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  • Investments
  • 21 February 2024
  • 4 min read
  • Words: Northzone

Our investment in Spektr: automating workflows within ongoing due diligence

Photo: The Spektr team

The compliance tech market has gone through a huge shift in the past decade. Historically, companies had to choose between buying outdated software from banks which required a lot of manual work, or building the entire stack themselves in-house. The second key shift we believe has taken place over the past decade is that while historically most risk officers viewed risk almost purely from a compliance perspective, an increasing amount of companies are now also approaching risk from an operational perspective, most notably as when it comes to revenue generation; for example by first being able to convert customers through smooth onboarding, and then maintaining that customer base by having effective KYC practices in place to avoid having to offboard them.

KYC continues to be a major headache for both financial and non-financial companies that handle a high volume of customers and transactions. A critical part of effective KYC flows is ongoing due diligence (ODD), meaning continuous monitoring of a company’s customer base that typically involves a lot of painful, manual work. After a regulated company has onboarded a customer, they are required to renew the KYC continuously, with cadence and scope defined by the risk segment that the customer belongs to. If for example a customer changes their primary address from a less controversial country to a more controversial country, this could potentially be an anti-money laundering issue, and if not detected result in a fine. As a result, companies tend to end up with a massive backlog of customers that need to be re-screened. While this might seem like a minor issue, the reality is that it is far from trivial.

While we over the past years have seen other parts of the compliance value chain get digitised and innovated on, the topic of ODD has remained rather overlooked and underserved. Historically, products and services catering to the ODD space have heavily focused on allowing companies to monitor client data where all alerts are channelled into a case management framework.

Surprisingly, we have so far seen an almost complete lack of automation in the tools catering to this area, with current setups being constrained by human capital, which result in large corporations throwing people at the problem. On the buyer side, the perspective has been highly focused on setting up a fully digital onboarding process, without much thought put towards what happens after the person actually becomes a client, or how to manage the post-onboarding processes.

Enter: Spektr. Mikkel and Cip have exceptional founder-market fit as they previously founded and built onboarding tool HelloFlow, now acquired by Trulioo. Drawing from their own experience in building the compliance space, they learned time and time again that companies, regardless of size, are lagging behind in risk monitoring and management, and particularly in ODD.

Photo: Loop process

With the ultimate goal of reshaping compliance as we know it, Spektr’s starting point is an ODD product that allows for customers, such as payment and remittance companies, to manage and automate their continuous KYC requirements in an intuitive and user-friendly interface. Customers integrate Spektr with their existing risk infrastructure, and are then able to set up KYC processes as well as ‘loops’, which are automated playbooks that action on alerts flagged by the system, significantly limiting the need for a manual case management system. Spektr’s platform lets their customers run real-time, continuous KYC, handling the re-screening of customers on a regular, rule-based basis, while automating as much of the information-gathering process as possible through deep integrations.

With Spektr, co-founders Mikkel and Cip have gathered a complementary team that have built in the space before, and that thanks to those learnings are able to read the market quickly, intuitively and, if we may say so, very well.

We’re excited and proud to lead Spektr’s €5m seed round, alongside the team’s previous backers Seedcamp and PreSeed Ventures, as well as a group of angel investors including industry leaders from Trulioo, ComplyAdvantage and Mastercard.