How legacy systems are failing in detecting financial crimes.
- The benefits and future potential of AI in money laundering detection.
- Impacts and lessons learned from TD Bank’s recent financial sector fines.
- Simple explanations of how AI differentiates between normal and abnormal transactions.
- How small-to-medium businesses can benefit from AI technologies.
- Peter’s transition from law to fintech and leadership strategies.
- Regulatory considerations and AI’s integration in various markets.
- The evolution of AI blending cognitive understanding with machine learning.
- Country-specific challenges in implementing AI-driven solutions.
Podcast Highlights
0:00 - AI Revolution in Financial Crime Detection
6:17 - AI Enhances Financial Crime Detection
9:55 - Legacy Systems in Banking
12:36 - Bank Inaction Despite Resources
15:06 - Streamlining Remittances with AI Technology
20:38 - Navigating Regulatory Compliance in AI
23:08 - AI Reduces AML False Positives
24:30 - Human-AI Collaboration for Decision-Making
30:53 - African Business Expansion & Compliance
33:40 - Understanding Fraud Prevention Insights
36:00 - Expand Your Perspective
Favorite Quotes
Mission and Vision: "Our mission is to reshape the future of financial crime detection and AML." - Peter Reynolds
Legacy System Issues: "Banks have to assume something's bad all the time because they don't know it's good." - Peter Reynolds
AI's Potential: "AI is really good now at being able, in a very cost-effective way with great cloud computing software, to actually identify things like financial crimes." - Peter Reynolds
Episode Show Notes: https://leadersoftransformation.com/podcast/business/528-reshaping-financial-crime-detection-with-
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to the leaders of transformation podcast. The number one
show for business leaders and entrepreneurs passionate about uplifting
others and making a greater impact in the world. Now, here's
your host, transformational coach, speaker, and business
adviser, Nicole Jansen.
(00:21):
Why is AI the future of financial accountability? Our
guest today is Peter Reynolds. He is the CEO of Theta Ray
and the driving force behind the company's vision to become the industry
standard in AI powered anti money
laundering. And today, we're gonna talk about Theta Ray and how
they're using AI to transform the way banks, governments,
(00:43):
and Fintechs detect financial crimes while enabling
derisked financial digital inclusion in developing
countries. I know that sounds like a lot for some of you may not be
very techie, but we're gonna bring it down to layman's terms and what that means
for you as an entrepreneur, as a business leader, and how you can
apply this in your arena as well. So, Peter, welcome to
(01:04):
Leaders Transformation. We're glad to have you here today. Thank you very much. It's lovely
to be here, and I'm a great fan and lovely to get the chance to
be on it rather than just listen to it. Oh, well, thank you. And we
wanna do a shout out actually to Alejandra Castellanos
Barav, and she was a guest in, man, this
is like forever ago, episode 185. We're
(01:25):
on we're over 525 episodes. This is
probably gonna be somewhere near 530. So that was a long time
ago. And we were talking about emerging technology coming out of
Israel. And so we had a really great conversation and have stayed in
touch, and she's the one that reached out because she's now working with you and
what you're doing. And so thank you, LA, for the connection
(01:47):
to, to this. This is awesome. And when she was talking about what you
guys were up to and talking about I'm a Canadian. So
when you talk about TD Bank and the impact of,
you know, what's been going on with them in Canada, of course, my years perked
up, and I was like, oh, this is interesting. But this applies to everybody. And
so let's talk about, first of all, your mission and
(02:10):
why it is such an important topic right now. Must be talking
about Israeli tech to a Canadian is perfect for me with a a company that
came out of Israel and, has been backed by Israeli venture capital
firms like JVP. But recently, we did a round with Portage in
Toronto. So perfect audience. Look, our mission is let's put it
very bluntly. Our mission is to reshape the future of financial crime detection
(02:32):
and AML. Imagine a world where
everyone was guilty until proven innocent.
And as silly as that concept would be, that's exactly what's happening
in the world of AML. Banks have to assume
something's bad all the time because they don't know it's good.
And we'll talk about TD and some of the repercussions of when you get it
(02:54):
wrong. And under all of that is this legacy tech
problem where legacy tech has been deployed,
you know, over the years across all of the global banks to detect
financial crime and money laundering and all of these very important
things that you need to be able to detect, and that they can't do it.
And then just not very good at it. And it's it's not the
(03:16):
industry's fault. For many years, the legacy tech players were
the rules based players was what what there was. Luckily, now there's
been a revolution around AI that we'll talk about today and
with now companies like Federated are very good at detecting
financial crimes. So that's the mission we're on. And look, it is very important.
$3,100,000,000,000 of illicit funds went through the global
(03:39):
financial markets last year. That's $3,100,000,000,000
15% of that was attributed to terrorist financing. And we had
the biggest increase of 19% in human trafficking around the world,
a 115,000 known cases. So, you
know, if you wanna get involved in something that stops things like that,
then solving this problem is more than mission critical. Got it.
(04:02):
Wow. Well, so just for those of us who are not super
tech, when you say legacy tech, who represents or what represents
legacy tech? Is that kinda like the old traditional technology, which
platform and it's maybe outdated or, like yeah. Great
question. So, you know, the legacy tech platforms, what we would say is
rules based technology. So, you know, if there's a 100
(04:25):
payments of x amount to a certain person, flag
them and say maybe they're the wrong type of payment. I think what the
industry now needs is a different approach because rules based
legacy platforms, as I say, aren't very good at actually detecting what
financial crime is. And think about it, the enemy, so the people
doing financial crime, are using AI. They're using much
(04:47):
more sophisticated methods. So you've got banks that have
these big infrastructure that is very slow and hard
to move, and they need to move into much more dynamic,
much more risk based approaches to find this financial crime.
And when they get it wrong, there's 1,000,000 and 1,000,000 of dollars of fines.
But even if they live with it, there's a horrible experience. There's
(05:09):
no efficiencies in the banking industry when it comes to compliance, and these are the
things we look to address. Yeah. Got it. Well, so it's
very interesting when you talk about human trafficking or you talk about some of
these financial even these crimes. A lot of times on this
show, we've kind of been talking about the people that are front
lines helping out. You're in the behind the scenes. It was a guest
(05:31):
we had a number of years ago, Chris Wexler, and he was and is
identifying where online, how you can find the
perpetrators of, like, child pornography and all of that and
those that are perpetrating that. And so it's like we gotta go to the root
and to the source of figuring out how do we identify these.
And when you mentioned about, well, if a 100 transactions
(05:54):
are going to the same person, maybe it's something suspect. It's interesting because it's
like the questions. The question is the wrong question because, like,
I have clients who have paid me for years. So it's like you're asking
when we ask the wrong questions, we get the wrong answers. We don't get the
answers we need. And so it sounds like you're just needing to also ask different
questions about what's an identifier. So maybe talk a little bit about that. Yeah.
(06:17):
I think One of the beauties is that technologies has now
advanced in many ways. So there's sophistication, and it's an overused
buzzword, and it's a problem in the industry. Everyone talks about AI. But the
reality is that AI, take away it being a marketing tool,
AI is really good now at being able to, in a very cost effective
way with great cloud computing software, to actually
(06:38):
identify things like financial crimes. So the way we work is that you
understand, look at data, very quickly understand
normality. So normality in data, and then very
quickly say, oh, well, that isn't normal. And then when you have that
data that doesn't normal, is it something that you've seen before and what was
it? And is it something the bank's trying to look for? Once you
(07:00):
can do that, this will lead to the ability to say, okay. I don't need
to stop all of those 100 payments to Nicola because someone paid her a
100 times in 3 weeks because she's done some work. That is actually fine. But
actually, this one isn't. This payment doesn't look right. So this is one we think
you as a bank should look into. And the inefficiencies in the market are
huge, and we see that in the cost of payment. We see that in the
(07:22):
time it takes to do payments. We see that in how you can do payments
between different parts of the world. And so that's where AI will
come in, and we'll talk a bit today about actually the problem with the
industry as we spend the time looking for the bad. But actually, that's not what
you need to do. You need to actually by identifying the bad very accurately.
So if I if I've got a 100 payments and I can tell you 3
(07:43):
of them are bad, I'm actually telling you that 97 of them are good. And
if I can focus my time on the good and make sure we have a
great flow of funds around the world for the good but stop the bad, then
that's great for the financial services industry. And that's what Federated is on a mission
to do. Got it. Oh, I like that. I like that. It's like a counterfeit
and the authentic. How do you know what is authentic or what's
(08:03):
counterfeit? You need to know what the authentic is. So that's good. Let's talk about
TD Bank and their recent court case.
