Contextual Compliance with Jennifer Arnold, Co-founder & CEO of Minerva

Steve interviews Jennifer Arnold of Minerva
Transcript

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In this episode, I speak with Jennifer Arnold, Co-founder & CEO of Minerva.

Jennifer shares the origin story of Minerva and how her time as a compliance leader influenced her decision to start the company. She also discusses the importance of context in anti-money laundering programs, the power of applied artificial intelligence in combating financial crime, and changing sentiment of regulators towards advancing technology.

RESOURCES:

Connecting with Jennifer Arnold

Jennifer Arnold’s LinkedIn: https://www.linkedin.com/in/jenniferearnold/

Minerva’s website: https://www.gominerva.com/

Companies & Resources Discussed

Minerva: Minerva is a company founded by Anti-Money Laundering (AML) industry experts to transform AML compliance with artificial intelligence.

Next Canada: An entrepreneurial network made up of 500+ top Canadian academics, entrepreneurs, investors and founders.

Meet Jennifer Arnold | Next AI Class of 2020 Entrepreneur YouTube Video: Jennifer’s interview for the Next Canada accelerator program.

Next AI: A Next Canada program, is a founder and venture development acceleration network for AI-enabled startups.

3D Biometrics: is a concept that involves the use of three-dimensional data for the purpose of identifying and verifying an individual's identity.

Sarah Paquet (FINTRAC): Sarah Paquet is the Director and CEO of the Financial Transactions and Reports Analysis Centre (FINTRAC) of Canada. FINTAC is the national financial intelligence agency of Canada. (S. Paquet’s speaking notes from the 91st Ottawa Conference on Security and Defence, May 10, 2023)

Binance: is a blockchain ecosystem, with a product suite that includes the largest digital asset exchange. Its mission is to be the infrastructure provider for crypto in tomorrow’s world.

Coinbase: (NASDAQ: COIN) is on a mission to increase economic freedom for more than 1 billion people. It provides a platform that makes it easy for people and institutions to engage with crypto assets, including trading, staking, safekeeping, spending, and fast, free global transfers.

Risky Women Compliance Network: A global network connecting, celebrating and championing women in risk, regulation, compliance, and ethics.

FULL EPISODE TRANSCRIPT

Steve Craig: Welcome to the PEAK IDV EXECUTIVE SERIES video podcast, where I speak with executives, leaders, founders, and change makers in the digital identity space. I’m your host, Steve Craig, Founder and Chief Enablement Officer at PEAK IDV. For our audience, this is a video first podcast series, so if you’re enjoying the audio version, please be sure to check out the full video recording on executiveseries.peakidv.com, where you can watch the full episode, read the transcript, and access any of the resources or links that we discuss in today’s episode. I’m really thrilled about this week’s episode. I’m speaking with Jennifer Arnold, Co-founder and Chief Executive Officer of Minerva. Minerva helps leading compliance teams get ahead of financial crime with an anti-money platform that proactively identifies risk from onboarding to exit. Jen’s mission at Minerva is to demystify AML compliance. She’s held executive-level compliance roles where she designed and implemented AML programs without introducing unnecessary cost or complexity.

With Minerva, she’s building efficient, effective solutions at scale for financial crime fighters everywhere. Welcome, Jen. Thank you for being on the podcast.

Jennifer Arnold: Thank you. Thank you for having me.

Steve: Well, let's jump in and get started. I talked a little bit about Minerva, but can you share your company's typical thirty second elevator pitch?

Jennifer: We think of ourselves as a client risk assessment engine. So if you want to understand or make good decisions about who you're going to do business with as a financial services provider, we can help you do that in about 20 seconds. We look at whole ton of data. We perform the analysis in accordance with the regulations around anti money laundering, anti terrorist financing, and then inform the organization whether they're about to make a good choice or a bad choice.

Steve: Excellent. And, and I see you started Minerva in 2020. I actually watched a video for the Next Canada Next AI Class of 2020. Can you share more about Next Canada and, and how you got your start with the company?

Jennifer:  We started very quietly working on Minerva the Brain in 2018, and we applied to our first accelerator program and that was Next AI as part of the Next Canada program. It was really, really cool. We did not know that as a startup you don't necessarily need to show up with a fully working product. We did because we didn't know better. And it was a really great experience. It's quite a rigorous program, and really academic. And they also like, they really dig into the technology to see if you've actually built what you say that you've built.

