HomeFundingBerlin-based Elucidate raises €2.5 million to establish its financial crime risk benchmark

Berlin-based Elucidate raises €2.5 million to establish its financial crime risk benchmark

Today Elucidate, the financial crime risk scoring platform, today announced that it has raised €2.5 million in a pre-Series-A funding round led by Frontline Ventures. Existing investors Seed X Liechtenstein, APEX Ventures, and Big Start Ventures also participated in the round. This brings the total Elucidate has raised in 8 months following an earlier funding round in July 2020 to over €5 million.

Founded in 2018, Elucidate’s FinCrime Index (EFI) is one of the industry’s only regulated financial crime risk benchmarks. It serves a range of industry leading financial institutions and public sector entities by taking a quantified approach to predict and prevent financial crime before it happens. Built using probabilistic modelling and machine learning, it moves the financial crime risk dial from manually determined reactions to a new universal standard for financial crime risk analysis and scoring.

Preventing financial crime requires utilisation of all available data, yet most financial institutions and regulators are currently under-utilising the data available to them. Where data is analysed, it is often done manually and without the benefit of industry comparison, leading to incomplete conclusions. The startup states that no universal standard or benchmark has previously existed, and thus financial institutions have been left to create individual, varied approaches.

Shane Riedel, co-founder and CEO of Elucidate said: “The US passed the world’s first anti-money laundering legislation 50 years ago and we continue to see scandals emerge with shocking regularity. The time for status quo optimisation has passed and we are in a unique position to digitise an antiquated infrastructure. Our deep learning dataset is unparalleled in the industry, identifying financial crime patterns as they emerge. Just as John Moody revolutionised the way credit risk was understood in 1909, Elucidate’s universal standard is enabling the next wave in financial crime risk management, focused on efficiency and effectiveness, with a benchmark built on standardised risk scoring.”  

Crimes such as money laundering, terrorist financing, sanctions, cybercrime, fraud, corruption and tax evasion continue to rise, estimated by the IMF to represent 2-5% of global GDP. The startup also signals that financial institutions are spending, on average, around 3% of revenue to manage the risk with limited returns. This means that one of the most expensive line items is also its least effective. It also means criminals are currently able to abuse the financial sector with limited fear of detection, and virtually no fear of prosecution.

Facing these realities, Elucidate has rapidly expanded and currently powers over 2,700 financial institutions’ risk scores, for users across five continents. The speed of uptake is indicative of the appetite for an alternative and enhanced approach to financial crime risk.

Speaking on the announcement Will Prendergast, Partner at Frontline Ventures said: “The cost of performing proper compliance checks today is so time intensive and costly that the easiest option for many financial institutions is not to trade with smaller banks or fintechs.  That may seem to remove the problem but it also has very detrimental impacts on financial inclusion.  We see Elucidate as the way of addressing this problem and opening up the financial system to those who deserve it, whilst identifying those that do not.”

Elucidate will use the additional capital to expand rating coverage to 100% of the market. The team will also accelerate market penetration to the public sector and regulators, in addition to banks, non-banking financial institutions (NBFIs), VASPs and fintechs already using the platform to assess, score and price financial crime risk.

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Charlotte Tucker
Charlotte Tucker
Charlotte is the previous Editor at EU-Startups.com. She spends her time scouting the next big story, managing our contributor team, and getting excited about social impact ventures. She has previously worked as a Communications Consultant for number of European Commission funded startup projects.

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