Anthony Quinn is founder and CEO of Arctic Intelligence, one of Australia's first Regtech startups. Anthony and the team have developed a platform that tackles the global problem of financial crime and money laundering. Dexter Cousins, CEO of Tier One People caught up with Anthony to talk about the journey so far.
Can you tell me more about Arctic Intelligence?
We specialise in audit risk and compliance software, predominantly in the final crime prevention space. One of our platform solutions is AML Accelerate, which is a cloud-based money laundering and terrorism financing risk assessment platform, that caters to 30 different financial and non-financial industry sectors and contains an AML Program tailored to the laws of over 10 countries
We've got a very diverse client base on AML Accelerate including some larger financial institutions like Suncorp, CUA, TAL, smaller financial institutions like the challenger banks, Xinja, Volt and 86:400, digital currencies, money remitters, non-bank lenders, as well as non-financial sectors including lawyers, accountants, real-estate agents and various pubs and clubs.
We also have developed two other platforms, another Risk Assessment Platform that we are about to launch. It is aimed at sophisticated financial institutions, major corporations and professional services firms and is a risk agnostic, flexible and highly configurable platform. The risk framework, risk and controls assessment and methodology can be adjusted to suit any company.
The other platform is Health Check which caters for regulated businesses and their professional advisers. The platform assesses the design and operational effectiveness of compliance programs through rigorous controls testing, which is used by clients like Deloitte on their engagements.
How did Arctic Intelligence get started?
I spent 20 years consulting to investment, and retail banks first in the UK. I moved to Australia in 2003 running a number of risk and compliance programs for different banks. Over the last 10 years I specialised in financial crime and was the program director running the AML and FATCA programme for Macquaries Banking and Financial Services Group. I developed a deep interest in solving the financial crime problem. Many of the challenges regulated businesses have in managing their risk and compliance obligations stem from the fact that many of these processes are manual.
So, I set about building a platform to make it easy for regulated businesses of all sizes, sectors and geographies to conduct financial crime risk assessments and build effective control frameworks to mitigate and manage their risks.
There was a huge gap in the market that no one was addressing. Money laundering risk assessments and AML programs have to be signed off by the board, with significant consequences for board directors and companies in the form of millions of dollars in civil penalties.
CBA’s $700m fine (which highlighted among many other things, deficiencies in product risk assessment), the royal commission into banking misconduct and the rise of the board executive accountability regime make it clear organisations can no longer rely on outdated spreadsheets to manage a very important risk category.
Arctic Intelligence started as a side hustle, like most startups do. For two years, I was developing the business while working four days a week with Macquarie. I personally funded the initial development of the platform, working with a development team to build an MVP. At the end of 2015, I finished up with Macquarie and went full time with Arctic Intelligence.
We were one of the first residents at Stone and Chalk. Then in August 2016, we won our first client, Deloitte, and then from there the business has just kept growing. We're 17 full-time staff at the moment, mostly based in Stone and Chalk but we do have a couple of people as Business Development Managers in Singapore and the UK.
How is the team structured?
First of all, as a startup we need people who are multi-talented. But we are broadly split across three main areas. Our Chief Operating Officer, Darren Cade looks after our operations, client services, HR, finance and content management activities.
We've got a sales and marketing team led by Imelda Newton. Her team is responsible for winning new clients and building relationships with consulting firms of all sizes plus establishing and maintaining active reseller relationships.
Then we have the product and technology team, headed by Nathan Zaetta our Chief Technology Officer and supported by a Head of Product, Tammy Goodman and Development Lead, David Stephen. They lead the requirements gathering and software development across our three platforms and manage the testing team which we've got in-house.
Under each of these teams we are supported by a very enthusiastic and high-performing team, as well as a very experienced Board, Advisory Group and Investor base.
What are the biggest challenges you have found in hiring people.
The challenges you face in being a startup, is that most people with experience would be mad to join in some ways. Myself and some of the people we've hired could earn a salary of over $400,000 at one of the banks. It’s a tough sell to entice people to leave that comfort and join a startup for 75% less than they are currently earning on a promise of changing the world!
So, you've got to have the right people with the right attitude. Most importantly, anyone you hire needs to clearly understand what they are letting themselves in for. We hire people who are passionate about the vision and can see where the business will be in a few years time. But even that isn’t enough. The people we hire need to demonstrate how instrumental they can be in making the vision come to life. Startup businesses are pretty tough at the beginning.
