By SGN | 26 Mar 2024
After the 2008 financial crisis, Hamish decided to put a pause on his career in Singapore as a quantitative strategist building mathematical models that analyses markets and companies.
“I took some time out and did my PhD, which my wife considered a midlife crisis,” he laughs.
It turned out to be one of the best decisions he’s ever made. He loved the focus and rigour of the work, and it generated valuable research that he went on to apply as a practitioner.
“What I found interesting was, every single time I pitched the quant fund I was running and mentioned accounting manipulation, the client would get very excited, stop me and say, ‘Hang on a second, how do you do that? I didn’t know that was possible.’”
It began to dawn on Hamish that accounting fraud – which incurs global losses in excess of $1 trillion each year – was “a gigantic problem that no one had actually found a solution for”. This was the spark that led him to build Transparently.AI, the world’s first AI system for the early detection of corporate financial fraud.
Detecting financial fraud early with AI
“With something like Wirecard,” Hamish says of the 2019 financial scandal, “would our system have alerted that there were problems with the company? The short answer is yes, absolutely.”
Predicting the downfall of companies may sound a little like magic, but Hamish explains that Transparently is based on pure maths. The platform sifts through millions of financial data points and analyses more than 160 risk factors in 14 categories, then computes a percentage score that indicates the likelihood that a company is manipulating its accounts, and will collapse as a result.
Incredibly, these red flags can bring such corporate malfeasance to light two to three years before it typically becomes public information.
“If you are a bank, a stock exchange, an auditor or a fund manager, then you have the time to investigate the company, derisk the investment or potentially even turn the company around,” he says.
Protecting the most vulnerable consumers
As a global ambassador for the Transparency Task Force, a UK-based organisation that advocates financial transparency and lobbies for regulatory changes, Hamish has sat in meetings with everyday casualties of financial fraud.
“The reality is, these companies prey on less sophisticated investors,” he says. “Ultimately, it’s mums and dads who lose their life savings, and also taxpayer money that is destroyed.
“So we want our piece of regulatory technology to be as widely available as possible. We want it to be a force for good. The more entities out there have access to our technology, the more we can identify the bad actors and prevent these fraudsters from getting away with it.”
And will Transparently put auditors or forensic accountants out of a job? “No, a very firm no,” Hamish stresses. “It’s a productivity tool.”
Accounting manipulation doesn’t fall within the purview of time-pressed auditors, he notes, and forensic accounting reports that take upwards of a month to write are produced by Transparently in seconds. The system can perform this on any one of 85,000 companies, in any financial year, plus provide detailed next-step recommendations.
Finding his footing as a founder
Becoming a founder was a major transition to navigate. Thankfully, Hamish had knowledgeable connections in private equity and venture capital to tap into – not for money, but for horror stories.
“I wanted to hear stories of where people messed up. And that was an incredibly valuable experience,” he says. “There’s an infinite number of decisions that a founder makes, and some of them are really hard to fix if you get them wrong at the beginning,” he notes.
One of these critical areas is hiring. Hamish counts himself lucky to have attracted a strong team, not least his co-founder Mauro Sauco, an Argentinian who is now a Singaporean citizen. Prior to Transparently, Mauro held tech leadership positions in APAC, including at Google, IBM and Amazon Web Services.
He was instrumental in building the product infrastructure around Hamish’s AI algorithm. “Mauro is a brilliant individual,” Hamish enthuses. “He’s incredibly experienced in myriad aspects of technology, and can solve complex problems extraordinarily quickly.”
Opportunities for impact
The team is currently working on a long pipeline of projects. “Some of them will be absolutely game-changing,” Hamish says. Slated for release in April 2024 is a self-service portal where individual traders or smaller investment managers can subscribe to access risk analysis and reports for a specific market.
Though Transparently processes the data only of publicly listed companies at the moment, the system will eventually let users inject their own data, allowing them to predict scandals such as the FTX saga that unravelled in late 2022.
The company has already expanded into multiple countries across APAC and Europe. “Most recently, we developed a relationship with Franklin Templeton, which will accelerate our go-to-market strategy in the US,” Hamish shares. The investment firm has taken a stake in the startup and enrolled it in their fintech incubator programme.
At the forefront of AI
Since relocating with his wife to Singapore in 2006 (after working in Hong Kong, Sydney and his native Auckland), Hamish has no plans to move again – even if he misses the magnificent landscapes of New Zealand.
His children, both teenagers now, were born and raised in the city-state. “We love it here,” he says. “It’s very family-friendly, and the accessibility to healthcare is so good.”
At Singapore Management University, he has been an adjunct professor for over a decade, both because he genuinely enjoys teaching (he’s also a certified scuba instructor), and because he likes staying connected with the flow of ideas within the academic community.
“I’m really passionate about new ideas, and Singapore is an environment where there is a great deal of support and encouragement of innovation,” he shares. “And so it was an absolute no-brainer that we would form the company here,” he says.
“Singapore is putting a huge amount of time, effort and, very importantly, thought into AI,” Hamish observes. “I say ‘very importantly, thought’ because it’s a complex area where regulation is necessary but you also need people to be free to innovate.”
He sees the country’s National AI Strategy, a five-year plan to integrate AI in the economy, as a good avenue for engaging with industry players to understand opportunities and weaknesses in the field.
“Our company has been the beneficiary of a number of grants which have assisted the original research that went into developing the product, as well as our overseas expansion,” he says.
“When I meet people in the industry or, indeed, politicians from other countries, they are astonished at the extent to which Singapore is supporting development in this space. I think it’s very clear that Singapore is positioning itself at the forefront of AI.”
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Meet Hamish
Hamish is the co-founder and CEO of regtech startup Transparently.AI, the world’s first AI solution for early detection of accounting manipulation and fraud. Based in Singapore since 2006, he has more than 30 years of experience in quantitative investing and strategy. He holds a PhD in Finance from the University of Auckland.
Connect with him here.
