Another AI-Regtech Tie-Up, This One with Global Reach

When the San Bernardino shooter obtained a loan online, he reportedly used his real name, which wasn't on the government's sanctions-screening list, underscoring the limitations of identity verification technology.

A new partnership between two compliance vendors aims to start filling that gap with technology designed to check not only that an identity is neither fake nor stolen nor blacklisted, but also safe to do business with.

On Tuesday, IdentityMind Global, based in Palo Alto, Calif., is set to announce the alliance with a Brazilian company called Neoway. The deal will jump-start Neoway's business in North America and expand IdentityMind Global's reach in Latin America, particularly Brazil and Mexico. It will also combine the two companies' data sets and analytical capabilities, which they offer to financial institutions to use in making credit decisions, detecting fraud and screening for money laundering, sanctions violations and politically exposed persons.

Such collaboration "is essential to solve the identification of all users electronically and in real time, which is fundamental to the expansion of financial services worldwide," Garrett Gafke, IdentityMind Global’s president and chief executive, said in a draft press release.

The tie-up comes as regtech is emerging as a hot offshoot of fintech. Regtech seeks to reduce the compliance costs of running a financial institution — whether it's a traditional bank or a payments or lending startup — using automation and innovative approaches to data. The most prominent example is IBM's deal to buy Promontory Financial Group so its regulatory experts can teach Watson, Big Blue's artificial intelligence computer, to do basic compliance work. Reducing back-office inefficiencies and compliance costs could, theoretically, let banks offer competitive digital services and court customers they have been unable to profitably serve because of the risk and work required.

Neoway builds extensive profiles on Latin American businesses and individuals from public sources such as bankruptcy and mortgage filings, and its artificial intelligence is designed to sort reliable data from noise. Example: Which of the many people named John Smith is this one? That technology "can be applicable to almost any market," Jose Caldera, the vice president of marketing and products at IdentityMind Global, said in an interview.

His firm, in turn, gleans information about digital identities from social networks, the dark web, cellular subscribers and other sources and scores the risk when someone tries to sign up for an account or send a payment. IdentityMind Global was named one of American Banker's Fintech Companies to Watch in 2015.