You wrote a very powerful op ed on that, and it was published
by Tech Bullion. We'll have a link in the show notes on that. But
you were talking about rethinking compliance. We've talked kind of alluded to it. But maybe
for some that maybe not aware of what happened with
(08:25):
TD Bank, maybe just kind of explain that and how that has created such
ripple effects through the financial sector in in Canada in particular.
Well, firstly, I will say that my op ed comes came from
a point of frustration, really, because, actually, I will say I
hope it causes ripple effects. It really should cause ripple
effects. Actually, the ripple effect should have started in the banks before
(08:47):
TD. Go back and look at Danske Bank got 1,000,000,000 of dollars.
And if you Google what happened to Danske Bank, there's some people who believe
that the CEO committed suicide on the back of, you know, being involved in
this huge scandal. And the ripple effect should have happened all along.
So, unfortunately, what we find sometimes is that while we look at it
and think that will obviously create change, it doesn't always create change. If you
(09:09):
read up about TD, there was some money laundering, you know, that they were found
guilty of, and there was a huge 1,000,000,000 of dollars in
a fine. And I think the ripple effect should be, and I
think is, is that if you get this wrong, the
fines are going to be huge, impactful, damaging. There
is the global financial markets work on trust. And when you lose that
(09:31):
trust, it takes a long time to get it back. And I think
that this has caused a big issue in the industry. Now,
unfortunately, sometimes you see that it takes longer for people to really
learn from the ripple effects. And what you'll find actually, I'll go back to my
point earlier, that might actually start creating in compliance more
of a no. So compliance and AML can become a limiting
(09:53):
factor. It can be a negative. No. We're not doing it. And when you have
big things like TD, and I won't go into details, but you talk about these
big banks who have legacy system that can't find financial crime, and then they get
fined. And then I think sometimes they keep going on those paths until there's a
real reason to change and actually look at ways of fixing it. But I think
what you'll find is that that will the industry now needs to
(10:15):
try and turn that around and actually say, sure. If you get it wrong,
there's massive fines, and it's actually not that hard of a problem to
solve. And as I said, the way technology has evolved over the last 20 years
makes it fairly simple to find financial crime in a way that the regulator
is gonna be very happy with. And actually, I would flip it around to
say, so if we do that, how can we grow and onboard our customers
(10:37):
easier? If we have the right controls and risk based approach
to anti money laundering, to financial crime, how can we serve
our customers better without the fear of fines? How can we open
new channels? And how can we reduce costs? Later today, I'll talk to you about
the problem with these legacy systems and hundreds of thousands of false
alerts means that you have many, many people spending their time looking
(10:59):
at false alerts, which actually, if you try and find one thing in a 1,000,
you don't find it anyway. So it becomes very, very inefficient. So I think
to me, going back to my point about if you can become very good as
a bank at saying I can identify the bad, then I can keep my
compliance teams and I can keep my regulator very happy that the program I
have in place will identify the bad. I can then tell you that the rest
(11:22):
of them are good. And by doing that, I can then spend my time growing
my business because I've got trust. I can work in different parts of the world.
And TD Bank or any big global bank is not a bank in
the country where they get fined. They're big global players, and they need to work
in multiple areas, and they need to facilitate, you know, global trade. It's
important. Cross border payments, remittance payments. You know, how small
(11:43):
businesses survive is if these banks have the right services
they can offer. So it's really important to get it right. And, yeah,
the ripple effects are huge, and everyone's very excited about
it. But I remember they were after Danske, and I think what the regulators
are starting to get frustrated about is that these aren't
hard problems to solve if you think about the improvement in technology.
(12:06):
If you and I were talking, obviously, not on a podcast, in
1995, we would have said, well, this is the best technology
there is, and we're doing the best job we can. And this is the risk
of working in that industry. Fast forward to where we are today, actually,
that's not the case. There is technology that can easily solve the
problem that's fairly easy to implement, as I'll talk about later. And so
(12:28):
you are gonna find regulators and the global markets very
unforgiving when these things happen, which is why your fines are
so huge. Well and they've got so much money. I mean, it's not like these
banks are struggling for resources to be able to put these things in
place. They are big behemoths that are
it takes a lot to maybe make those changes, but, I mean, they have
(12:50):
the resources to do it. And so it almost is
like laziness. It's a harsh word perhaps, but to stay
up on things. I mean, I think a lot of times, and we see that
across the board where it's like everybody's in status quo mode.
Right? It's like keep doing what we're doing until all of a sudden we can't
do that anymore because we get fined or
(13:12):
because there's such a loud it's like somebody yelling, you know,
crying wolf out there and saying, hey. This can't happen like
this, and this can't keep continuing to happen like this. Let's talk about
Theta Ray and your product, your actual service
that you provide and who you provide it for so we can
all understand who would be a good client for you.
(13:34):
And, I mean, we're talking about banks right now. We're talking financial sectors,
big organizations, institutions, and that's one thing. What about the
business owner, the entrepreneur, the leader of an organization
of less than a 1000 people? How do they apply this
in their business as well? Yeah. So firstly, there's something you said
I wanted to address when you said, they can afford to buy these
(13:57):
systems and they have the resources. We work with some of the world's biggest
banks, and there isn't a project we do that doesn't save you money. So it's
actually even worse than that. You sometimes think that the I can do the right
thing and I can improve everything and I can save money. And so sometimes you
wonder why people take so long to make those decisions. But, you know, we all
know some parts of the industry move slow and that's something that we live with.
Look, we work with a number of different sectors. We work in the
(14:20):
banking sector, and the banking sector would be very big global banks
that we work with around the world and people like Santander and
big banks like that. We also work with smaller banks, and we have
banks across Europe like ClearBank. We have banks in the Middle
East like ADCB and Mashreq Bank, and then we have banks
in the US and what have you. And in the US, we have a real
(14:42):
nice business growing in the regional banking space, which is something that's
really important. And so actually, what we do see in some of the smaller banks,
the need to actually make these decisions quicker from a cost saving point of view,
from a not wanting fine point of view. So we do see some great traction
there. And then we work with Fintechs. So they can be the biggest
Fintechs in the world like Payoneer, Travelex, or they can be Fintechs
(15:05):
that you would never have heard of. You know, we've got some amazing customers.
There's a customer in Cape Town in South Africa called ClickSend Now, which is a
remittance platform, whereas a South African, if you wanna remit money to
New York, you can pick a price and send money to New York. And they
they have the same AML financial crime
requirements as the bank. So our technology works there. And I think that's
(15:27):
one of the reasons why there's a big shift in that legacy tech
because if you are a, you know, a start up and you're just a remittance
platform, you might have 200 people. And the idea of spending 1,000,000
on a big system infrastructure isn't what you can do, but a cloud based, AI
based system that can very quickly get you to where you need to be across,
you talked about products, transaction monitoring, so monitoring all of
(15:48):
your transactions and finding financial crime, sanction screening,
which looks at both the customers that you're making payments to and the
transactions and make sure the people involved in the transactions are
allowed to be involved in transactions. And then we have something called customer risk analysis,
which is how when we onboard customers and when we do diligence
checks across time on these customers, which are the ones we need to focus on.
(16:10):
So where are my high risk customers and where are my customers where I
don't need Nicole to come to the branch every quarter to give me more documentation.
I'm looking at her transactions. AI tells me they're pretty safe. The regulator's
happy about how I'm doing it. Don't worry. These 5% of my
customers, actually, I wanna stop them working until they do actually give
me documentation that I can see is good. So that's the kind of range. And
(16:32):
when it comes to you talk about business owners, the lifeline of our economy, I
think where we get very, very involved is by supporting those
fintechs and those banks. You know, we work with many, many corporate
banks, SME banks, SME fintechs that are enabling the
payments around the world. We have customers that people are
maybe working jobs in the US and sending money back to families
(16:54):
in Nigeria. And if you don't have the right protection and controls
across those channels, they can't do it or the fees are too much. So very
much involved in the movement of any kind of transaction around the
world in a safe, cost effective, and regulatory approved
way. How did you get into this? Great question. So I
have been involved in very fast growing Israeli
(17:17):
tech for many years. I'm did my law degree in
London and kind of fell into the Fintech world. It got into
banking and then fell into a Fintech really before they were called Fintechs and
before it was called SAS. A great 10 years with a company called
Reval and had a great time there. And then got to meet first
JVP, one of the big investors in Israel who had some great
(17:39):
payment companies. They take a very sector based approach into what they do,
and I was very interested in those sectors. So I helped run a
global payment company called Funtech, which ended up now as
Finastro. It was gone through a few different phases. I helped
grow that and really learned my trade there and then worked in
some other companies, including a very big successful company called EarnX.
