Software developed by European start-up Searchspace is playing an important role in the war against organised crime and terrorism. But, unlike some of its peers, this is not a case of a technology vendor cashing in on current political and economic tensions – Searchspace is almost 10 years old and has been helping banks defend themselves against money laundering and fraud since 1995.
Back in 1999, the London-based company became the first vendor to make a presentation to the Financial Action Task Force, the global anti-money laundering (AML) initiative sponsored by the Group of Seven (G7) leading industrialised nations. Since the events of 11 September 2001, Searchspace executives have given evidence to a variety of financial regulatory committees in the US that are seeking to track the flow of funds to terrorist organisations including the al-Qaeda network.
The growing stature of a company with humble origins in a laboratory at London's University College has not gone unnoticed by the wider industry. IBM recently added it to its select band of 70 strategic partners, and Ericsson is installing a component of the company's fraud-detection software in its handsets.
Searchspace CEO Jason Kingdon says the deal with IBM cemented a long-standing relationship between the two companies. "It is an enormous complement to us," he says. IBM brings its sales people and consulting business, Searchspace provides the technology
and contacts within many of the world's biggest financial institutions – such as Bank of New York, UBS, Lloyd's of London and the London Stock Exchange. "We have been pursing a partnership strategy for a number of years and the two of us make a natural fit," adds Kingdon.
Searchspace, a private company backed by 3i, Europe's biggest venture capital firm, has enjoyed strong growth of late despite the tough economic conditions. Sales in the 12 months to the end of March 2002 were about £12 million (EU18.7m) – almost tripling the previous year's revenues of £4.3 million (EU6.7m). Kingdon says the company's fortunes have been boosted by both the increasing regulation of the global financial sector and a growing sense that non-IT specialists would like access to corporate data.
Artificial business intelligence
Searchspace's core technology builds profiles on millions of individual accounts, enabling it to detect evidence of unusual patterns of behaviour that can then be investigated by a bank or financial regulator. It prioritises the most serious cases. If a bank launches an investigation and finds evidence of money-laundering or some other criminal activity, regulations in most parts of the world oblige them to report their findings to a particular agency.
The company's software aims to be a truly 'intelligent', but it differs significantly from most BI tools in that IT expertise is not a pre-requirement to use it – Gartner dubs the technology category 'business activity monitoring'.
"The easiest thing we could have done would have been to become just another business intelligence tools vendor," says Kingdon. "The BI community has been very passive. They think we still want to do long-term analysis with spreadsheets."
Searchspace's technology is also designed to be 'always on', seamlessly integrating with the business through workflow. Selected employees are automatically alerted when a suspect transaction passes through a bank's computer system. So-called 'escalation procedures' can be added that pass the alerts to higher management if they are not acted on promptly by the assigned employee.
"It is smart technology. It is working a lot harder than you," says Kingdon. "We are trying to integrate a piece of analytics into the actual operational processes of the organisation. We want computers to play an active role in the business. When I tell people what we do they say: 'That's what I thought computers would do.'"