Steve: That's great. And up until that point, looking at your background, you'd been working in large global financial institutions. What was giving you the inspiration, sounds like back to 2018, to start your own, and then the pandemic came. Like how, how did you decide this was it? 

Jennifer: Oh yeah, I mean work, my work life kind of made the decision easy for me. So I met my co-founder, Victor. We were both working at Bank of Montreal on this amazing project with an amazing project team. We were implementing a transaction monitoring system for them, for the capital markets team. As part of that work, I spent a lot of time with the investigators. So these are the folks who every day, like picking up alert, do an investigation on a client, look at the transactional behavior. It's pretty labor-intensive and I had a real affinity for that group and thought this has got to be a better way to do this work. And the more time I spent with them, the more I wanted to build that thing for them. 

Steve: Well, let's shift to today and looking at your solutions on your website, the platform, the tech, as I was reading the messaging ‘context’ is highlighted through throughout those points, can you share more about how the solutions evolved in the categories today and how they interconnect and how they work?

Jennifer: Yeah, I mean, context is kind of everything really, right? When we, when we meet someone, when we make a decision, it is the contextual elements that affect our, our decision-making. And, AML is very much a contextual conversation. When the regulator says, “know your client”, they don't say- they don't mean-just look at a piece of the ID and let's look at your credit bureau score. They're saying, who are you? Where does your money come from? Where are you sending it? How do you spend it? How do we establish a baseline of behavior and attributes on this client to understand if in the future they're going to continue to behave in the way that we expect? If you think about it, so much of risk that comes with a customer is how do they earn their money; where do they send their money; who do they know; who are they connected to; who are they doing business with? Those are all context questions, and that's hard information to get because it's not the stuff that we show up with when we open an account anywhere. Right? And it's quite a bit of digging and looking for the right information that's relevant to financial crime risk. It takes a lot of time to do that work and it could be a whole lot better and a whole lot faster.

Steve: When I think about this series and the types of companies that have been on it, and then I think about practitioners, a lot of times the thinking is on that onboarding event. They have to do that KYC process to be able to know who it is at the time they're opening. But, their intentions can change over time. How they log into the account could [change], you know, there could be, account takeovers, things like that. How does Minerva enable more of a lifecycle approach? I saw you have IDV, KYC, KYB.

Jennifer: So if I think of the regulatory framework that guides us for anti-money laundering pretty much worldwide, but let's say North America specifically in this case, there are places throughout the relationship with a client where you need to kind of check in and say, are you still who you say you are,  are you still behaving in [the same] way, and it looks like this. At onboarding, I need to know that you're you, that you're really, you, that you haven't appropriated someone else's information, identification, etc. And we have a couple ways of cross-referencing that information. Once I've done that, I need to understand, yikes, is this person sitting on a sanctions list? No? Okay, great. Your like, come on in. Oh, but you know, maybe you have association with some higher risk financial products, or you work in a higher risk business like cash intensive or cannabis or something. So you're coming with an elevated risk, which means I need to understand a little more about you to get a better baseline.

That's part of the enhanced due diligence process. And then you get a risk score and you go into your transaction monitoring program. And when that spits out an alert based on transactional behavior anomalies, then we do an investigation to better understand why that transaction, what's going on, what happened.

And then we repeat that on a kind of ongoing way throughout the course of the entire relationship with the customer. Those are the pillars of client risk assessment throughout the relationship from a regulatory perspective, and we really look at that from end to end.

Steve: You mentioned that you have a couple different ways of doing identity verification. Can you talk about your overall approach? Is it document-centric or how are you verifying?

Jennifer: So for us, IDV- Minerva's-IDV solution, our idea was if we could bring together the sort of the fraud check of the IDV component along with the AML check and have them happen simultaneously, we can shave time off of the experience of onboarding and also you'll just onboard better clients more quickly if you had that information from the get-go. So the IDV solution is really focused on 3D biometrics, multiple, multiple images of a face so we can get a better match to the face that's being presented in the identification.

We can do some cross-referencing on age, on the ID versus the age of the face that we're looking at. And then there's the verification component of that identity as well. That is how we think about that happening upfront, and then being supported and looking at that identity information alongside the sanctions, political exposure, adverse media components that really round out our view on a customer, especially right at the beginning of the relationship.