(18:01):
And then came to Federay originally as the chief revenue officer. And
then just over a year and a half ago became the CEO. And that
was where our kind of real entry into Canada was through
we raised some money with Portage. And our focus before then
has always been getting into the North American market as well as growing our
global market. So that's been my journey. It's been a great journey. A lot of
(18:23):
fun, a lot of ups and downs, but it's a great way of growing a
business. What is the biggest obstacle
in bringing this to you know, you can have a service
that people need, companies, organizations, institutions,
whoever need, and yet there's resistance to it.
Maybe you alluded to it about the cost, and it's actually a savings.
(18:45):
It's like reframing it for them. But, yeah, I'm just curious about
that, you know, in terms of bringing it to market and to who
needs it the most. What has been that biggest obstacle? What is
the biggest resistance? There's no single point. I think you
need phenomenal tech. Like, we're now in an arms race,
really, when it comes to tech and AI. So firstly, you need good
(19:08):
tech. The world's changed from kind of being sold on tech
to seeing the real output of tech. So job number 1 is that
we work very hard on having the best tech in the market that can do
a great job and it can actually get a lot of tech. Right? Sure. There's
lots of every single financial institution in the world has to do
what we're doing, and so there's lots of tech out there. So number 1, I
(19:29):
think you have to have a very compelling tech, and then you need a phenomenal
go to market. You need to look at the world in different ways. You need
to firstly look about Fintech business and how you get Fintechs. And
we have a phenomenal challenge. We have customers from
Fintechs across Australia, customers in Singapore,
Nigeria, Kenya, South Africa, Somalia. I'm
(19:51):
only stopping in a few places. My mind, I wasn't ready for the question, but
across Europe, in from UK, France, Spain, across I
think we have customers live in South Korea, in Japan, and then obviously
the US markets and South America and Canada. So
firstly, that go to market has to be relevant to all of
those different areas. And then the biggest, I think, obstacle
(20:13):
or or probably what we've turned into an advantage, but the biggest obstacle
you have is that these are very regulated businesses. So I talked to you
about working with Santander. You know, when you work with Santander, they have to be
regulated in each country by central banks, European Central Banks. The number
of regulators they go through is very big, and so they
expect their vendors to be okay with all of those different regulators. So
(20:35):
regulatory becomes something that you have to spend a lot of time on. So one
of the biggest focuses I have as the CEO is to make sure in all
those different areas take the US. We have a regulatory
advisory board that help us on how do we make sure
we grow our business in a way that the US regulator is gonna be okay
with because, of course, all of the banks gonna say, what are the regulators gonna
(20:56):
say? And when it comes to AI, things like model explainability, you know, all of
this becomes so very important. And we've worked with some very
big advisers in the area like k 2, who help us make sure
that this is what you'll need in the US, make sure we have it.
So that becomes a challenge that you have to spend a lot of time
on. But as I said earlier, I think if you get it right and you
(21:17):
can show a bank how happy the regulator is gonna be that you do it,
and this is what they're asking for, and here's the documentation, and here's the use
cases, and this is the other banks that are being used, then it becomes an
advantage. Yeah. I thank you for that because, I mean, every business has
a challenge. Right? Every business and then I love what you said there about turning
it in to that obstacle. Oftentimes, the biggest obstacle
(21:40):
is also the biggest opportunity when you learn how to
turn around. So one of the things on this show, leaders of transformation is about
creating transformation in the world. It's also even just transforming the way we see
ourselves, others, the way we see the world around us, the way we see opportunity.
So it's like a mindset around that. And it's overcoming
those obstacles as entrepreneurs to figure out how do we
(22:01):
solve that. I think one of the biggest questions that we can ask
ourselves or I guess the biggest mindset, one of the most important mindsets to
have is that I may not know this or we may not know this, but
we can figure it out. And we can bring the right people to figure it
out. So that's good. So what advancements, what changes
do you envision? Obviously, there's a lot of
(22:23):
changes in terms of AI, huge opportunity in
growth and all of that. But as we look into the future from where we
are now, what do you see? I hop on a lot about it.
This move in the industry, forget federate, forget anyone. There's
gonna be a massive move in the industry to go from legacy
technology to new modern technology. You can't have been
(22:46):
in the world and listened to your podcasts. You can't have missed
the advancement of technology that's happened and how there are
now better ways at solving problems. And it's across the board we see it.
So I think decades before you were using the best
system you could do, you'd spent this by the way, there's been a $100,000,000,000
spent on the best legacy technology. It just doesn't solve the problem. And
(23:08):
so I think you're gonna find that, but I think the move is gonna come
for a reason. So take we have a in I won't mention the bank, but
in the Americas, we have a global bank that's implemented in a country,
and they reduce by using AI, they
reduce the number of false positives by 500,000.
Now preparing for our call, people will give you different views on how
(23:30):
many cases a case manager in a bank can look at a day. So I
went to chat GTP and they said between 2040. So if you think
about there being 500,000 false alerts for
a bank to process, then someone can do 20 or
40, you can imagine the teams of people. So there's you
trying to send money around the world. It's stuck as a false positive
(23:52):
where someone's saying this could be financial crime. And more importantly, they
got approval from the central bank of the country to use the
models they were using so that those 500,000 disappeared. So no more
false positives. So no more people needing to process them. Suddenly, your
financial crime team can start working on things that are way more strategic. Go to
your instance of banks that are being fined. There's millions of more things they could
(24:14):
do than look at false positives. And like all of this, when you're looking at
500,000 false positives, you and I would probably agree it's pretty hard to
find the 4 pieces of financial crime in 500,000. Whereas, if you look
at 10, you can identify them. So I think that's one of the big changes
to AI. And I think where the world's going to, the race at the moment
is around the quality of AI. And and actually where I get
(24:37):
very excited with my team is looking at that blend of
human cognition and AI. Because at the moment, the problem with
AI is that, firstly, AI will sometimes can be very basic. But let's
assume you've got great AI. AI will definitely tell you that something's
wrong. But if you really want to make an impact with
AI, is you're gonna be able to make human decisions. So if you read a
(24:59):
lot of the research, some of the Teslas of this world, what they're trying to
do is they're trying to bring in cognitive understanding
into AI. So how can I make a decision, And how can I learn
from what humans want, what we've seen to make decisions in a
way that are explainable and very much understood by a regulated
institution and the regulator? So where we're thinking is and where we're
(25:21):
trying to get to is imagine if you could use AI to read a compliance
document. That compliance document might say, we're not so happy about
money coming from Syria at the moment into New York. I
make that up. I obviously made a no view of mine. But if you had
that document, AI could read that document and it could say, hey, Nicole,
you didn't ask me to find this, but this looks like money that's coming from
(25:43):
a place that your documentation says she shouldn't. Or, hey, we've seen
this before. I know you weren't asking me to look for the proceeds
of animal poaching in Africa. But we've seen this before,
and this doesn't look right. And so that's where we think the
next phase of the future of AI is AI that's gonna be able to have
that cognitive thought, and it's gonna be able to really actually become a
(26:05):
real value add and help the banking industry. So go back to
my point on you mentioned TD, but any big bank, if you've
got legacy system and rules, it is going to be exactly as
good as the rule you write. So if you write a rule that
says, if someone comes into a branch and deposits
$50,000, do not accept it. That's a great rule. But in
(26:27):
the hugely sophisticated way that money's moved right now,
you can't even claim that you'd be able to write every rule possible,
and that's going to my point of all these false positives because you're trying to
have such a broad rule set. Imagine if a bank like that had a solution
that says, hey. I know you weren't asking for this, but we have seen these
types of transactions before. I would definitely look at these. This is the
(26:49):
way the industry is gonna evolve, and it's that blending of cognitive and
artificial intelligence. Wow. I mean, it's fascinating
when you think about what is possible with AI. And I know there's a lot
of people afraid of their jobs, but if you wanna get a job and you're
just coming out of high school and going into college, you might wanna
look at AI and really understand and become
(27:10):
somebody who is well versed in it. There's such huge
opportunity, and I love the fact that it can free up our
time and our energy once it's implemented. Obviously, it needs to be managed,
but so that we can go and do more creative things and innovate in
other areas. And so I love that. I couldn't agree more. My daughter's a great
14 year old daughter. She's a great sports fan, and they often
(27:33):
sport eats into other things. And the agreement my daughter and I have is the
one club it won't get in the way of is she does coding. Because I've
said, listen. If sport doesn't work out, I look at the talent we
hire, and I get the absolute beauty of watching teams around the
world hire the best talent. You know, we're all looking for those a players.
