BARCELONA, SPAIN – MARCH 01: A view of the MasterCard company logo on their stand during the Mobile World Congress on March 1, 2017 in Barcelona, Spain. (Photo by Joan Cros Garcia/Corbis via Getty Images)
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Mastercard is redoubling its efforts to detect and prevent fraud that is passed through crypto exchanges.
The company told CNBC exclusively that it is partnering with Feedzai, a regulatory technology platform that aims to combat money laundering and financial fraud online using artificial intelligence.
Through the partnership, Feedzai will integrate directly with Mastercard’s CipherTrace Armada platform, which is used to help banks monitor transactions from more than 6,000 crypto exchanges for fraud, money laundering and other suspicious activity.
CipherTrace Armada will be embedded directly into Feedzai’s technology, rather than accessed through an API, or application programming interface, where Feedzai “inhales” the data to enable real-time alerts on suspicious crypto transactions.
“This will increase fraud detection by protecting unwary consumers, but also detect potential money laundering activity and mule accounts,” Feedzai CEO and co-founder Nuno Sebastio told CNBC. Mule accounts are user accounts that fraudsters exploit to launder their ill-gotten funds.
An estimated 40% of fraudulent transactions go directly from a bank account to a cryptocurrency exchange today, according to data from Feedzai.
The tie-up will also give Mastercard access to Feedzai’s artificial intelligence. Feedzai says its software can identify and block suspicious transactions in a matter of nanoseconds — but also recognize transactions that are legitimate.
Feedzai’s RiskOps platform analyzes transactions worth more than $1.7 trillion annually. Co-headquartered in Coimbra, Portugal, and San Mateo, California, in Silicon Valley, the company holds close to 100 patents and secures an average of 10 patents per year to protect its technology.
“Many banks that believe they are preventing illegitimate crypto transactions are actually only blocking transactions involving the widely recognized and regulated entities within the crypto space and leaving the rest out,” Sebastio said.
Crypto entering the mainstream?
The move marks Mastercard’s push into the market to legitimize crypto as a mainstream financial asset that can be subject to the same rules and compliance frameworks as traditional assets.
Banks and other large financial institutions have shown increased interest in experimenting with crypto in their products and services. But the next step, deploying commercially available crypto products as part of their core offerings, has proven more elusive.
Banks have been concerned about the lack of comprehensive regulations and applications of digital assets on fraud and fraud.
Last year, the amount of theft and fraud caused a global increase of 79% in crypto-related losses from the previous year, according to data from blockchain analysis firm Chainalysis. Illegal addresses received $14 billion in 2022 year over year, almost double what they received in 2020.
Mastercard’s vast network is used by banking institutions worldwide to process and monetize payments.
The company competes with a peer payments giant Visawhich is also in the business of supporting card payments, among other fintech services.
In the UK, banks have shown reluctance when it comes to being associated with crypto. Several larger lenders have stopped transactions with cryptocurrency exchanges on their networks, citing the risk of fraud.
Top banks inclusive JPMorgan, NatWest, and HSBC have restricted or blocked crypto transactions. This drew criticism from Coinbase CEO Brian Armstrong, who said the development affected Britain’s ambition to become a global “Web3” hub.
Ajay Bhalla, president of cyber and intelligence solutions for Mastercard, told CNBC that the “interconnectedness of life today and increasing digital penetration of finance has brought risk as well as opportunity.”
“Our latest data shows fraud on transactions where people buy crypto is 5 times higher than regular fiat transactions,” Bhalla said via email, adding that, with Mastercard’s new tie-up with Feedzai, financial institutions “will be able to tell good transactions”. of bad.”
The partnership builds on Mastercard’s agreement to acquire US blockchain sleuthing firm CipherTrace. Mastercard bought CipherTrace in 2021, and the following year launched its first product using the company’s technology, called CryptoSecure, to analyze and block transactions from fraudulent crypto exchanges.