Two months ago, the Securities and Exchange Commission (SEC) fined 16 Wall Street companies more than $1.1 billion for “widespread record-keeping failures” related to maintaining electronic communications, in violation of federal securities laws. In addition, the SEC he is now researching private equity firms about their employees' use of messaging apps for work purposes, including WhatsApp, Signal, and Telegram, as many of these apps have features that support auto-disappearing messages, potentially violating SEC rules.
To complicate matters, many companies have now embraced remote or hybrid work models, allowing employees to combine work from the office and home, making it more difficult for financial institutions to track employee communications.
And it is in that context that the Tel Aviv and New York-based communications compliance platform Shield wants to address issues most banks and investment firms face, including records management, electronic discovery, supervision, and surveillance.
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Regulators continually change or add new compliance standards faster than companies can adapt, which can lead to large fines and reputational damage for banks around the world, Shield CEO and co-founder Shiran Weitzman explained. Another challenge, according to Weitzman, is the difficulty of capturing data transmitted through applications such as WhatsApp. The complexity of communication channels and the use of voice and text make it more difficult for organizations to keep track of 'paper'.
To meet this growing demand for "more advanced" cross-channel surveillance, Shield announced Thursday that it has raised $20 million in a Series B funding round. Its previous backer, Macquarie Capital, led the round along with UBS Next a Swiss bank venture fund; and existing investors such as Mindset Venture and OurCrowd.
The four-year-old startup said it plans to use the capital to grow its global presence and accelerate development of its communications compliance platform.
“There is an immediate need in the market for more advanced surveillance solutions to enable financial institutions to comply with new regulations and fight financial crime,” Weitzman said. “Understanding that regulators will continue in this strict enforcement period and banks will not stop using communication channels as work from home is now permanent.”
When asked how the company handles user data, Weitzman said it operates under the same strict rules as its customers. “Shield does not store user data and does not have access to customer data. We take proactive steps to protect data by masking the personally identifiable identification (PII) within communications.
Shield relies on AI techniques to help companies counter market abuse, bad insiders, and regulatory risk. The startup, which is not the only company using AI, would compete with AI-powered communications surveillance platforms such as Behavior y Relativity in the industry. shield has recently included new eDiscovery capabilities that allow users to quickly respond to regulatory inquiries. The company partnered with London-based NLP and speech technology company Intelligence Voice to bolster its voice surveillance capabilities, Weitzman said.
The company's latest cash injection comes less than a year after Shield raised a Serie A of $15 million, and the company said it has increased its sales by 280% year-over-year. The company said it has also increased its customer base by 250% since its previous funding round in January. In addition, Shield opened an R&D facility in Lisbon this year, adding that the company chose Portugal because it is becoming a major European technology hub.