Can-do attitude is important, You can’t be political or too precious in a startup. We are building a team of high performers. We have been very selective with the people we have hired . We are very lucky to have high calibre people on the team.
How do you hire high calibre people?
We’ve done a couple of investor rounds which were targeted to private investors. That process not only brought in funding but gave access to investor networks. That is how we have assembled an impressive board. We have the ex Chair of PWC Australia as Chairman, Neil Helm, the ex-CEO of OFX is a director. Our board and investor network are all very deeply experienced and well connected, so we leverage that whenever we can.
Arctic Intelligence were one of the first RegTechs in Australia. How far has the industry come since you launched?
It’s funny. When we launched RegTech wasn’t even a term. The Regtech Association came together about 18 months ago. A small group of startups were out promoting the benefits of RegTech and highlighting the need for change. We really struggled initially to get momentum, primarily because the care factor of AML compliance was so low.
Fines and penalties for non compliance were very low, the biggest fine was $300,000. And the likelihood of a regulator taking a business to court was virtually non-existent. The big shift started when CBA were fined $700 million, and the Royal Commission into banking misconduct. There is now a lot of demand for RegTech solutions.
Arctic Intelligence were one of the first nine founding members of the RegTech Association. It has been overwhelming how positive the association has been received and much of the credit should go to Deborah Young, the CEO for driving this forward. At the last conference in March 2019 we had 105 startup and corporate members and sponsors. So it's definitely taken on a life of its own and the conversations are really starting to happen in major firms that may not have considered the value of regulatory technology.
There's certainly a lot of good use cases and testimonials and some really good early adopters of the latest technology. We have noticed a significant uptake in our business and see this continuing to gain momentum.
What is the opportunity for RegTech in Australia to compete globally?
I think what we've got going for us is that it is a small market, but it's a very open environment. We have Tech hubs like Stone and Chalk, Tank Stream Labs, Fishburners etc fostering innovation in RegTech and FinTech. But we also have very open and engaged regulatory authorities such as AUSTRAC and ASIC. They are running regular update meetings and have developed an outreach programme to RegTech startups.
The regulators are now very open to RegTech and frankly I think they need it as much as the banks do. If you look at a regulator like AUSTRAC, they've got 300 staff to monitor 14,000 regulated businesses. This number will increase to approximately 85,000 businesses in 2020. Without technology it is not feasible that regulators can effectively regulate - they are resource constrained and losing the battle, they have to be smart about supporting technology innovation but also become adopters themselves. I offered our technology to one of the regulators for free, over 4 years ago but nobody has taken up this offer.
It's a great eco-system where you've got regulators, regulatory bodies, professional services firms and tech providers collaborating together, challenging each other on the art of the possible. It is leading to rapid innovation and proving what can be achieved. Everyone is going on their own journey with RegTech, which gives us all a much deeper understanding of multiple perspectives.
I think this is the key reason why Australian RegTech seems to be standing out globally.
What are the future plans for Arctic Intelligence?
We are about to launch, another risk assessment platform, which is domain agnostic. So it can do much more than Anti Money Laundering. The new platform has multiple use cases including bribery, fraud, cyber, operational risk or any risk domain. It allows a lot more flexibility in terms of being able to introduce risk models or control frameworks, add relative weighting of risks and controls, changing methodologies.
We’ve developed a very flexible risk platform primarily aimed at sophisticated reporting entities like major banks. Believe it or not, most of the major banks we work with in Australia and overseas are still managing financial crime and AML risk assessments on spreadsheets. The platform takes the data in those spreadsheets and puts it into a robust risk assessment framework.
The platform is geared towards regulated businesses and the professional services community. Deloitte are white labelling our technology. We are in a beta test program, which is a global program with about 25 different stakeholders in the UK, Canada, the US, Southeast Asia and Australia.
What's the end-game for Arctic Intelligence?
We feel like we're at the bottom of the mountain, even though we've been going for quite some time. There's a lot of growth potential for us in terms of growing into new markets, growing into new industry sectors and growing across our product ranges.
We think we're just at the start and the sky’s the limit, so we are really pumped to get out there and make a difference. And ultimately it is about trying to do our bit to help solve the money laundering problem and the social impact that causes - violence on our streets, rampant ice addiction in Australian cities and country towns, increase in crime rates, domestic violence and broken families.
That is our higher purpose and the thing that really drives us.