Fraud DAO Highlight: Daniel Sankey, Former Head of Financial Crimes Compliance at Brex

The Fintech Fraud DAO is a decentralized network of fintechs that pool data to identify fraud before it proliferates. 

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To better understand how something like the Fintech Fraud DAO can be used to prevent fraud and why organizations should be open to exploring this form of data sharing, Unit21’s Product Manager, Dhiraj Bhat, interviewed Daniel Sankey, the former Head of Financial Crimes Compliance at Brex and current Head of FIU at Anchorage Digital.

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Our association began while Daniel was at Brex, where he has been a huge supporter of the Fraud DAO initiative, and led our efforts to partner with Brex on the project. Brex is a corporate expense management platform offering debit cards and cash management accounts to technology companies.

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Here, we’ll discuss:

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• How Daniel thinks about fraud and his point of view on fraud detection vs. prevention
• The top challenges Daniel believes are present in fraud 
• How Brex addresses fraud currently
• How he believes the Fintech Fraud DAO can be used as a weapon against fraud

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Let’s dive in.

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Daniel Sankey’s Journey in Fraud Detection and Prevention

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Dhiraj: 

“What has your industry journey been like in the world of fraud?”

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Daniel:
“I started in the online fraud team at Wells Fargo - Which at the time was considered a high-tech portal. I got started in fraud almost accidentally because I was quite bored of working in a branch. Eventually, I ended up working on resolving online fraud, moving into AML, and so on.

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Once I departed Wells Fargo, I went straight into one of the world’s first big Fintechs: Square, working in a similar role. Further, I moved to an early-stage Coinbase - I could definitely write a book about the time there, because the early days of crypto were like the Wild West - the things we learned at the time were unprecedented. 

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The novelty of the fraud vectors made it incredibly fun to work on. Coinbase’s response to the fraud was a heavy focus on blockchain analytics. De-anonymizing the blockchain and identifying actors was unheard of at the time. 

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After that, I joined Brex, where the boundaries of fraud and the vectors have been quite different as well.”

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Dhiraj: 

“How do you view fraud as an innovator who is constantly pushing the boundaries of shifting from detection to prevention?” 

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Daniel: 

“A lot of the time, fraud is seen as a cost center like in an IT department - or similar. 

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Data in these spheres is valuable, just as it is in marketing tech for example. Tailoring the user experience (level of friction) based on the level of information has become the trend, and turns into a race of who can tilt the scales quicker and find the balance between friction and security. 

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If a company isn’t serious about leveraging data, the fraud program will be a set of binary rules,  such as brute force prevention of vectors. However, because companies know that data is money, it is siloed.

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The key is sharing it in a way that doesn’t compromise integrity or privacy.”

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How Fraud Has Evolved Due to the Pandemic

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Dhiraj: 

“In your perspective how do you think fraud has evolved during the pandemic vs before?”

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Daniel: 

“The pandemic showed us how unprepared the public sector is to deal with rapid changes - the technology exists, but the obligation and incentive to adopt it is very low. 

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During COVID, Small Business Administration (SBA) loans were hit really badly - no controls were built by the government to mitigate the threats. 

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A report was released that stated that about 90% of all unemployment and SBA loan apps coming out of Vermont, for instance, were fraudulently originating from countries like Nigeria. It affected Brex’s relationships with our banking partners who were originating the loan wires since the obligation is on the sending entity in cases of wire transfers.” 

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Dhiraj: 

“How did Brex respond to the rampant fraud during and post-pandemic?”

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Daniel: 

“The pandemic has forced companies to drive better internal accountability and toughen up their fraud programs. It has also been far less of an issue since the SBA loans don’t see the same degree of traffic, accessibility, or even demand. 

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Most of Brex’s fraud programs are internal - vendors are used for identity verification and risk scoring, but many of the scores coming out of the vendors are used to feed their own internal models. 

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Fraud rates are currently low, but eventually, we at Brex do foresee a need to ramp up and use infrastructure to navigate the fast-moving vectors in the fraud space.”

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How Brex Stays Ahead of the Curve Regarding Fraud

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Dhiraj: 

“What is a particular fraud area that is relevant to companies in your space? How is Brex staying ahead of the curve on this?”

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Daniel: 

“Occupational fraud. In many cases, fraud controls being built are internal from Brex as feature sets. Expense management specifically will be bolstered by fraud controls that the employers can turn on and off - providing real-time alerts to employers to ensure that occupational fraud can be kept in check, or at least mitigated to some extent. 

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This is an untapped area, because banks do not take responsibility for occupational fraud, instead passing the liability on to the employer.”

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Why Daniel Joined the Fintech Fraud DAO

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Dhiraj: 

“Why did you join the Fraud DAO? What do you hope to accomplish through being a founding member of the DAO?” 

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Daniel: 

“There are a couple of different reasons. 

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We see it as leveling the playing field to a certain extent.

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Small players aren’t able to compete with someone like a JP Morgan’s risk models - which of course are better than most. 

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Most small and medium businesses do not want to invest in risk and fraud. It's less of a focus than fraud. Lowering the barrier to entry is exciting and can help drive product innovation across the board. 

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I personally love the crypto space, and projects such as KlimaDAO, and the Fintech Fraud DAO are a very compelling use case for the technology. That’s why I work in tech - I like to try innovative new things and see what takes off - it's incredibly exciting to be on the ground floor when technology is being adopted, or as in the case of DAOs - rediscovered.” 

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Concluding Thoughts

At the end of the day, data is money. 

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Programs like the Fintech Fraud DAO help companies access more data that they can wield to balance friction and security with customer experience while infusing it into their fraud prevention programs, thus leveling the playing field between newcomers and long-time industry staples.  

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If you are interested in discovering how to get access to better data to fuel your fraud prevention program, please reach out to support@fraud-dao.com.

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