And the talent we're having right now around the data engineering, the
(27:55):
data science, I mean, we have set up an office in Madrid recently
or some reason anymore. It's kind of 5 years, maybe more old. But one of
the reasons we did that is because we saw a great young
talent base of people with AI. We had banks in the region. We've
got a team out there that are smart, phenomenally good with
customers, a really young vibe of us, and it's totally
(28:17):
the skill set you need going into this world around data
engineering, data science is something that's gonna give you a lot of options
if you have. Yeah. Absolutely. As we wrap up, I have a question
about cryptocurrency, and we didn't talk about that
beforehand, you and I. But how does this play in
with cryptocurrency? A lot's gonna go on with crypto.
(28:40):
So I'm gonna try and avoid any political sides on
this conversation. But if you look at the world right now, you're gonna
see some people saying we should deregulate crypto and others saying we
should regulate it more. We work with a lot of companies in the crypto space,
often the money in and out of crypto. It probably doesn't surprise you that
as a regulator, as a central bank, as a bank, one of the things you're
(29:02):
looking at is the money going into crypto. And, of course, that's really, really
important and not turning that into something that's completely
unregulated. But then there are some people who say, hey. Let's deregulate it
and make it easier to use crypto. I think, ultimately, though, you're gonna
find with the society, the world we live in now is always gonna want
to know about certain criminal activities. So there isn't
(29:24):
a no one's trying to make money laundering easier. No one's trying to make
terrorist financing easier. No one's trying to make child trafficking
easier, human trafficking, poaching. And so there will always
be the regulators around the world who are looking to make sure that they
have the controls in place to understand. That would be my bet. So it's something
we've invested a lot in. We have customers in the crypto space. It's
(29:46):
a fantastic fascinating world of monitoring transactions in crypto
and understanding where the flow of funds is going. But you are right to
say it's something that's gonna be a huge error. If it became
completely a great regulate and if it became something that money could disappear
into, then you'd see that would be a weakness in the system. So that is
something that I don't think the world would wanna happen. Right. Last question.
(30:09):
Is there an area of the world that is,
like, countries that are I mean, maybe the western world is more receptive
to it. But is there an area of the world that is lagging behind
in this area? Like who's leading and who's lagging? It's a very
good question. And I think a couple of ways to answer that.
So you see a lot of innovation in payments across
(30:31):
Europe. And you often find where the biggest take up of the innovative solutions comes
when there's huge amounts of payment gateway. So solutions comes when there's
huge amounts of payment gateway. So if you take a European bank, you know, they're
all doing cross border payments, correspondent banking. This opens up a
lot of risk. So they spend a lot of money on innovation around compliance and
making sure they can grow their business, onboard customers, make sure the regulator is
(30:53):
happy. I think we have a very big business across Africa. I
think there's a lot of institutions in Africa that are looking to
make sure that they have got done the right things, to make sure that the
payments going through the organizations are the right kind of payments. I
think that you do have in the Western world, you
have very powerful regulators. So go back to my point, if you
(31:15):
didn't understand what the regulator expected of
the bank in or financial institution to carry out the
correct best practice AML and governance, then you'd
find it hard to get the technology implemented. So that's, I suppose,
something that I actually don't in this day and age, I see it as it's
there's no country that sees it as more critical. It's just something that every
(31:37):
country has because we've gone away from the country model. If you think about
now the new global citizen, the new global business. I'm
a fairly small company and we pay people across the world. We have
people in places where it's hard. We have developers in Eastern
Europe. We have people in Israel, Dubai,
Madrid, New York, London, and even us paying payments
(31:59):
around the world. We see how complex it is. So the bigger you are as
a company, the bigger the complexity. And I would definitely say any
organization that has a global or more than one country,
then doubles the problem they've got because suddenly I'm operating in 2 countries,
2 regulators, 2 different sets of rules. So no. I don't really
see that there's a country by country focus. I think it's everyone trying to get
(32:22):
to the same stage. Now there's countries that are gray listed. There's countries that the
regulators have said, hey, you're not doing enough. But once you're in
the system, it can spread around. So even if you've got a weakness in one
part of the world, if they've got a relationship here, you can see how you
need to look at the flow of funds going country to country. Yeah. Well, that's
exactly right because it's like what's the weakest link. That's good. So this
(32:44):
is a cloud based software, so people can
go on your website. So theta ray.com. We'll make
sure that's in the show notes as well. So they go on there,
and they can learn more about it. And so they're
utilizing something. So whether they're a small company or
a large financial institution, there's you have different offerings for
(33:06):
them. Maybe just to clarify that. Yeah. Sure. Banks,
fintechs, some government customers, transaction monitoring,
sanction screening, customer risk assessment. But also, if you go to the website, there's lots
of thought leadership pieces, webinars, you know, different views on how you
do things around the world. I think one of the biggest learnings I've always had
is that to become successful in industry is that you have to become a key
(33:28):
part of that industry. You'll be part of that industry ecosystem. So we spend a
lot of time making sure that we understand each ecosystem we're working in
and you got to be an advisor on a problem before you allow to solve
the problem. Yeah. Awesome. Well, Peter, thank you so much. This has
been insightful for me because I don't know a lot about this area. I
know it's important, but I don't know a lot about it. So thank you for
(33:51):
enlightening us today on the importance of it. And more
importantly, what you're doing about it, some of the technology that's available to
be able to solve these problems. And I love what you said in the beginning
is like this idea of guilty until proven innocent versus
there's 97%, let's say, of the transactions
that are good transactions, and we wanna be able to allow
(34:12):
those to move through because I think any business owner has had that
experience where there's been a delay at some point. I
remember years ago with her family business going and depositing
large sums of money. I was like 18, 19, 20 years
old. The bank manager didn't like me and didn't like us
because that was outside of her realm of comfort and
(34:34):
possibility. And so she wouldn't tell us, but she'd hold our checks
and she'd do all these things and it creates havoc to have that much power.
But I appreciate, obviously, you wanna make sure you know where it's coming from and
so forth. But we had the track record. But those kinds of things can create
havoc on business when their transactions cannot be
processed quickly or people can't be paid. Like you gotta pay your people, you
(34:56):
have payroll, so forth. This all has to happen. And so it's important.
It affects everybody. It's like, oh, this is all up here, and it's a big
bank issues, Fintech issues, but it does trickle
down to the everyday user. It does trickle down to the small business
person. So that's why I thought it would be a really good conversation to have
so that people can know what's going on behind the scenes. So thank you for
(35:18):
that. And you just hit the nail on the head. If you can take a
no industry of compliance, and you talked about TD
Bank, you can see why there's fear of getting it wrong and turn it into
business enablement and actually show how you doing it right means you can
grow and do more. You do that, and I think that's the
vision I have, and that's the mission I'm on. Yeah. I love it. Well, Peter,
(35:40):
thank you so much. Appreciate you. Appreciate what you're doing
and wading into these deep waters to make sure this all
happens effectively. I always say leaders of transformation
take action. So for listeners, for viewers out there, take
action on something you learn. Maybe it is just to educate yourself
on some of this. So just expand your mind. Sometimes we get so
(36:03):
narrow in our focus, so narrow in just doing our
day to day things to step out and to look at the world and have
a bigger perspective. It'll actually help you in being
more innovative and creative within your own space when you come back to
that narrow space where, you know, and niche where you're in. And so
just to have a bit of a global perspective and understand and
(36:24):
even just to envision what would it be like if your business, maybe your
business is only in one country or maybe 2 countries, but to
recognize what it would be like if you could actually do business around the world.