Steve: Do you have good visibility into how that risk changes over the consumer's life cycle with your client, how those evolve?

Jennifer: No, that's, we're not, yeah, we're not privy to that information and we're not so-and we're not even-privy to the work that our client is doing. So for example, let's pretend Bank X is using Minerva. They make a call for information, data, and analysis. ‘Minerva The Brain’, the machine sees and does that work? But the humans do not. It's not appropriate for us to be able to see that. What a user can tell us is you identified the right target, the risk information is appropriate for this person and their risk score did change. So feedback to Minerva to help her understand that she's doing her job correctly.

Steve: Excellent.

Jennifer: But we don't have a clear line of sight into that.

Steve: Yeah. Okay. Yeah, that makes sense. And a few of the things you mentioned around Minerva and The Brain, the other element that I saw, which is pretty prevalent in your company's origin with, with the Next Canada and, what you have on there is the AI and neural networks to the deep learning. These are core concepts to what you've built. What are the AML use cases for this cutting edge tech?

Jennifer:  Yeah, so it's- it's- actually really quite simple. A human being is not capable of ingesting billions of data points, synthesizing that information, and then being able to make a risk decision based on the information in just a few seconds. It's not possible. We're not made that way. Nobody's fault, just is what we are. So Minerva is that augmentation to the human investigator. We'll give you more data, better data, so a better breadth and depth of information, but relevant to the conversation of financial crime. We don't need to know everything. We don't need extraneous data. We just need what the regulator is asking for and the information that indicates risk. Those are kind of the two components. So, Minerva is consuming that information, doing the analysis, providing the information back in a very consumable way to the user, and then providing all of the documentation that's required. So when the regulator comes knocking, you can demonstrate that you did your homework correctly.

Steve: Shifting gears a little bit to go deeper into the compliance field. When I speak on IDV topics, of course, they're not just in the regulated markets, they're- they're-in other industries. But what's interesting about compliance within large corporations or small, often the chief compliance officer, they're held personally liable for compliance failures. I wonder if this is one of the reasons why some of the same tech and same processes are being used over and over again, which I highlighted when I, saw your video, or I noticed when I saw your video before.

What's your take on that?

Jennifer: The introduction of the personal liability, like you get to wear the orange jumpsuit if your organization fails in this way, I think is incredibly powerful and motivating to get that right. It's also an intense amount of pressure and you need to train and compensate those people appropriately, for taking on that risk on behalf of the organization.

I always have mixed feelings when we're, when we hold a single, maybe single person, responsible for some of those decisions. Because you know, if your chief risk officer, for example, is the owner of those decisions and they get to wear the orange jumpsuit, if something goes wrong, they have a direct line into their board, right? So there's accountability there as well.

Steve: Do you think that there's also just a general fear of change aside from the risk that they don't want to use some of these technologies?

Jennifer: Yeah, I- I think that- I think-the biggest sort of prohibitor has been that up until quite recently, regulators have been really unclear on how they feel about AI and in what, in what circumstances is it appropriate to use AI? And you know, the black, the black box solution has always been verboten in financial services. You cannot do that. You have to be able to show like data going in, what transformation and processes are happening, data coming out. If you can demonstrate that, then that's a much easier conversation. But recently, and even if you look at Sarah Paquette's recent address, who is the CEO of FinTrac, everyone's warming up to the idea of AI because they know it's what will be required to do this job well.

Steve: When I've worked with compliance officers in the past, explainability has been top of their mind. And then model governance, being able to track how models change, and the drift, and that is not just in IDV or KYC, that's in credit risk and how they price products. When I think about compliance too, it's- it's-not just what the regulators are saying or, or the fines or the process. I'd be remiss if I didn't talk about the bigger picture, which is beyond the bad press. It's the ‘why’. So why are we doing these anti-money laundering processes? What- what's-your take on the ‘why’, beyond the government told you so.

Jennifer: That's- that's-my favorite part of the job. It- it-is the responsibility of those financial services organizations to take care of their shareholders, run a business and obey the law.

But for me, the why is the law there in the first place? Well, it is there to prevent money laundering and terrorist financing. We have lots of great examples like from today and recent history and far back history that says this work is important. We need to protect our communities that we live and work in.

