Thirdfort, which has pioneered anti-money laundering (AML) and know your customer (KYC) technology for the legal sector, has bagged £15m ($19.67m) in a Series A funding round. In the wake of sanctions against Russian businesses and individuals, such tech seems all the more relevant.
The fundraise was led by Breega, a pan-European VC fund. Element Ventures, a London-based fund also took part, along with founders of businesses including ComplyAdvantage, Tessian, Fenergo, R3, Funding Circle and Fidel.
Thirdfort is unusual in that its launch idea was to help lawyers avoid fraud by handling the money in property transactions, with the AML and KYC capabilities added on. However, after going through the Mishcon de Reya MDR LAB they realised that many firms liked to hold onto their clients’ cash – despite the risk – as it gave them additional bank interest. So, instead they doubled down on the AML and KYC tech and improved upon it.
The unplanned change has turned out to be the best thing they ever did, as there is a major problem – in the UK, and around the world – with lawyers, especially property lawyers, getting dragged into very risky territory due to unscrupulous clients and their equally dodgy advisors, e.g. seemingly respectable accountants who are in fact quite crooked, who seek to ‘game the system’ and make a mockery of money laundering rules by then using lawyers not just for money laundering, but ‘reputation washing’ as well.
I.e. if a dodgy client and their crooked intermediaries can convince a well-known law firm to handle their deal, they not only get to launder their cash, but the law firm’s assistance gives them a ‘halo of respectability’, which they can exploit for future dodgy deals and to win the assistance of other lawyers. In short, it’s a huge chain of deceit, and every time a lawyer falls for it they help to strengthen the apparently clean image of the client.
As Olly Thornton-Berry, co-founder of the UK company, told Artificial Lawyer, they’ve developed several capabilities to help prevent fraud and money laundering, and that open banking in the UK has been pivotal. The access to the financial data, and the automated approach they take to analysing income data, as well as cross-referencing this with the information submitted in digital forms, allows them to quickly come up with a recommendation on whether the client is the real deal, or is in fact likely masking their true intentions.
Thornton-Berry noted that they started off with small to medium size law firms, which do a lot of property work, but soon found that a much wider range of clients needed their help.
‘We then started to see the large estate agents show an interest, and then accountants, mortgage brokers and wealth advisers,’ he explained.
And of course, with the global push back against oligarchs and their nebulous wealth, lawyers are going to have to be extra careful, and in fact any professional or financial manager that may get dragged into this kind of thing.
‘What we have done is build a system that is analysing the past 12 months of banking data of a potential client and then there is a source of funds Q&A that informs the decisions we make,’ he said.
Thornton-Berry noted that they don’t give an exact risk score, but they can give a clear recommendation on whether someone is trying ‘to spoof the system’.
He added that the future would be about growing further and investing more in tech, especially AI approaches to analysing the data they received.