Enhancing Anti-Fraud Protection Measures for Banks

In the ever-evolving landscape of the financial industry, synthetic ID fraud remains a significant challenge. Fraudsters use fake identities to open new accounts, bypassing verification processes and evading detection. This issue was recently discussed by Sunil Madhu, CEO and founder of Instnt, and Tracy Kitten, Director of Fraud and Security at Javelin Strategy & Research, in a PaymentsJournal podcast.

The conversation touched upon the growing use of automation by fraudsters, who leverage collections of stolen or fake IDs to target numerous businesses. This expansion of their reach poses a significant threat to the industry.

Tracy Kitten emphasized that it's not just about the financial loss from fraud, but also about ensuring that financial institutions are not funding terrorist organizations or neglecting due diligence on transactions.

To combat these threats, Instnt has entered into a unique and exclusive partnership with insurance company Markel. This partnership offers an entirely new approach to dealing with the threat of first-party fraud.

The insurance company will cover losses from first-party fraud, protecting businesses from such losses from the outset. Moreover, the management of claims payments will be handled through Instnt's insurance agency.

First-party fraud, or credit defaults, are significant concerns within the lending industry. Traditionally, financial institutions address various types of fraud in different areas of their operations. For instance, first-party and stolen ID fraud in lending, fake ID fraud in checking and savings accounts, e-commerce fraud in credit cards, ACH and chargeback reversal fraud within the bank itself.

However, the overall performance of the toolbox used to combat fraud is generally poor, and banks constantly have to retool that toolbox to keep up with different types of fraud.

This partnership with Markel could provide a solution. By offering fraud loss insurance, losses can be offset and businesses can prevent incurring losses in the first place. Additionally, compliance regulations like Basel III require financial institutions to maintain capital reserves to offset losses from first-party fraud. With fraud loss insurance, the CFO can convert these reserves into working capital for their businesses.

Insurance also increases the top-line revenue for the business by instilling trust in onboarded customers. By offering protection against fraud losses, businesses can attract more customers and grow their operations.

In conclusion, the partnership between Instnt and Markel represents a significant step forward in the fight against bank fraud. By offering a comprehensive solution to first-party fraud, businesses can protect their assets, attract more customers, and grow their operations.