Insight & Analysis

Know-your-data essential in fighting financial crime

Published: Feb 2022

Delegates at BAFT Virtual Bank to Bank Forum heard from financial crime expert Elucidate how benchmarks hold the key to scoring and pricing financial risk.

Judge's gavel ontop of lot of dollar notes

“Our vision is to rid the earth of financial crime,” said Shane Riedel, Founder and CEO of Elucidate, a Berlin-based tech company, speaking during a panel session ‘Pricing Financial Crime Risk – A Sustainable and Inclusive Approach to Cross-Border Payments’ at 2022 BAFT Virtual Bank to Bank Forum.

Riedel, a former compliance officer, left banking to set up Elucidate in response to escalating demand from banks for solutions to financial crime like money laundering, terrorism, organised crime, poaching and tax evasion. According to statistics, banks spend on average 3% of their revenue on managing financial crime risk and in some cases have 10% of their staff working on compliance alone. “It’s not sustainable; banks need to reduce the cost,” he said.

Riedel said that financial crime can only be tackled with a network-based solution. With this in mind, Elucidate has built authorised financial crime benchmarks, enabling financial institutions to score and price the risks of financial crime. “We are building the market infrastructure to ease financial risk and we are doing it by financial crime benchmarking,” he told attendees. Elucidate’s flagship product, the Elucidate FinCrime Index (EFI), is a regulated benchmark helping create a standard for measuring finance crime risk.


KYC is important, but so is KYD – know-your-data. Riedel said solving financial crime can’t depend on qualitative data and manual analysis because the volume of data makes this impossible. Elucidate’s strategy uses a financial crime model akin to credit risk models that give objective values. From this it is possible to determine the financial crime risk associated with a particular entity.

Riedel explained how Elucidate gathers data primarily from SWIFT messages, subsequently enriched with external data. These scores are then applied into a pricing algorithm to provide scores with as much clarity as possible. The strategy allows banks to determine what pricing they want to put on a risk that goes outside their risk appetite.

Today, banks carry out risk assessment in a periodic review cycle. Typically, this will involve a number of static data points and a risk classification in a rating system that is always skewed too high, he said. Many banks struggle to manage the daunting manual process and volume of requirements.

Moreover, the assessment criteria must be transparent to all parties. Elucidate’s benchmarking process creates an objective score based on agreements from all sides around contributing data and the results. “By using a robust internal set of data derived from SWIFT messages and enriching it with external data can create positive outcomes.”

By ensuring transparency around the methodology and how the score is arrived at, institutions understand how to improve their scores, he said. He added that it is important to maintain simplicity in this space.

Riedel said solving financial crime is made more difficult by the evolving and increasingly complicated market. New fintechs, and evolution in payments and trade, significantly increase financial crime risk.

He said functioning markets require standardisation across entities providing similar services. He noted a strong regulatory and commercial bias in favour of fintechs, adding that because they have a more limited business model, fintechs’ vulnerability to financial crime is often ignored. Riedel concluded that the best way to manage risk is to price it correctly. Moreover, acknowledging financial crime risk to its point of origin will significantly reduce risk.

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