Human trafficking is a form of financial crime. I can't think of anything more disgusting than humans trafficking in other humans. And we have the power to actually interfere with that today. We have the, we have the technology and the knowledge to actually be able to put an end to things like that. And so why wouldn't we?

 Steve: How does Minerva help fight the fraud and the human trafficking. Like what, what specifically are you doing to enable that and prevent it? 

Jennifer: Yeah, so that is actually pretty, is use case specific I think, but I think about it in a number of dimensions. One is if you can get a more accurate sense of who or what that customer is when they walk in your door, you have a better chance of preventing financial crime from happening, just full stop. If you can get a good beat on them and the information that we’re currently looking at today in financial services is not sufficient to make a call on risk in that way. And so if we add in other data components such as adverse media, such as, you know, legal and criminal, data to understand who we're dealing with, that gives us a more fulsome picture. We can make a better decision upfront. During the investigation process, so much of the problem we have is we're operating so far after the fact, often months after the fact. Fraud operates in real time. AML should operate in real time. That's how we become truly useful, truly a force for good rather than reporting things after the fact.

Steve: Yeah, I like- I like-what you said there and it's true. Fraud is operating 24x7, it doesn't take a bank holiday and it doesn't have, you know, it doesn't wait for months for something to change in the ecosystem. So that's really, really powerful. And I know Minerva serves banks, financial institutions. Fintechs, I'm really interested though, in your crypto, cryptocurrency footprint and some of the customers like Binance, Coinbase that are listed on your website. How do you think crypto compliance is different from some of the more established banks? 

Jennifer: Yeah, well, it really depends on who you're talking to in crypto, right? Like Coinbase is a centralized exchange. So they function very much like a bank and they have the same obligations. What I have noticed about crypto, and I think what I love about that community, is they are technology curious. They are very interested in technology solutions for regulatory challenges. That is an exciting conversation because you can do so much more for so much less. And it's a very exciting group of folks to talk to because they're like: “Oh, so we can actually do all of these things. And we could actually move it closer to real time, if not real time itself and be effective in our marketplace and better protect everybody and it will cost us less too? Sign us up.”

Steve:  Do you find that it's taken an evolution from the governments also to have more position or do you find that they've been more kind of forward thinking in the crypto arena?

Jennifer: I think, so for us, regulators are the canary in the coal mine. I think in, in some ways we- we-do a lot of research, we do a lot of conversation and- and-reading of what's coming out from regulators globally.

It was really clear at the end of 2021 what was going to change for crypto in 2022. If you were just reading what the regulators were saying and what was coming up. So, they needed help, and certainly the larger an institution is the more pain they're in from a cost efficiency and effectiveness place. So that was a really good fit for us and they turned out to be like really, really cool customers.

Steve: Phenomenal. Well, with the cryptocurrency market as it's evolved,  a lot of the benefit that people saw in that was it's cross border - it's - there's anonymity to it, but those are all things that fraudsters and financial criminals - like they're - it's great for them. And so bringing in a some controls are- are-really important when you think about your customers more broadly, and that could include crypto exchanges or, financial institutions like retail banks and stuff. Where do customers achieve the most lift, like the return on investment when they go from one practice to deploying your technology?

Jennifer: Yeah, I- I-think if we look at the processes specific to performing enhanced due diligence and AML investigation, that is the most meaningful lift because today those processes are really manual. They involve lots of swivel chair and copy and paste, which as far as I can tell, is not actually a tool for investigation. Being able to show organizations that that four to eight to sixteen hour leg of work for a human being can be truncated into a few minutes. They can move so much more quickly, they can increase the capacity of their team. It's really evident on day one.

Steve:  And do they measure that in, financials? Or they measure that in loss prevention? Or what are some of the key criteria? 

Jennifer: So there are a number of ways that you would look at that, right? Which is, how much does a- how much does-it cost an organization to investigate a case today? Right? because that impacts all kinds of other things. But certainly AML is a cost center in an organization. So sure, I have all of my technologies, and I have many, and I have my headcount and I have my consultant's allowance who are going to come in when we've had a, you know, difficult conversation with a regulator, for example, being able to say, you don't need to actually grow your team size. You can increase their capacity and their capability with a single tool. That's pretty meaningful and very easy to measure. Like, the metrics for an intelligence unit are, how many cases per day per investigator are getting done? What does that cost us? How far behind are we in terms of case investigation. Do we have three months of work to get through? Are we forever going to be three months behind? Yeah, probably.

