- Mastercard partners with Feedzai, integrating AI to combat online financial fraud and money laundering.
- Feedzai’s system directly integrates with Mastercard’s CipherTrace Armada, enhancing fraud detection in crypto transactions.
- The partnership aims to legitimize cryptocurrency, aligning it with traditional financial asset regulations.
Mastercard is intensifying its initiatives to identify and thwart fraud occurring via cryptocurrency exchanges. In an exclusive conversation with CNBC, the company revealed its collaboration with Feedzai, a regulatory tech platform focused on using artificial intelligence to fight against online financial fraud and money laundering.
The collaboration between Mastercard and Feedzai involves a direct integration of Feedzai’s system with Mastercard’s CipherTrace Armada platform. This platform is employed by banks to scrutinize transactions from more than 6,000 cryptocurrency exchanges, looking for signs of fraud, money laundering, and other dubious activities.
Instead of using an API (Application Programming Interface), CipherTrace Armada will be directly incorporated into Feedzai’s technology. This setup allows Feedzai to “ingest” the data, facilitating immediate notifications regarding any suspicious cryptocurrency transactions.
““This will increase fraud detection by protecting unwary consumers, but will also detect potential money laundering activity and mule accounts.”
Nuno Sebastio, Feedzai CEO and co-founder
According to data from Feedzai, it’s estimated that about 40% of fraudulent transactions currently move directly from bank accounts to cryptocurrency exchanges.
This partnership with Mastercard not only enhances security measures but also grants Mastercard access to Feedzai’s advanced artificial intelligence capabilities. Feedzai’s software is designed to rapidly identify and halt suspicious transactions in mere nanoseconds, while also accurately distinguishing legitimate transactions.
Feedzai’s RiskOps platform oversees transactions amounting to over $1.7 trillion each year. The company, with dual headquarters in Coimbra, Portugal, and San Mateo, California, in the heart of Silicon Valley, holds approximately 100 patents. It continues to strengthen its technological edge by securing an average of 10 patents annually.
Nuno Sebastião, commenting on the current state of cryptocurrency transaction monitoring by banks, pointed out a significant oversight. He noted that many banks, believing they are effectively blocking illegitimate cryptocurrency transactions, are actually only focusing on transactions involving well-known and regulated entities in the crypto world, neglecting others.
Mastercard is moving to legitimize cryptocurrency as a mainstream financial asset, aligning it with traditional asset regulations. This shift occurs amid growing interest from banks in crypto, despite concerns over regulation and fraud.
In 2022, crypto-related losses surged by 79% globally, with illicit addresses receiving $14 billion, as reported by Chainalysis. This increase in theft and scams has made banks cautious, with some, like JPMorgan, NatWest, and HSBC, restricting or blocking crypto transactions. This cautious stance has drawn criticism from figures like Coinbase CEO Brian Armstrong, especially in the U.K., where several banks have stopped transactions with crypto exchanges.
Mastercard, competing with Visa in the global payments network, aims to mitigate these risks through its partnership with Feedzai, enhancing the ability to differentiate between legitimate and fraudulent transactions. This effort is part of Mastercard’s broader strategy, which included acquiring blockchain firm CipherTrace in 2021 to develop tools like CryptoSecure for monitoring risky crypto transactions.
