Exclusive: Anti-money laundering startup Sandbar raises $4.8M

Sandbar, which builds anti-money laundering software for fintechs, has raised $4.8 million in seed funding, the company tells Axios exclusively, in a round led by Lachy Groom and Abstract Ventures.

Why it matters: The fund raising comes as regulators are cracking down on lax risk and compliance practices at fintech companies.

How it works: Sandbar builds an API-based transaction monitoring system to give fintechs more visibility into user activity and flag suspicious transactions.

• Its product is designed to help detect large-scale fraud, money laundering, or illicit funding for users. It also helps risk and compliance teams to manage, prioritize and solve cases that are flagged.
• "We are trying to provide more signal and less noise... to produce fewer false positives without missing any true positives," Sandbar founder and CEO Brock Bontrager says.

State of play: While financial institutions are required to monitor transactions for illicit activity, many fintechs don't have the right tools in place to do so effectively.

• Coinbase, for instance, just agreed to a $100 million settlement with New York's Department of Financial Services (NYDFS) related to deficiencies in its compliance program that dated back to 2018.
• Coinbase's compliance program failed to keep up with its growth and was overwhelmed with a backlog of 100,000-plus unreviewed transaction monitoring alerts.

Of note: Other investors in the round include BoxGroup and multiple angels from the fintech industry, including founders and executives from companies like Ramp, Stripe, Plaid and Square.