Fresh off a $21 million funding round, London-based regulatory technology provider SteelEye is expanding into the U.S. as it anticipates increased demand for compliance technology amid heightened scrutiny from lawmakers.
SteelEye’s series B on Sept. 8 marks the largest raise by a European regtech firm in 2022. The company has raised a total of $43 million, according to a company release.
The company’s Amazon Web Services-powered cloud platform provides a data engine that can index structured and unstructured information — such as emails, voice calls and trade orders — by utilizing artificial intelligence (AI)-based analytics to present the findings in a user-friendly format, Brian Lynch, president of SteelEye’s U.S. division, told Bank Automation News.
“Anyone who’s involved in the trading flows and has a regulatory responsibility to surveil for bad behavior has the potential to be a customer of ours,” Lynch said.
Regulatory pressure
SteelEye focuses on surveillance solutions aimed at helping clients identify illegal practices that violate local regulations. With a strong foothold in the European Union, the company plans to penetrate the U.S. market amid increased regulatory pressure on financial institutions (FIs), Lynch said.
Earlier this year, the Securities and Exchange Commission (SEC) fined major U.S. banks, including Bank of America and JPMorgan Chase, a total of $2 billion after finding that employees use of WhatsApp to discuss banking matters violated record-keeping regulations. And in 2021, the U.S. Department of Treasury’s Financial Crimes Enforcement Network handed out more than $1.6 billion in fines for violations of compliance regulations.
The U.S. could constitute up to 55% of SteelEye’s global opportunities, Lynch said, noting the company’s biggest hurdle now is name recognition among U.S. regulators.
“There’s a lot of legacy systems that are extremely expensive that maybe people have been able to ignore during the good times because focus is on generating revenue and increasing profits,” he said. “Whereas now, there’s a real focus on cost savings and efficiency and regtech is no longer viewed as a danger zone. People get it.”
US regtech future
With U.S.-based FIs ramping up their digital transformation efforts, the regtech sector has a bright future as companies federal and state oversight increases, Nicole Valentine, fintech director of the Milken Institute’s Center for Financial Markets, told BAN.
The SEC’s recent announcement that it is doubling the size of its enforcement unit responsible for protecting investors in crypto markets and cyber-related threats should also put companies on notice, Valentine said.
“When analyzing regtech, it’s important to also understand ‘suptech’ [supervision technology] as a technology tool used by supervisory agencies to support supervision,” she said. “It’s prudent for companies to adopt regtech solutions in a market environment where regulators are leveraging technology for market oversight, surveillance, stability and consumer protection.
“A CEO should always be in the position to know more about their business than the regulators — and to know first,” Valentine said.