How would you do that? How would you do that? If you were to do
business, I mean, because we have some people that are listening that are just they're
in a local area, and then there are others that are global companies. And so
just kind of making it relevant to everyone is to look at that from a
(36:47):
perspective and saying, hey. What if? What would be possible? What would it
look like? And if you are an organization that this is something,
you know, go to theta ray.com and find out more about how you can
implement this system. If you're a Fintech, if you're in that
space, SaaS space, go and learn a little bit more about it
and how you can make sure that you can do what you do better
(37:10):
as well. We encourage you to do that. We'd love to hear your stories. We'd
love to hear how this has impacted you, and you can reach out to us,
of course, through our website, leaders of transformation.com. Social media, we're all
over social media. We'd love to hear from you. And if there's any topics that
maybe we haven't talked about that you'd like us to talk more about, you know
what? Post that in the comments as well and let us know. We'd love to
(37:30):
be able to bring that to you. We'll bring the experts just like we're
bringing Peter. We'll bring the experts, people that know and that are the best of
the best in the world. We'll bring them to you so you can learn from
them as well. So we encourage you to do that. Thanks for being here, and
we look forward to seeing you next week on another episode of the Leaders of
Transformation. Thank you for listening to the Leaders of Transformation
podcast with Nicole Jansen. If you're enjoying the show, please
(37:52):
click the follow or subscribe button, and leave a rating and review
wherever you listen to your podcasts. And remember to join us on
social and get connected. Together, we can make this
world a better place for everyone. We'll see you next time.
Welcome to the leaders of transformation podcast. The number one
show for business leaders and entrepreneurs passionate about uplifting
others and making a greater impact in the world. Now, here's
your host, transformational coach, speaker, and business
adviser, Nicole Jansen.
(00:21):
Why is AI the future of financial accountability? Our
guest today is Peter Reynolds. He is the CEO of Theta Ray
and the driving force behind the company's vision to become the industry
standard in AI powered anti money
laundering. And today, we're gonna talk about Theta Ray and how
they're using AI to transform the way banks, governments,
(00:43):
and Fintechs detect financial crimes while enabling
derisked financial digital inclusion in developing
countries. I know that sounds like a lot for some of you may not be
very techie, but we're gonna bring it down to layman's terms and what that means
for you as an entrepreneur, as a business leader, and how you can
apply this in your arena as well. So, Peter, welcome to
(01:04):
Leaders Transformation. We're glad to have you here today. Thank you very much. It's lovely
to be here, and I'm a great fan and lovely to get the chance to
be on it rather than just listen to it. Oh, well, thank you. And we
wanna do a shout out actually to Alejandra Castellanos
Barav, and she was a guest in, man, this
is like forever ago, episode 185. We're
(01:25):
on we're over 525 episodes. This is
probably gonna be somewhere near 530. So that was a long time
ago. And we were talking about emerging technology coming out of
Israel. And so we had a really great conversation and have stayed in
touch, and she's the one that reached out because she's now working with you and
what you're doing. And so thank you, LA, for the connection
(01:47):
to, to this. This is awesome. And when she was talking about what you
guys were up to and talking about I'm a Canadian. So
when you talk about TD Bank and the impact of,
you know, what's been going on with them in Canada, of course, my years perked
up, and I was like, oh, this is interesting. But this applies to everybody. And
so let's talk about, first of all, your mission and
(02:10):
why it is such an important topic right now. Must be talking
about Israeli tech to a Canadian is perfect for me with a a company that
came out of Israel and, has been backed by Israeli venture capital
firms like JVP. But recently, we did a round with Portage in
Toronto. So perfect audience. Look, our mission is let's put it
very bluntly. Our mission is to reshape the future of financial crime detection
(02:32):
and AML. Imagine a world where
everyone was guilty until proven innocent.
And as silly as that concept would be, that's exactly what's happening
in the world of AML. Banks have to assume
something's bad all the time because they don't know it's good.
And we'll talk about TD and some of the repercussions of when you get it
(02:54):
wrong. And under all of that is this legacy tech
problem where legacy tech has been deployed,
you know, over the years across all of the global banks to detect
financial crime and money laundering and all of these very important
things that you need to be able to detect, and that they can't do it.
And then just not very good at it. And it's it's not the
(03:16):
industry's fault. For many years, the legacy tech players were
the rules based players was what what there was. Luckily, now there's
been a revolution around AI that we'll talk about today and
with now companies like Federated are very good at detecting
financial crimes. So that's the mission we're on. And look, it is very important.
$3,100,000,000,000 of illicit funds went through the global
(03:39):
financial markets last year. That's $3,100,000,000,000
15% of that was attributed to terrorist financing. And we had
the biggest increase of 19% in human trafficking around the world,
a 115,000 known cases. So, you
know, if you wanna get involved in something that stops things like that,
then solving this problem is more than mission critical. Got it.
(04:02):
Wow. Well, so just for those of us who are not super
tech, when you say legacy tech, who represents or what represents
legacy tech? Is that kinda like the old traditional technology, which
platform and it's maybe outdated or, like yeah. Great
question. So, you know, the legacy tech platforms, what we would say is
rules based technology. So, you know, if there's a 100
(04:25):
payments of x amount to a certain person, flag
them and say maybe they're the wrong type of payment. I think what the
industry now needs is a different approach because rules based
legacy platforms, as I say, aren't very good at actually detecting what
financial crime is. And think about it, the enemy, so the people
doing financial crime, are using AI. They're using much
(04:47):
more sophisticated methods. So you've got banks that have
these big infrastructure that is very slow and hard
to move, and they need to move into much more dynamic,
much more risk based approaches to find this financial crime.
And when they get it wrong, there's 1,000,000 and 1,000,000 of dollars of fines.
But even if they live with it, there's a horrible experience. There's
(05:09):
no efficiencies in the banking industry when it comes to compliance, and these are the
things we look to address. Yeah. Got it. Well, so it's
very interesting when you talk about human trafficking or you talk about some of
these financial even these crimes. A lot of times on this
show, we've kind of been talking about the people that are front
lines helping out. You're in the behind the scenes. It was a guest
(05:31):
we had a number of years ago, Chris Wexler, and he was and is
identifying where online, how you can find the
perpetrators of, like, child pornography and all of that and
those that are perpetrating that. And so it's like we gotta go to the root
and to the source of figuring out how do we identify these.
And when you mentioned about, well, if a 100 transactions
(05:54):
are going to the same person, maybe it's something suspect. It's interesting because it's
like the questions. The question is the wrong question because, like,
I have clients who have paid me for years. So it's like you're asking
when we ask the wrong questions, we get the wrong answers. We don't get the
answers we need. And so it sounds like you're just needing to also ask different
questions about what's an identifier. So maybe talk a little bit about that. Yeah.
(06:17):
I think One of the beauties is that technologies has now
advanced in many ways. So there's sophistication, and it's an overused
buzzword, and it's a problem in the industry. Everyone talks about AI. But the
reality is that AI, take away it being a marketing tool,
AI is really good now at being able to, in a very cost effective
way with great cloud computing software, to actually
(06:38):
identify things like financial crimes. So the way we work is that you
understand, look at data, very quickly understand
normality. So normality in data, and then very
quickly say, oh, well, that isn't normal. And then when you have that
data that doesn't normal, is it something that you've seen before and what was
it? And is it something the bank's trying to look for? Once you
(07:00):
can do that, this will lead to the ability to say, okay. I don't need
to stop all of those 100 payments to Nicola because someone paid her a
100 times in 3 weeks because she's done some work. That is actually fine. But
actually, this one isn't. This payment doesn't look right. So this is one we think
you as a bank should look into. And the inefficiencies in the market are
huge, and we see that in the cost of payment. We see that in the
(07:22):
time it takes to do payments. We see that in how you can do payments
between different parts of the world. And so that's where AI will
come in, and we'll talk a bit today about actually the problem with the
industry as we spend the time looking for the bad. But actually, that's not what
you need to do. You need to actually by identifying the bad very accurately.
So if I if I've got a 100 payments and I can tell you 3
(07:43):
of them are bad, I'm actually telling you that 97 of them are good. And
if I can focus my time on the good and make sure we have a
great flow of funds around the world for the good but stop the bad, then
that's great for the financial services industry. And that's what Federated is on a mission
to do. Got it. Oh, I like that. I like that. It's like a counterfeit
and the authentic. How do you know what is authentic or what's
(08:03):
counterfeit? You need to know what the authentic is. So that's good. Let's talk about
TD Bank and their recent court case.
You wrote a very powerful op ed on that, and it was published
by Tech Bullion. We'll have a link in the show notes on that. But
you were talking about rethinking compliance. We've talked kind of alluded to it. But maybe
for some that maybe not aware of what happened with
(08:25):
TD Bank, maybe just kind of explain that and how that has created such
ripple effects through the financial sector in in Canada in particular.
Well, firstly, I will say that my op ed comes came from
a point of frustration, really, because, actually, I will say I
hope it causes ripple effects. It really should cause ripple
effects. Actually, the ripple effect should have started in the banks before
(08:47):
TD. Go back and look at Danske Bank got 1,000,000,000 of dollars.
