Highlight Report

AML RightSource rising—the firm bags its 5th acquisition of 2021 with QuantaVerse

September 8, 2021

M&A palooza! AML RightSource got a new private equity (PE) parent in late 2020 and wasted no time boarding the growth-by-acquisition bus. The US-based provider of risk and regulatory compliance consulting and outsourcing services with deep specialization in (as its name suggests) anti-money laundering (AML), know your customer (KYC), and Bank Secrecy Act services, continued its acquisition spree with QuantaVerse. The acquired firm uses data science and its QuantaVerse Financial Crime Platform to help drive down false positives in financial crime identifications and investigations and robotic process automation (RPA) to streamline report creation.

Acquisitions prioritize talent, tech, and turf

QuantaVerse is AML RightSource’s fifth acquisition this year and is a clear tech-enablement play. Its other acquisitions include:

  • Vantage GRC (January 2021): While positioned as an acquisition, absorbing Vantage GRC essentially added two deeply experienced industry stalwarts, its CEO and COO, with the intent to expand and diversify the Financial Crimes Advisory practice, enhance the core Managed Services offering, and accelerate key organic and acquisition growth initiatives.
  • Arachnys Information Services (March 2021): A UK-based regtech platform providing enriched and intelligent KYC and AML data and software solutions to accelerate customer onboarding and monitoring for financial institutions and other high-risk industries. This was its anchor tech-enablement addition.
  • Passcon (March 2021): A Germany-based provider of managed services, advisory, and technology solutions firm offering KYC, transaction monitoring, sanctions, and investigations with 300 team members and 10+ offices across EMEA, APAC, and North America. Passcon brought critical geographic expansion.
  • Blue Umbrella (July 2021): A Hong Kong-based provider of third-party compliance technology and due diligence services across a range of industries, including technology, food and agriculture, life sciences, and financial services, with 200 team members supporting clients across Asia, Latin America, Europe, and North America. Blue Umbrella is AML RightSource’s industry diversification play.

Reading the acquisition tea leaves, the firm set current growth objectives that include a clear mix of geographic footprint expansion, client diversification from financial services to corporate compliance, and application of emerging technologies. Senior leadership validated this direction to HFS, especially underscoring the need for emerging tech—not as a product play but for services enablement.

The path to growth – the inorganic chapter

Founded in 2004 in the aftermath of the September 11 terrorist attacks in the US to help regulated financial institutions identify and report suspicious financial activity, AML RightSource was able to surf a groundswell of regulatory requirements related to the global financial crisis and AML-related monitorships of firms. The firm offered consulting and managed services, building its reputation initially with the community and local firms as a specialist in project-based surge needs and, eventually, outsourced multi-year projects.

In 2017 it attracted the attention of Clarion Capital, which invested an undisclosed amount and helped the firm with its organic growth agenda, expanding its footprint across the US and into Canada. At just about its three-year PE ownership milestone, Clarion sold AML RightSource to Gridiron Capital for an estimated $425M. The top of the agenda, as driven by AML RightSource’s CEO Frank Ewing, is inorganic growth.

Regtech in banking and financial services is a painful Catch-22

Banking and financial services (BFS) industries are known for substantial and early investment in emerging technologies. However, the focus tends to be on building and optimizing their internal stacks. In the risk and regulatory compliance domain, regtech solutions have exploded over the past few years. However, managed service providers are often used primarily for labor and expertise, despite their ability to bring regtech or general purpose optimization technologies like machine learning and RPA to bear. Outsourcing providers have thus focused on optimizing their service delivery without touching client tech, but often with diminishing or overly manual results.

Acquisitions like AML RightSource’s recent QuantaVerse buy are essential to driving impact and better outcomes in risk and regulatory compliance services. However, clients need to be willing to consider tech-enabled solutions that complement existing tech stacks and improve existing overly manual processes. Digital transformation is ultimately the willingness to change how work is done rather than the tech alone, which is fundamental to achieving HFS’ OneOffice mindset.

The Bottom Line: AML RightSource is a global risk and compliance leader in the making—provided it can integrate its acquisitions and make a viable case for regtech enablement

As the leading research firm specialized in business operations transformation enabled by emerging tech and IT and business process services, HFS loves a services growth story—particularly one that brings together industry-specific expertise and business outcomes. AML RightSource is clearly on a growth tear, fueled by five acquisitions this year alone. The firm now needs to settle down to the business of integrating its vastly expanded family, articulating its enhanced value to clients and prospects, and making a clear case for the inclusion of enabling regtech capabilities in its offering suite. Tech-enabled beats people-only any day of the week.

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