Steve: Yeah. When I've spoken with chief compliance officers, they often tell me that they don't get increases in budget. You know, as the organization grows and scales, they're often working with the same size team, so being able to allow them to do more with less and to do it faster, it sounds phenomenal. And I think that's been the- the-theme for the last few years with AI in general. It's like it's- it's-not a replacement tool, it's a augmentation and acceleration tool.

Jennifer:  I mean, again, the regulators are, are pretty clear that it has to be a person, human judgment, accepting the risk decision on behalf of an organization. And there are places where you can automate some of that decision making. But in the case of an investigation or enhanced due diligence, there has to be a human in the loop, because we're not at the place yet where regulators would be super comfortable when we pull them out. The investment and then de-investment in compliance teams is incredibly painful to watch.

So from a banking perspective, the regulator comes in, they do an examination, there's a massive spend on new technology and more people, and then you get in like a year and a half and then they start cutting people and cutting and reducing costs and reducing costs. And we just go in this kind of forever loop.

Steve: The audit has been passed, move on, move the budget elsewhere, and that, that's that cycle.

Jennifer: Exactly. Exactly. And again, some banks had had these beautiful programs that were actually quite leading edge, that get completely gutted the minute the regulatory pressure is off. 

Steve: Yeah, that's- that's-unfortunate. And- and-I think about when the regulatory pressures on, when you're getting in front of governments, if some of the things that have happened in recent years, in the US with, congressional or or senate conversations you can't just say, oh, well the AI made us do it. You know, this- this-we made our decisions over. It's not going to work. They'll be in the hot seat. But yet AI is evolving rapidly. This 2023 was crazy in terms of development and generative AI. And post pandemic, we, we've seen this further globalization, more cross-border commerce, people working in different countries for companies. The remote culture has really accelerated. What do you think, as an AI company, 2024 looks like for Minerva, in terms of what you're, you're building?

Jennifer: So for us, we are very much applied to AI solving a specific problem for a specific group of organizations that have to manage those, the regulations, as well as the, you know, societal responsibility of putting into financial crime, and human trafficking, etc.

So for us it is very much the application of AI to a specific problem rather than generalized AI kind of becoming this, like peanut butter for all kinds of other problems. I think it is, like a risky move to build a company on top of someone else's technology. So for, because they can just come and eat your lunch anytime they wish, once they turn their eyes to you.

So that's not for us. I think we'll see that kind of activity in the marketplace, and then I'll think we'll see some of those getting knocked out. Like, if you built your business on Chat GPT, they're- they're-coming for you. Right? They're coming for you. I think that we'll see more- more-things like us in the marketplace. And- and-that will be interesting because there are maybe one or two other organizations that I think are thinking about anti-money laundering the way we do. I'm excited to see kind of our little peer group grow, because we're quite tiny. Like, AML is huge; lots of noise in the marketplace. You know, we have name scanning and transaction monitoring and things like that, that generate work for the human, but there's very few of us who actually do the work with the human.

Steve: Do you foresee AML practices moving more and more into unregulated markets where money's being exchanged, especially in this cross-border scenario? 

Jennifer: Yeah, I mean, if you move money, if you accept deposits, you are likely going to be caught up in the net of regulation. If you would like to not lose money or facilitate crime, it would be in your best interest to know who you're doing business with.

Steve: Yeah, there was a, around the time we're recording this, there was a news story about a large retailer who got in trouble for gift cards and, often fraudsters buy gift cards to launder money or to shift money. And it's like, well, I'm not a bank. Well, you're- you're-exchanging money in funds. So I, I think that's going to be…

Jennifer: Yeah. You're exchanging money, you're exchanging value, right, too? So that's also like, you know, in that net of regulation. Yeah. Gift cards. I was going to say, gift cards are an awesome way to launder money - I don't mean awesome - but it is a very popular method. And so, you know, like I think it was almost 10 years ago when that first really kind of came to the fore for big banks. There was like, oh my God, how are we going to manage this? And I love those times because it's when we get creative.