And if you Google what happened to Danske Bank, there's some people who believe
that the CEO committed suicide on the back of, you know, being involved in
this huge scandal. And the ripple effect should have happened all along.
So, unfortunately, what we find sometimes is that while we look at it
and think that will obviously create change, it doesn't always create change. If you
(09:09):
read up about TD, there was some money laundering, you know, that they were found
guilty of, and there was a huge 1,000,000,000 of dollars in
a fine. And I think the ripple effect should be, and I
think is, is that if you get this wrong, the
fines are going to be huge, impactful, damaging. There
is the global financial markets work on trust. And when you lose that
(09:31):
trust, it takes a long time to get it back. And I think
that this has caused a big issue in the industry. Now,
unfortunately, sometimes you see that it takes longer for people to really
learn from the ripple effects. And what you'll find actually, I'll go back to my
point earlier, that might actually start creating in compliance more
of a no. So compliance and AML can become a limiting
(09:53):
factor. It can be a negative. No. We're not doing it. And when you have
big things like TD, and I won't go into details, but you talk about these
big banks who have legacy system that can't find financial crime, and then they get
fined. And then I think sometimes they keep going on those paths until there's a
real reason to change and actually look at ways of fixing it. But I think
what you'll find is that that will the industry now needs to
(10:15):
try and turn that around and actually say, sure. If you get it wrong,
there's massive fines, and it's actually not that hard of a problem to
solve. And as I said, the way technology has evolved over the last 20 years
makes it fairly simple to find financial crime in a way that the regulator
is gonna be very happy with. And actually, I would flip it around to
say, so if we do that, how can we grow and onboard our customers
(10:37):
easier? If we have the right controls and risk based approach
to anti money laundering, to financial crime, how can we serve
our customers better without the fear of fines? How can we open
new channels? And how can we reduce costs? Later today, I'll talk to you about
the problem with these legacy systems and hundreds of thousands of false
alerts means that you have many, many people spending their time looking
(10:59):
at false alerts, which actually, if you try and find one thing in a 1,000,
you don't find it anyway. So it becomes very, very inefficient. So I think
to me, going back to my point about if you can become very good as
a bank at saying I can identify the bad, then I can keep my
compliance teams and I can keep my regulator very happy that the program I
have in place will identify the bad. I can then tell you that the rest
(11:22):
of them are good. And by doing that, I can then spend my time growing
my business because I've got trust. I can work in different parts of the world.
And TD Bank or any big global bank is not a bank in
the country where they get fined. They're big global players, and they need to work
in multiple areas, and they need to facilitate, you know, global trade. It's
important. Cross border payments, remittance payments. You know, how small
(11:43):
businesses survive is if these banks have the right services
they can offer. So it's really important to get it right. And, yeah,
the ripple effects are huge, and everyone's very excited about
it. But I remember they were after Danske, and I think what the regulators
are starting to get frustrated about is that these aren't
hard problems to solve if you think about the improvement in technology.
(12:06):
If you and I were talking, obviously, not on a podcast, in
1995, we would have said, well, this is the best technology
there is, and we're doing the best job we can. And this is the risk
of working in that industry. Fast forward to where we are today, actually,
that's not the case. There is technology that can easily solve the
problem that's fairly easy to implement, as I'll talk about later. And so
(12:28):
you are gonna find regulators and the global markets very
unforgiving when these things happen, which is why your fines are
so huge. Well and they've got so much money. I mean, it's not like these
banks are struggling for resources to be able to put these things in
place. They are big behemoths that are
it takes a lot to maybe make those changes, but, I mean, they have
(12:50):
the resources to do it. And so it almost is
like laziness. It's a harsh word perhaps, but to stay
up on things. I mean, I think a lot of times, and we see that
across the board where it's like everybody's in status quo mode.
Right? It's like keep doing what we're doing until all of a sudden we can't
do that anymore because we get fined or
(13:12):
because there's such a loud it's like somebody yelling, you know,
crying wolf out there and saying, hey. This can't happen like
this, and this can't keep continuing to happen like this. Let's talk about
Theta Ray and your product, your actual service
that you provide and who you provide it for so we can
all understand who would be a good client for you.
(13:34):
And, I mean, we're talking about banks right now. We're talking financial sectors,
big organizations, institutions, and that's one thing. What about the
business owner, the entrepreneur, the leader of an organization
of less than a 1000 people? How do they apply this
in their business as well? Yeah. So firstly, there's something you said
I wanted to address when you said, they can afford to buy these
(13:57):
systems and they have the resources. We work with some of the world's biggest
banks, and there isn't a project we do that doesn't save you money. So it's
actually even worse than that. You sometimes think that the I can do the right
thing and I can improve everything and I can save money. And so sometimes you
wonder why people take so long to make those decisions. But, you know, we all
know some parts of the industry move slow and that's something that we live with.
Look, we work with a number of different sectors. We work in the
(14:20):
banking sector, and the banking sector would be very big global banks
that we work with around the world and people like Santander and
big banks like that. We also work with smaller banks, and we have
banks across Europe like ClearBank. We have banks in the Middle
East like ADCB and Mashreq Bank, and then we have banks
in the US and what have you. And in the US, we have a real
(14:42):
nice business growing in the regional banking space, which is something that's
really important. And so actually, what we do see in some of the smaller banks,
the need to actually make these decisions quicker from a cost saving point of view,
from a not wanting fine point of view. So we do see some great traction
there. And then we work with Fintechs. So they can be the biggest
Fintechs in the world like Payoneer, Travelex, or they can be Fintechs
(15:05):
that you would never have heard of. You know, we've got some amazing customers.
There's a customer in Cape Town in South Africa called ClickSend Now, which is a
remittance platform, whereas a South African, if you wanna remit money to
New York, you can pick a price and send money to New York. And they
they have the same AML financial crime
requirements as the bank. So our technology works there. And I think that's
(15:27):
one of the reasons why there's a big shift in that legacy tech
because if you are a, you know, a start up and you're just a remittance
platform, you might have 200 people. And the idea of spending 1,000,000
on a big system infrastructure isn't what you can do, but a cloud based, AI
based system that can very quickly get you to where you need to be across,
you talked about products, transaction monitoring, so monitoring all of
(15:48):
your transactions and finding financial crime, sanction screening,
which looks at both the customers that you're making payments to and the
transactions and make sure the people involved in the transactions are
allowed to be involved in transactions. And then we have something called customer risk analysis,
which is how when we onboard customers and when we do diligence
checks across time on these customers, which are the ones we need to focus on.
(16:10):
So where are my high risk customers and where are my customers where I
don't need Nicole to come to the branch every quarter to give me more documentation.
I'm looking at her transactions. AI tells me they're pretty safe. The regulator's
happy about how I'm doing it. Don't worry. These 5% of my
customers, actually, I wanna stop them working until they do actually give
me documentation that I can see is good. So that's the kind of range. And
(16:32):
when it comes to you talk about business owners, the lifeline of our economy, I
think where we get very, very involved is by supporting those
fintechs and those banks. You know, we work with many, many corporate
banks, SME banks, SME fintechs that are enabling the
payments around the world. We have customers that people are
maybe working jobs in the US and sending money back to families
(16:54):
in Nigeria. And if you don't have the right protection and controls
across those channels, they can't do it or the fees are too much. So very
much involved in the movement of any kind of transaction around the
world in a safe, cost effective, and regulatory approved
way. How did you get into this? Great question. So I
have been involved in very fast growing Israeli
(17:17):
tech for many years. I'm did my law degree in
London and kind of fell into the Fintech world. It got into
banking and then fell into a Fintech really before they were called Fintechs and
before it was called SAS. A great 10 years with a company called
Reval and had a great time there. And then got to meet first
JVP, one of the big investors in Israel who had some great
(17:39):
payment companies. They take a very sector based approach into what they do,
and I was very interested in those sectors. So I helped run a
global payment company called Funtech, which ended up now as
Finastro. It was gone through a few different phases. I helped
grow that and really learned my trade there and then worked in
some other companies, including a very big successful company called EarnX.
(18:01):
And then came to Federay originally as the chief revenue officer. And
then just over a year and a half ago became the CEO. And that
was where our kind of real entry into Canada was through
we raised some money with Portage. And our focus before then
has always been getting into the North American market as well as growing our
global market. So that's been my journey. It's been a great journey. A lot of
(18:23):
fun, a lot of ups and downs, but it's a great way of growing a
business. What is the biggest obstacle
in bringing this to you know, you can have a service
that people need, companies, organizations, institutions,
whoever need, and yet there's resistance to it.
