The Magic Circle firm led by banking partner and AI working group head Edward Chan (pictured), has launched Nakhoda, which it built in order to achieve “a level of flexibility” not currently on offer in existing products in the market.
Linklaters signed up with RAVN Systems in 2016 and is currently trialling Kira Systems for contract analysis in due diligence but speaking to Legal IT Insider about Nakhoda, Chan said: “We took the decision initially to automate due diligence in [bank ring fencing reform] work. We looked at the available tools which were very good but there was a level of flexibility that we wanted which we thought would be easier to achieve if we built our own solution. There was a feeling that there was a degree of flexibility and control we wanted to explore.”
The ring fencing reforms, which come into force in January 2019, mean that banks holding over £25bn in assets must set up a separate retail banking division that can’t lend money to other financial institutions.
Eigen’s co-founder Lewis Liu was formerly a senior strategic adviser at Linklaters and Chan said: “We teamed up with Eigen because we know the founder, who worked for a bit in Linklaters and understands how Linklaters works.” Chan added: “We’re not seeking to replicate what’s out there with Kira and RAVN.”
However, Nakhoda has a number of different use cases and is being tested across both transactional and advisory departments, in due diligence and internal know-how, with the firm also currently engaged in discussions for its external deployment.
Chan said: “Everyone can see its immediate use for due diligence. The difficulty is, is that all it can do or can you push its technical capability further? That’s what we’re trying to do.” The firm is not currently looking at eDiscovery applications.
The roll out of Nakhoda is not expected to mean an end to the work Linklaters is doing with RAVN and possibly Kira too. Chan said: “The more we’ve looked into this, the more we’ve realised maybe a toolkit approach is the right one, where technology is at the point where it’s a medley of things that you use and you can’t say with confidence that one tool will do everything.”
The toolkit approach is also viewed as a way to circumnavigate bandwidth issues common within the startup market.
The launch of Nakhoda followed and perhaps was facilitated by a similar collaboration between Linklaters’ lawyers and its IT department on a solution to help automate banking clients’ decisions on whether they are able to undertake business with an institution under the bank ring fencing reforms.
The new tool, called LinkRFI, quickly classifies which institutions are and aren’t financial institutions within the definitions of the new legislation, in a fraction of the time it would take a human to conduct the same exercise.
The idea came from Chan and banking partners Benedict James and Tom Wells, who – in something of a first for the Magic Circle firm – collaborated with the IT team to create a client-facing solution.
Chan said: “Traditionally the way we think about it is that clients come to us and say ‘here’s an organisation, are we allowed to do business with them?’ and we run through the statutes and definitions and write the client a memo. In this instance, there are millions of names so you can’t do that and LinkRFI is a way to sift through huge amounts of names based on data from a lot of external registers including credit institutions and insurers, giving banks the assurance that you’ve run through as many as you can.”
Lloyds Banking Group and The Royal Bank of Scotland are understood to be among the firms working with the product in different capacities.
Chan said: “This is great for us as we’re effectively deploying IT on the front line. They were terrific.”