Surveillance Firm Hawk AI Raises $17M as Financial Crimes Grow

Hawk AI has raised $17 million to boost its fraud prevention and anti-money laundering efforts.

The Munich company announced the Series B on Thursday (Jan. 26), saying the funds would help it expand its platform, which uses artificial intelligence and cloud technology to help financial institutions (FIs) detect fraudsters.

“Financial crime has historically been challenging to identify due to the complexity of financial structures and regulations,” said Chris Eng, Principal at Sands Capital, which led the round.

“Hawk AI’s sophisticated technology and use of explainable artificial intelligence present critically needed straightforward solutions for institutions across the payments landscape.”

PYMNTS’ research has found a number of FI executives dealing with the complexity Eng mentioned amid an increase in financial crime.

The report “The State of Fraud and Financial Crime in the U.S.,” a collaboration by PYMNTS and Featurespace, found that 62% of large banks have seen recent increases in such crimes, with the average cost of digital payments misuse for FIs exceeding $120 million.

Yet many executives report feeling overwhelmed by the scale of fraud prevention demands in a global landscape where fraudsters can strike anytime, anywhere.

Two-thirds of the executives surveyed by PYMNTS pointed to complex regulatory requirements as a challenge keeping them from piloting new technical tools to protect their organizations. 

Meanwhile, 40% of executives cited worries about the potential complexity in the day-to-day use of new technologies. The same percentage also said a presumed integration complexity of combining new fraud prevention controls with old systems kept them from investing in further innovations in bank fraud prevention.

And there’s a cost to being behind on anti-money laundering (AML) and fraud prevention measures beyond losing money to scammers and other criminals.

Last year saw the penalties for failing to stop financial crimes jumped by more than 50%, according to a recent Financial Times (FT) report.

FIs were fined close to $5 billion for AML violations, breaches of sanctions and flaws in know-your-customer (KYC) systems last year, said the report, which was based on figures from compliance firm Fenergo.

Fines had been down the year before, and the FT report argued that this raises questions about the effectiveness of the worldwide crackdown on financial crime after the 2008 meltdown.

“There’s a lot of evidence, particularly in the U.K. and the U.S., in terms of recidivism . . . repeat offending by the big firms after they’ve been fined for things,” Huw McCartney, a University of Birmingham professor who studied the impact of post-crisis fines on the Anglo-American banking sector, told the British news outlet.