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Nasdaq puts Financial Fraud in Focus with Verafin Deal

The rise of digital payments has created new opportunities for financial fraud, stoking demand for software that can detect suspicious payment activity.

Nasdaq is cementing its hold on this growing market with the acquisition of Newfoundland-based Verafin, which provides a cloud-based software platform helping more than 2,000 financial institutions to detect, investigate, and report money laundering and fraud.

Following regulatory crackdowns over the last decade, the market for software that can serve compliance and surveillance needs has heated up, with stringent requirements for AML and compliance being introduced just as new technologies like process automation and machine learning have become available for automating investigations and pooling transaction data.

At the same time, the rise of commission-free trading has led to falling revenues for exchanges, making the growing market of financial fraud detection software an attractive area for expansion.

“The problem of detecting money laundering and fraud hasn’t been solved very well yet,” said Nasdaq SVP of market technology Valerie Bannert-Thurner in an interview. “With our acquisition, we are doubling down on our belief that this is an area that is being disrupted and where we can have a big impact.”

Under Nasdaq, Verafin’s technology will be made available to a network of over 250 banks, exchanges, broker-dealers and regulatory authorities that already use the firm’s existing trade surveillance tools.

Prior to the acquisition, Verafin snubbed several previous suitors, including private equity buyers and strategic players. This suggests widespread demand for financial fraud detection software, which is benefitting not only from regulatory tailwinds, but an ever-growing volume of online payments – particularly in the wake of the pandemic.

As volumes of online payments continue to increase, and criminals dream up more sophisticated ways of moving funds, the financial fraud detection software market is only likely to grow, making it likely that we will soon see more strategic partnerships and acquisitions in this sector.

“Cybersecurity and “RegTech” businesses, focused on core vertical markets like financial services, continue to demand premium valuations given the ever increasing regulatory tailwinds coupled with the continuing digitisation of the sector. In the UK market, we have seen private equity invest in businesses across the sector such as SmartSearch (Marlin) and CubeLogic (GCP), with more expected in 2021.”

Richard Baker | Managing Partner

Richard is a Co-Founder and Managing Partner at Acuity Advisors with 25 years’ experience in all aspects of corporate finance.

Having held influential leadership, corporate development and consulting roles at JPMorgan, Monitor and Diageo plc, Richard has had great insight into the world’s most successful businesses. He has extensive experience working alongside investment banks on M&A transactions across the technology sector and has deep-rooted longstanding relationships with many venture capital and private equity investors.

Richard has been instrumental in building Acuity’s Deep Tech Practice which, along with our successes in the semiconductor sector, has firmly established Acuity as the most successful Deep Tech mid-market advisor. With many notable funding and exit mandates completed, clients have come to rely on Richard’s sector insight to help shape and deliver shareholder value.

Insight is one of Richard’s notable strengths. He very quickly grasps what drives a company’s bottom line and growth, an understanding that’s bolstered by his personal experience of running and then exiting his own business. Richard easily builds strong working relationships with potential buyers and has a keen and intuitive sense for what motivates them.

Since securing a first class degree in Economics with Statistics, Richard has worked extensively in Europe, the US and Asia, creating an enviable and comprehensive international network.