Maybe you alluded to it about the cost, and it's actually a savings.
(18:45):
It's like reframing it for them. But, yeah, I'm just curious about
that, you know, in terms of bringing it to market and to who
needs it the most. What has been that biggest obstacle? What is
the biggest resistance? There's no single point. I think you
need phenomenal tech. Like, we're now in an arms race,
really, when it comes to tech and AI. So firstly, you need good
(19:08):
tech. The world's changed from kind of being sold on tech
to seeing the real output of tech. So job number 1 is that
we work very hard on having the best tech in the market that can do
a great job and it can actually get a lot of tech. Right? Sure. There's
lots of every single financial institution in the world has to do
what we're doing, and so there's lots of tech out there. So number 1, I
(19:29):
think you have to have a very compelling tech, and then you need a phenomenal
go to market. You need to look at the world in different ways. You need
to firstly look about Fintech business and how you get Fintechs. And
we have a phenomenal challenge. We have customers from
Fintechs across Australia, customers in Singapore,
Nigeria, Kenya, South Africa, Somalia. I'm
(19:51):
only stopping in a few places. My mind, I wasn't ready for the question, but
across Europe, in from UK, France, Spain, across I
think we have customers live in South Korea, in Japan, and then obviously
the US markets and South America and Canada. So
firstly, that go to market has to be relevant to all of
those different areas. And then the biggest, I think, obstacle
(20:13):
or or probably what we've turned into an advantage, but the biggest obstacle
you have is that these are very regulated businesses. So I talked to you
about working with Santander. You know, when you work with Santander, they have to be
regulated in each country by central banks, European Central Banks. The number
of regulators they go through is very big, and so they
expect their vendors to be okay with all of those different regulators. So
(20:35):
regulatory becomes something that you have to spend a lot of time on. So one
of the biggest focuses I have as the CEO is to make sure in all
those different areas take the US. We have a regulatory
advisory board that help us on how do we make sure
we grow our business in a way that the US regulator is gonna be okay
with because, of course, all of the banks gonna say, what are the regulators gonna
(20:56):
say? And when it comes to AI, things like model explainability, you know, all of
this becomes so very important. And we've worked with some very
big advisers in the area like k 2, who help us make sure
that this is what you'll need in the US, make sure we have it.
So that becomes a challenge that you have to spend a lot of time
on. But as I said earlier, I think if you get it right and you
(21:17):
can show a bank how happy the regulator is gonna be that you do it,
and this is what they're asking for, and here's the documentation, and here's the use
cases, and this is the other banks that are being used, then it becomes an
advantage. Yeah. I thank you for that because, I mean, every business has
a challenge. Right? Every business and then I love what you said there about turning
it in to that obstacle. Oftentimes, the biggest obstacle
(21:40):
is also the biggest opportunity when you learn how to
turn around. So one of the things on this show, leaders of transformation is about
creating transformation in the world. It's also even just transforming the way we see
ourselves, others, the way we see the world around us, the way we see opportunity.
So it's like a mindset around that. And it's overcoming
those obstacles as entrepreneurs to figure out how do we
(22:01):
solve that. I think one of the biggest questions that we can ask
ourselves or I guess the biggest mindset, one of the most important mindsets to
have is that I may not know this or we may not know this, but
we can figure it out. And we can bring the right people to figure it
out. So that's good. So what advancements, what changes
do you envision? Obviously, there's a lot of
(22:23):
changes in terms of AI, huge opportunity in
growth and all of that. But as we look into the future from where we
are now, what do you see? I hop on a lot about it.
This move in the industry, forget federate, forget anyone. There's
gonna be a massive move in the industry to go from legacy
technology to new modern technology. You can't have been
(22:46):
in the world and listened to your podcasts. You can't have missed
the advancement of technology that's happened and how there are
now better ways at solving problems. And it's across the board we see it.
So I think decades before you were using the best
system you could do, you'd spent this by the way, there's been a $100,000,000,000
spent on the best legacy technology. It just doesn't solve the problem. And
(23:08):
so I think you're gonna find that, but I think the move is gonna come
for a reason. So take we have a in I won't mention the bank, but
in the Americas, we have a global bank that's implemented in a country,
and they reduce by using AI, they
reduce the number of false positives by 500,000.
Now preparing for our call, people will give you different views on how
(23:30):
many cases a case manager in a bank can look at a day. So I
went to chat GTP and they said between 2040. So if you think
about there being 500,000 false alerts for
a bank to process, then someone can do 20 or
40, you can imagine the teams of people. So there's you
trying to send money around the world. It's stuck as a false positive
(23:52):
where someone's saying this could be financial crime. And more importantly, they
got approval from the central bank of the country to use the
models they were using so that those 500,000 disappeared. So no more
false positives. So no more people needing to process them. Suddenly, your
financial crime team can start working on things that are way more strategic. Go to
your instance of banks that are being fined. There's millions of more things they could
(24:14):
do than look at false positives. And like all of this, when you're looking at
500,000 false positives, you and I would probably agree it's pretty hard to
find the 4 pieces of financial crime in 500,000. Whereas, if you look
at 10, you can identify them. So I think that's one of the big changes
to AI. And I think where the world's going to, the race at the moment
is around the quality of AI. And and actually where I get
(24:37):
very excited with my team is looking at that blend of
human cognition and AI. Because at the moment, the problem with
AI is that, firstly, AI will sometimes can be very basic. But let's
assume you've got great AI. AI will definitely tell you that something's
wrong. But if you really want to make an impact with
AI, is you're gonna be able to make human decisions. So if you read a
(24:59):
lot of the research, some of the Teslas of this world, what they're trying to
do is they're trying to bring in cognitive understanding
into AI. So how can I make a decision, And how can I learn
from what humans want, what we've seen to make decisions in a
way that are explainable and very much understood by a regulated
institution and the regulator? So where we're thinking is and where we're
(25:21):
trying to get to is imagine if you could use AI to read a compliance
document. That compliance document might say, we're not so happy about
money coming from Syria at the moment into New York. I
make that up. I obviously made a no view of mine. But if you had
that document, AI could read that document and it could say, hey, Nicole,
you didn't ask me to find this, but this looks like money that's coming from
(25:43):
a place that your documentation says she shouldn't. Or, hey, we've seen
this before. I know you weren't asking me to look for the proceeds
of animal poaching in Africa. But we've seen this before,
and this doesn't look right. And so that's where we think the
next phase of the future of AI is AI that's gonna be able to have
that cognitive thought, and it's gonna be able to really actually become a
(26:05):
real value add and help the banking industry. So go back to
my point on you mentioned TD, but any big bank, if you've
got legacy system and rules, it is going to be exactly as
good as the rule you write. So if you write a rule that
says, if someone comes into a branch and deposits
$50,000, do not accept it. That's a great rule. But in
(26:27):
the hugely sophisticated way that money's moved right now,
you can't even claim that you'd be able to write every rule possible,
and that's going to my point of all these false positives because you're trying to
have such a broad rule set. Imagine if a bank like that had a solution
that says, hey. I know you weren't asking for this, but we have seen these
types of transactions before. I would definitely look at these. This is the
(26:49):
way the industry is gonna evolve, and it's that blending of cognitive and
artificial intelligence. Wow. I mean, it's fascinating
when you think about what is possible with AI. And I know there's a lot
of people afraid of their jobs, but if you wanna get a job and you're
just coming out of high school and going into college, you might wanna
look at AI and really understand and become
(27:10):
somebody who is well versed in it. There's such huge
opportunity, and I love the fact that it can free up our
time and our energy once it's implemented. Obviously, it needs to be managed,
but so that we can go and do more creative things and innovate in
other areas. And so I love that. I couldn't agree more. My daughter's a great
14 year old daughter. She's a great sports fan, and they often
(27:33):
sport eats into other things. And the agreement my daughter and I have is the
one club it won't get in the way of is she does coding. Because I've
said, listen. If sport doesn't work out, I look at the talent we
hire, and I get the absolute beauty of watching teams around the
world hire the best talent. You know, we're all looking for those a players.
And the talent we're having right now around the data engineering, the
(27:55):
data science, I mean, we have set up an office in Madrid recently
or some reason anymore. It's kind of 5 years, maybe more old. But one of
the reasons we did that is because we saw a great young
talent base of people with AI. We had banks in the region. We've
got a team out there that are smart, phenomenally good with
customers, a really young vibe of us, and it's totally
(28:17):
the skill set you need going into this world around data
engineering, data science is something that's gonna give you a lot of options
if you have. Yeah. Absolutely. As we wrap up, I have a question
about cryptocurrency, and we didn't talk about that
beforehand, you and I. But how does this play in
with cryptocurrency? A lot's gonna go on with crypto.
