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Startups face many challenges, but one outsized one is having to navigate regulatory requirements that differ in each jurisdiction. Particularly when it comes to financial compliance, implementing solutions isn’t a walk in the park — or cheap. A recent Accenture survey found that nine in 10 companies expect evolving business, regulatory and customer demands to increase their compliance costs by up to 30% over the next 2 years.

An added hurdle is that information isn’t always readily available to founders, resulting in a knowledge gap, Baran Ozkan tells TC. Ozkan is the founder of Flagright, a startup that aims to prevent financial crime, like money laundering or terrorist financing, with an API-first product.

“I used to run the product team at a fintech startup in Lithuania, and one of my responsibilities was compliance and fraud prevention,” Ozkan said in an email interview. “I was looking for a real-time solution for around 15 months and had a very bad experience with the existing providers. Some were just too expensive, and we had a lean startup budget. Some didn’t have good operational tools on an intuitive user interface. Some were very business-focused and were very immature on API and developer experience . . . Overall, they were all focused on large enterprise deals and none of them really cared about startups.”

Ozark’s less-than-satisfactory experience with existing financial compliance software led him and Madhu G. Nadig to co-launch Flagright. Previously, Nadig was one of the first hires for Palantir’s office in India and did a stint at Amazon Web Services building no-code automated deployment products.

Flagright provides transaction monitoring technology that supports risk-based thresholds and customer segmenting. From a console, companies can set thresholds and actions for different rules based on customer profiles to make “risk-based” decisions and, in theory, minimize the work required of security teams. 

“We are taking an educational angle with our no-code console, where users can leverage preconfigured templates across the board without having to hire a compliance expert,” Ozark said. “We provide many resources to help startups get started and offer the platform as a turnkey solution. You simply integrate, click ‘Activate,’ and it works.”

Flagright’s products are underpinned by AI models trained in “silos” with individual customers’ data. Ozark said that he and Nadig made the conscious decision not to use one customer’s data to train models used for other customers. Flagright also opted not to adopt a fully automated transaction monitoring solution, instead blending AI with “human input” — that is, investigations and outside crime prevention efforts.

“Our customer base taught us that AI alone causes more harm than good for daily operations,” Ozark said. “Compliance requires explainability and a certain amount of mechanical oversight. At the end of the day, the board and executives are liable.”

Pricing for Flagright is usage-based, a model that’s worked well to date. Battling competition like Unit21, Sardine and Sentinels for market share, Flagright, a small company (nine workers total), claims it’s managed to acquire eight business customers. All are startups.

“The pandemic wasn’t a negative for financial crime prevention businesses, because online transactions, including digital payments, have increased drastically. This drove higher demand for solutions around money laundering, terrorism financing, and fraud prevention,” Ozark said. “Flagright is quite disciplined in spending. We don’t currently have any survival concerns and are focused on maturing up our product portfolio to the next level.”

Flagright has raised a total of $3.2 million in venture capital, the bulk of which is being put toward rolling out customer risk scoring, fintech license automation, sanctions screening, and “crypto screening” capabilities, according to Ozark. Y Combinator and Moonfire are among the startup’s investors.