“There’s a level of confidence when you do correlations like this, and we were looking for high confidence because we wanted to drive automation of certain things,” he says.
After taking some time to set up the infrastructure and sort out the data workflow for a full deployment, BNY Mellon then moved on to a full implementation, which involved staff from the software developer and three groups at the bank: the technology team, the data subject matter experts, and the KYC center of excellence. “They’re the ones with the opportunity to make sure we do this well from a regulatory perspective,” he says.
Quantexa’s software platform doesn’t just do entity resolution: It can also map networks of connections in the data — who trades with whom, who shares an address, and so on.
The challenge, for now, may be in knowing when to stop. “You correlate customer records with external data sources, and then you say, let’s correlate that with our own activity, and let’s add transaction monitoring and sanctions,” he says. “We’re now doing a proof of concept to add more datasets to the complex, as once you start getting the value of correlating these data sets, you think of more outcomes that can be driven. I just want to throw every use case in.”
Investing in technology suppliers
BNY Mellon isn’t just a customer of Quantexa, it’s also one of its investors. It first took a stake in September 2021, after working with the company for a year.
“We wanted to have input in how products developed, and we wanted to be on the advisory board,” says Hirschhorn.
The investment in Quantexa isn’t an isolated phenomenon. Among the bank’s other technology suppliers it has invested in are specialist portfolio management tools Optimal Asset Management, BondIT, and Conquest Planning; low-code application development platform Genesis Global; and, in April 2023, IT asset management platform Entrio.
The roles of customer and investor don’t always go together, though. “We don’t think this strategy is applicable to every new technology company we use,” he says.
While some companies may buy a stake in a key supplier to stop competitors taking advantage of it, that’s not BNY’s goal with its investment in Quantexa’s entity resolution technology, Hirschhorn says.
“This isn’t proprietary; we need everybody to be great at this,” he says. “People are getting more sophisticated in how they perpetrate financial crimes. Keeping pace, and helping the industry keep pace, is really important to the health of the financial markets.”
So when Quantexa sought new investment in April 2023, BNY Mellon was there again—this time joined by two other banks: ABN AMRO and HSBC.