Steve: Well it's- it's-often they're- they're-using them to launder money, but it's also how they like to do phishing and scams. It's like, “Hey, can you please go buy me, you know, a thousand dollars in gift cards?” And they trying to spoof you as the CEO of the company. So it's- it's-like being able to really understand how that process is working. And it's tough because conflicts of interest over, you don't want to create too much friction. You can't AML KYC just because someone's buying a hundred dollar gift card in your store. Yet at the same time, there's a network of people buying a hundred dollar gift cards across stores. Might need to connect those dots.

Jennifer: My team gets texts from me asking them to go out and buy certain gift cards. I'm like, yeah, maybe not this company.

Steve: Well, we're getting close to time Jennifer and and I, this has been an amazing conversation. If you've seen any of the episodes in the executive series, I'd like to go a little bit beyond the profile, LinkedIn profile and the press, share more about the person behind the company. And I was looking at different content about you on the web. I found this network, Risky Women Compliance Network that says that you love Sci-Fi. So a couple questions like what is the Risky Women Network? And then I'd love to hear more about your sci-fi interests.

Jennifer:  Risky women is exactly what it sounds like. It is female or, female presenting individuals who work in risk and compliance. It is like, AML specifically is actually quite small and often people just know each other or of each other. And it's a really great community. There's community, there's education there is mentorship. It's a pretty frickin’ great organization.

Sci-Fi. Yeah, I mean, I'll probably get in trouble with the sci-fi folks, but I guess I'm really on the edge of kind of sci-fi and fantasy. I, you know, I was one of those kids that probably read, oh God, I'm going to say this out loud, like the Hobbit thirty-four times, you know, before the age of 12.

I was completely obsessed. And then after the Hobbit came, like the Dune series, and so. Any, any of anytime anything like that gets transformed into a miniseries or a movie, like, I'm lost and my poor husband is like, who is, he's a movie connoisseur. It is his like, you're killing me, you're killing me with the sci-fi.

Steve: I- I-just recently discovered Dune all enough, and I, I thought, wow, I have a House Atreides. I think the actor, who did the, the remake…of that…

Jennifer:  Need a little more Ginger. Need a little more ginger.

Steve: But the next one's coming out soon. I imagine you go see an IMAX in the theater.

Jennifer: Oh, I can't, I won't see IMAX mostly because it'll just make me barf. But, I, yeah, I, I'm really excited. Like we went, I dragged friends and family en masse for the first release. I hope we can do the same thing. [Steve: Excellent, excellent.] Well, I also, [Steve: yeah] and I don't know if this is technically Sci-fi, um, but I also have this thing, I've been on this kick for the last few years, um, about like books about books or libraries. So, whether there are like other dimension or magical in some way. I am like deep into this weird little subculture of on books, about books. 

Steve: Books about books, it's very meta. I don't think I've seen [Jennifer: It is, I love it] that genre.

Steve: Very, very cool. Well, back to the podcast in the company, what types of conversations would you be looking to have from those that are watching this or listening from the market?

Jennifer: Oh wow, Yeah. I'm always interested to talk to anybody who is up against the wall when it comes to being able to grow, mature, their financial crimes program because of whether it's budget or headcount limitations and are looking to be creative or have creative solutions. I am really interested in talking to customer experience people because I think they et so much of the blowback when things go wrong on that front. So I, I love hearing more there. Yeah, and for me, like any really more AML nerds like the merrier, the more the merrier. We're always happy to talk shop. We have a dinner series. We try to invite as many people as possible. If you're someone who's interested in that content, what's happening with the regulations? How does it impact your business? What is so-and-so over at Organization X doing that, we are not, and you want a safe place to have that conversation and not get in trouble, to be honest, then one of our dinners is a great place to do that.

Steve: Very cool. Very cool. And what's the best format to connect with you? Is it the website or LinkedIn? How do you prefer to be connected with?

Jennifer: I am fairly active on LinkedIn and I'm pretty sure you can, like my email's everywhere, so just email me directly. 

Steve: Alright, I'll be sure to include your email address, for the company, for people to reach out. Well, Jen, thank you so much for taking the time to speak with me today on the podcast.

I'm really inspired by the work that you're doing in AML and, and bringing AI to [Jennifer: Thank you] something's a little bit more dated at times, so with you at the helm of Minerva, we've got some exciting things ahead, so thanks again.

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