FICO launches cryptocurrency trade risk solution for banks

The software will bring crypto risk assessment to KYC processes.

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FICO has teamed up with Bitfury Group to create a cryptocurrency risk assessment solution for financial institutions. 

Announced on Wednesday, FICO said the partnership with Bitfury will focus on creating a risk management and monitoring service for banks and other organizations considering cryptocurrency-related future products. 

When cryptocurrency first began to establish itself as a major financial heavyweight, traditional banks and financial companies maintained their distance due to the decentralized nature of trading and the relatively untested technology that underpinned cryptocurrency exchanges: the blockchain. 

In recent years, the potential of blockchain technologies beyond virtual coins has prompted technology vendors and banks alike to take the market more seriously -- and as cryptocurrency has proven itself to be a popular alternative to fiat currency, many financial service providers are now seeking a way to cash in. 

However, there is risk associated with cryptocurrency-related projects: the stability of the technology used, whether or not control of funds is centralized -- and, therefore, potentially at risk of theft or exit scams -- cybersecurity controls, money laundering, and more.

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To address these issues, FICO and Bitfury say that the new offering will focus on risk issues at the Know Your Customer (KYC) stage, a verification process used by banks to manage risk and to verify identities before a relationship is established. 

The joint solution will combine FICO's financial crime and money laundering investigation services with Crystal blockchain analysis technologies. 

"The joint offering will help banks assess the risk of their clients' crypto business at the onboarding stage, as well as monitor that risk on all active accounts," the companies say. "This unique combination will enable banks to fully understand and actively manage the risk-exposure from customers -- individuals and corporations alike -- that engage in virtual currency transactions."

At the onboarding stage, KYC processes will include listing cryptocurrency assets and wallets. These assets will be cross-checked with Crystal to create a risk score, based on transaction histories and other data for due diligence. 

It may also be the case that the new solution will be applied to existing clients for crypto-related monitoring; for example, the risk score may change if suspicious activity is detected.

"Cryptocurrency services are an under-utilized market for many large banks, due to the crypto-related risks and lack of transactional intelligence available," said Sebastian Hetzler, VP of financial crimes product management at FICO. "This partnership integrates FICO's AI-powered financial crimes detection with Crystal's extensive blockchain analysis, providing financial institutions with an in-depth crypto-risk assessment of client activities and relationships."

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