Loss Liability and KYC Insurance: Why Your Business Needs Them


As Anti-Money Laundering (AML) and Know Your Customer (KYC) fines increase worldwide, digital onboarding tools and KYC insurance can help protect businesses in the face of fraud. After all, consumers are wary of financial institutions associated with fraudulent activities and even more hesitant to share information with those that have experienced data breaches. The regulatory pressure and the possibility of hefty fines make banks more cautious when accepting new clients, adding friction to customer onboarding experiences and reducing digital sign-ups. With support from a fully-managed digital customer onboarding solution, organizations can reduce loss liabilities and focus on growth rather than fraud.


Pressure Mounts as Regulatory Scrutiny Intensifies

The global pandemic, followed by the Russian invasion of Ukraine, grew the volume of online transactions leading to sanctions. Upheaval in the cryptocurrency space and even banking failures have further made markets uneasy. As a result, regulators have increased their focus on KYC verification and AML compliance in recent years. 

According to The Financial Times, “Banks and other financial institutions were fined almost $5 billion for anti-money laundering infractions, breaching sanctions and failings in their Know Your Customer systems in 2022.” USAA Federal Savings Bank was one institution penalized in 2022, with the Financial Crimes Enforcement Network (FinCEN) assessing a $140 million civil money penalty.

The bank failed to improve its AML program and report suspicious transactions. FinCEN’s Acting Director Himamauli Das said, “Growth and compliance must be paired, and AML program deficiencies, especially deficiencies identified by federal regulators, must be promptly and effectively addressed.”


Common reasons for fines include the following:

  1. Not filing suspicious activity reports
  2. Neglecting to carry out proper Customer Due Diligence (CDD)
  3. Failing to ensure the effectiveness of AML systems
  4. Not checking customers for money laundering


Fraud Shows No Signs of Letting Up

Fraudulent activity impacts financial institutions and consumers. Javelin Strategy & Research finds, “Total identity fraud losses were $43 billion in 2022, affecting 40 million U.S. adults.” Phishing, card skimming and other scams rob individuals and make them wary of doing business in spaces where their data could be stolen or compromised.

Money laundering schemes and digital payments increase banks’ exposure to crimes. Also, synthetic ID fraud continues to grow at a quick pace. McKinsey & Company says it accounts “for 10% to 15% of charge-offs in a typical unsecured lending portfolio.” These challenges and increased regulatory scrutiny make having KYC insurance and a Customer Identification Program (CIP) crucial.


Loss Liability and KYC Insurance Reduces Risks

Hefty fines and the cost of identity fraud impact your bottom line. Fortunately, loss liability and KYC insurance solutions like Instnt can protect your organization, providing peace of mind and allowing leaders to prioritize top-line growth. Instnt Access™, the first portable KYC solution, both streamlines the customer experience and ensures KYC and AML compliance. While Instnt helps businesses increase digital signups by over 50% and provide a frictionless user experience, it also allows businesses to shift fraud loss off the balance sheet. Keep in mind that shifting fraud loss liability supports Basel III regulations and frees up capital. 

The cost of fraud for businesses is undeniably high. Instnt indemnifies financial institutions against $100 million of fraud loss, in one case saving a banking client $150,000 in fraud loss by removing the liability from their balance sheet and covering it.


KYC Technology Backed by Fraud Loss Protection

In addition to reducing the cost of fraud, firms must also address the customer experience, which is even more critical if the organization was previously the victim of a cyber-attack or data breach. Customers lose trust in institutions without adequate identity verification practices or those with past instances of failed KYC. A fully-managed customer acceptance platform with KYC insurance reassures new customers and financial organizations. 

According to the Bank Administration Institute (BAI), “The biggest challenge for payment providers is finding a transaction monitoring solution that fits into their infrastructure quickly and without creating friction.” Fortunately, with Instnt Accept™, businesses can simply paste a code into their current onboarding flow. There’s no need to change or replace existing technologies, as Instnt conveniently sits on top of them. With plug-and-play zero code integration, businesses can be up and running with Instnt Accept™ within minutes.

Instnt makes it just as easy for your customers to sign up. With one click, good customers can access your services or products. Instnt helps financial firms increase sign-ups, even millennials and Gen Z customers. Quick verification and acceptance without compliance issues or fraud loss concerns are a win for banks and their clients.


Build Back Your Reputation and Earn Your Customer’s Trust

Fraud detection technology and KYC insurance save your company from reputational damage and substantial penalties. The best solutions also deliver a seamless digital onboarding experience for your customers. 

With Instnt, you know your customers the first time around. When fraud occurs, Insnt’s liability protection covers it. Schedule a demo today to see how Instnt can improve your approach to managing fraud.


Jessica Elliott is a business technology writer specializing in cloud-hosted and cybersecurity services. Her work appears in U.S. News, Business.com and Investopedia.



The Financial Times – Global anti-money laundering fines surge 50%

The Financial Crimes Enforcement Network (FinCEN) – FinCEN Announces $140 Million Civil Money Penalty against USAA Federal Savings Bank for Violations of the Bank Secrecy Act

Javelin Strategy & Research – Identity Fraud Losses Totaled $43 Billion in 2022, Affecting 40 Million U.S. Adults

McKinsey & Company – Fighting back against synthetic identity fraud

Bank Administration Institute (BAI) – Anti-money laundering scrutiny is growing in the payments space



About the Author

Instnt's fraud loss indemnification technology provides coverage of up to $100M for fraud losses stemming from synthetic, third-party, and first-party fraud. With Instnt's comprehensive fraud loss protection, businesses can confidently extend their services to a wider customer base, enabling them to embrace more opportunities and enhance revenue streams while maintaining a secure, fraud-free environment.