Beyond its familiar exchanges and indexes, Nasdaq also has a growing technology solutions business that targets fraud and money laundering across the financial sector.

The online global marketplace uses its anti-fraud technology to serve a range of entities, from regulators and market infrastructure providers to banks and credit unions.

“A lot of the technologies that Nasdaq uses internally, we provide to other firms globally that want to build markets,” Valerie Bannert-Thurner, Nasdaq’s global head of anti-financial crime technology, told Bank Automation News.

The anti-financial crime effort initially addressed market abuses such as insider trading. The company began to pivot more toward technology solutions particularly when Adena Friedman, president and CEO, took the reins in 2017, according to Bannert-Thurner, and that included an expanded anti-financial crime focus.

With Nasdaq’s February acquisition of anti-financial crime management company Verafin for $2.75 billion, its focus on money laundering and fraud increased. More than 3,000 financial institutions across North America — mostly community banks and credit unions — use Canada-based Verafin’s anti-financial crime and regulatory compliance solutions, including $19.2 billion Bank OZK based in Little Rock, Ark., $9.9 billion Digital Federal Credit Union based in Marlborough, Mass., and $18.9 billion United Community Bank based in Blairsville, Ga.

Verafin’s cloud-based anti-financial crime platform addresses Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance, high-risk customer management and fraud detection and management, incorporating artificial intelligence (AI) and machine learning (ML).

Globally, Nasdaq counts among its clients some 30 regulators and 50 markets and exchanges using its systems, including some cryptocurrency markets, Bannert-Thurner noted. The company also serves “most” top-tier investment banks, she added, declining to name any.

Detecting today’s criminal behavior ‘not good enough’

Nasdaq’s vision is to build markets of the future while combatting financial crimes and fraud, Bannert-Thurner said. “That could be any kind of markets — it could be crypto markets, it could be markets for commodities — you name it,” she told BAN. “We can only achieve our vision if financial crime is not part of it.”

Financial crimes in markets have many ramifications, she said. Bank customers run the risk of losing their proceeds, and consumers need protection from fraudulent scams.

While an estimated $2 trillion to $4 trillion is laundered through the global financial system every year, Bannert-Thurner said, the United Nations calculates that only 1% or less of that is detected.

“The effectiveness of the systems and the capabilities of the industry to detect the [criminal] behavior is not good enough by any stretch today, which is why we are working on it,” she said.

“Banks have to spend a lot of money to fight” criminals and protect against them, Bannert-Thurner added. “And to some extent, it also means that banks are not doing business everywhere they could do business, just because they don’t want to take the risk.”