(28:40):
So I'm gonna try and avoid any political sides on
this conversation. But if you look at the world right now, you're gonna
see some people saying we should deregulate crypto and others saying we
should regulate it more. We work with a lot of companies in the crypto space,
often the money in and out of crypto. It probably doesn't surprise you that
as a regulator, as a central bank, as a bank, one of the things you're
(29:02):
looking at is the money going into crypto. And, of course, that's really, really
important and not turning that into something that's completely
unregulated. But then there are some people who say, hey. Let's deregulate it
and make it easier to use crypto. I think, ultimately, though, you're gonna
find with the society, the world we live in now is always gonna want
to know about certain criminal activities. So there isn't
(29:24):
a no one's trying to make money laundering easier. No one's trying to make
terrorist financing easier. No one's trying to make child trafficking
easier, human trafficking, poaching. And so there will always
be the regulators around the world who are looking to make sure that they
have the controls in place to understand. That would be my bet. So it's something
we've invested a lot in. We have customers in the crypto space. It's
(29:46):
a fantastic fascinating world of monitoring transactions in crypto
and understanding where the flow of funds is going. But you are right to
say it's something that's gonna be a huge error. If it became
completely a great regulate and if it became something that money could disappear
into, then you'd see that would be a weakness in the system. So that is
something that I don't think the world would wanna happen. Right. Last question.
(30:09):
Is there an area of the world that is,
like, countries that are I mean, maybe the western world is more receptive
to it. But is there an area of the world that is lagging behind
in this area? Like who's leading and who's lagging? It's a very
good question. And I think a couple of ways to answer that.
So you see a lot of innovation in payments across
(30:31):
Europe. And you often find where the biggest take up of the innovative solutions comes
when there's huge amounts of payment gateway. So solutions comes when there's
huge amounts of payment gateway. So if you take a European bank, you know, they're
all doing cross border payments, correspondent banking. This opens up a
lot of risk. So they spend a lot of money on innovation around compliance and
making sure they can grow their business, onboard customers, make sure the regulator is
(30:53):
happy. I think we have a very big business across Africa. I
think there's a lot of institutions in Africa that are looking to
make sure that they have got done the right things, to make sure that the
payments going through the organizations are the right kind of payments. I
think that you do have in the Western world, you
have very powerful regulators. So go back to my point, if you
(31:15):
didn't understand what the regulator expected of
the bank in or financial institution to carry out the
correct best practice AML and governance, then you'd
find it hard to get the technology implemented. So that's, I suppose,
something that I actually don't in this day and age, I see it as it's
there's no country that sees it as more critical. It's just something that every
(31:37):
country has because we've gone away from the country model. If you think about
now the new global citizen, the new global business. I'm
a fairly small company and we pay people across the world. We have
people in places where it's hard. We have developers in Eastern
Europe. We have people in Israel, Dubai,
Madrid, New York, London, and even us paying payments
(31:59):
around the world. We see how complex it is. So the bigger you are as
a company, the bigger the complexity. And I would definitely say any
organization that has a global or more than one country,
then doubles the problem they've got because suddenly I'm operating in 2 countries,
2 regulators, 2 different sets of rules. So no. I don't really
see that there's a country by country focus. I think it's everyone trying to get
(32:22):
to the same stage. Now there's countries that are gray listed. There's countries that the
regulators have said, hey, you're not doing enough. But once you're in
the system, it can spread around. So even if you've got a weakness in one
part of the world, if they've got a relationship here, you can see how you
need to look at the flow of funds going country to country. Yeah. Well, that's
exactly right because it's like what's the weakest link. That's good. So this
(32:44):
is a cloud based software, so people can
go on your website. So theta ray.com. We'll make
sure that's in the show notes as well. So they go on there,
and they can learn more about it. And so they're
utilizing something. So whether they're a small company or
a large financial institution, there's you have different offerings for
(33:06):
them. Maybe just to clarify that. Yeah. Sure. Banks,
fintechs, some government customers, transaction monitoring,
sanction screening, customer risk assessment. But also, if you go to the website, there's lots
of thought leadership pieces, webinars, you know, different views on how you
do things around the world. I think one of the biggest learnings I've always had
is that to become successful in industry is that you have to become a key
(33:28):
part of that industry. You'll be part of that industry ecosystem. So we spend a
lot of time making sure that we understand each ecosystem we're working in
and you got to be an advisor on a problem before you allow to solve
the problem. Yeah. Awesome. Well, Peter, thank you so much. This has
been insightful for me because I don't know a lot about this area. I
know it's important, but I don't know a lot about it. So thank you for
(33:51):
enlightening us today on the importance of it. And more
importantly, what you're doing about it, some of the technology that's available to
be able to solve these problems. And I love what you said in the beginning
is like this idea of guilty until proven innocent versus
there's 97%, let's say, of the transactions
that are good transactions, and we wanna be able to allow
(34:12):
those to move through because I think any business owner has had that
experience where there's been a delay at some point. I
remember years ago with her family business going and depositing
large sums of money. I was like 18, 19, 20 years
old. The bank manager didn't like me and didn't like us
because that was outside of her realm of comfort and
(34:34):
possibility. And so she wouldn't tell us, but she'd hold our checks
and she'd do all these things and it creates havoc to have that much power.
But I appreciate, obviously, you wanna make sure you know where it's coming from and
so forth. But we had the track record. But those kinds of things can create
havoc on business when their transactions cannot be
processed quickly or people can't be paid. Like you gotta pay your people, you
(34:56):
have payroll, so forth. This all has to happen. And so it's important.
It affects everybody. It's like, oh, this is all up here, and it's a big
bank issues, Fintech issues, but it does trickle
down to the everyday user. It does trickle down to the small business
person. So that's why I thought it would be a really good conversation to have
so that people can know what's going on behind the scenes. So thank you for
(35:18):
that. And you just hit the nail on the head. If you can take a
no industry of compliance, and you talked about TD
Bank, you can see why there's fear of getting it wrong and turn it into
business enablement and actually show how you doing it right means you can
grow and do more. You do that, and I think that's the
vision I have, and that's the mission I'm on. Yeah. I love it. Well, Peter,
(35:40):
thank you so much. Appreciate you. Appreciate what you're doing
and wading into these deep waters to make sure this all
happens effectively. I always say leaders of transformation
take action. So for listeners, for viewers out there, take
action on something you learn. Maybe it is just to educate yourself
on some of this. So just expand your mind. Sometimes we get so
(36:03):
narrow in our focus, so narrow in just doing our
day to day things to step out and to look at the world and have
a bigger perspective. It'll actually help you in being
more innovative and creative within your own space when you come back to
that narrow space where, you know, and niche where you're in. And so
just to have a bit of a global perspective and understand and
(36:24):
even just to envision what would it be like if your business, maybe your
business is only in one country or maybe 2 countries, but to
recognize what it would be like if you could actually do business around the world.
How would you do that? How would you do that? If you were to do
business, I mean, because we have some people that are listening that are just they're
in a local area, and then there are others that are global companies. And so
just kind of making it relevant to everyone is to look at that from a
(36:47):
perspective and saying, hey. What if? What would be possible? What would it
look like? And if you are an organization that this is something,
you know, go to theta ray.com and find out more about how you can
implement this system. If you're a Fintech, if you're in that
space, SaaS space, go and learn a little bit more about it
and how you can make sure that you can do what you do better
(37:10):
as well. We encourage you to do that. We'd love to hear your stories. We'd
love to hear how this has impacted you, and you can reach out to us,
of course, through our website, leaders of transformation.com. Social media, we're all
over social media. We'd love to hear from you. And if there's any topics that
maybe we haven't talked about that you'd like us to talk more about, you know
what? Post that in the comments as well and let us know. We'd love to
(37:30):
be able to bring that to you. We'll bring the experts just like we're
bringing Peter. We'll bring the experts, people that know and that are the best of
the best in the world. We'll bring them to you so you can learn from
them as well. So we encourage you to do that. Thanks for being here, and
we look forward to seeing you next week on another episode of the Leaders of
Transformation. Thank you for listening to the Leaders of Transformation
podcast with Nicole Jansen. If you're enjoying the show, please
(37:52):
click the follow or subscribe button, and leave a rating and review
wherever you listen to your podcasts. And remember to join us on
social and get connected. Together, we can make this
world a better place for everyone. We'll see you next time.
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