Authors: Jeremy Clifton, CRCM, CAMS and Nick Milcarek
On September 8, 2023, FinCEN issued an alert regarding the fraud scheme known as “pig butchering”. Pig butchering is a form of fraud that involves victims (the pigs) giving money to foreign actors who operate under the guise of a successful money manager involved in crypto currency (virtual currency) trading. Once the perpetrator is satisfied with the amount the victim has given, they drain the entire “account” of funds from that victim (the butchering). Many of these scammers are victims of labor trafficking directed by large crime syndicates in Southeast Asia who reach out to millions of people around the world. These scammers usually reach out to the victims through social media, email, or text to persuade them into buying into this supposed “high return investment”. The fraudster will leverage high pressure sales tactics such as them missing out on a potential lucrative opportunity to further convince them into action. Once the victim begins to trust the supposed “investor”, they are directed to use a fraudulent website most likely controlled by the scammer. Note that this can also include trusted third-party applications. The aggressor may also demand remote access to the victim’s devices to create accounts via virtual asset service providers (VASP). Many victims are also asked to purchase multiple pre-paid cards or make large wire transfers to unknown entities. Unfortunately, victims have been known to take out money from tax advantage accounts, take on a second mortgage, or a home equity line just to put money into the scheme. Recent incidents have shown more successful scammers even inviting whole families and friend groups to join in. After the victim starts to buy in, the perpetrator must maintain legitimacy by fabricating high returns and even allowing the victim to take small amounts out of the “fund”. This builds confidence and reassures the victim that the investment is real. If the fraudster starts to believe that the victim is losing confidence in them and the investment, they become more aggressive by developing reasons to stay in and pressuring them to not miss out on the opportunity. If that does not work, the perpetrator pulls out all the money from the account and eliminates any contact with the victim(s).
One more interesting comment that FinCEN noted in this FIN is that financial institutions should “When requested to provide supporting documentation, financial institutions should take special care to verify that a requestor of information is, in fact, a representative of FinCEN or an appropriate law enforcement or supervisory agency. A financial institution should incorporate procedures for such verification into its BSA compliance or AML program. These procedures may include, for example, independent employment verification with the requestor’s field office or face-to-face review of the requestor’s credentials.” If your bank does not already have such a procedure in your written BSA program, it’s a good idea to do so now.
There are many red flags that can indicate a possible pig butchering scheme. Financial institutions should analyze multiple factors associated with historical financial activity, transactions in line with business practices, and whether the customer shows signs of multiple red flags. Red flags, and the formal alert by FinCEN can be found here: FinCEN_Alert_Pig_Butchering_FINAL_508c.pdf
On September 8, 2023, FinCEN issued an alert regarding the fraud scheme known as “pig butchering”. Pig butchering is a form of fraud that involves victims (the pigs) giving money to foreign actors who operate under the guise of a successful money manager involved in crypto currency (virtual currency) trading. Once the perpetrator is satisfied with the amount the victim has given, they drain the entire “account” of funds from that victim (the butchering). Many of these scammers are victims of labor trafficking directed by large crime syndicates in Southeast Asia who reach out to millions of people around the world. These scammers usually reach out to the victims through social media, email, or text to persuade them into buying into this supposed “high return investment”. The fraudster will leverage high pressure sales tactics such as them missing out on a potential lucrative opportunity to further convince them into action. Once the victim begins to trust the supposed “investor”, they are directed to use a fraudulent website most likely controlled by the scammer. Note that this can also include trusted third-party applications. The aggressor may also demand remote access to the victim’s devices to create accounts via virtual asset service providers (VASP). Many victims are also asked to purchase multiple pre-paid cards or make large wire transfers to unknown entities. Unfortunately, victims have been known to take out money from tax advantage accounts, take on a second mortgage, or a home equity line just to put money into the scheme. Recent incidents have shown more successful scammers even inviting whole families and friend groups to join in. After the victim starts to buy in, the perpetrator must maintain legitimacy by fabricating high returns and even allowing the victim to take small amounts out of the “fund”. This builds confidence and reassures the victim that the investment is real. If the fraudster starts to believe that the victim is losing confidence in them and the investment, they become more aggressive by developing reasons to stay in and pressuring them to not miss out on the opportunity. If that does not work, the perpetrator pulls out all the money from the account and eliminates any contact with the victim(s).
One more interesting comment that FinCEN noted in this FIN is that financial institutions should “When requested to provide supporting documentation, financial institutions should take special care to verify that a requestor of information is, in fact, a representative of FinCEN or an appropriate law enforcement or supervisory agency. A financial institution should incorporate procedures for such verification into its BSA compliance or AML program. These procedures may include, for example, independent employment verification with the requestor’s field office or face-to-face review of the requestor’s credentials.” If your bank does not already have such a procedure in your written BSA program, it’s a good idea to do so now.
There are many red flags that can indicate a possible pig butchering scheme. Financial institutions should analyze multiple factors associated with historical financial activity, transactions in line with business practices, and whether the customer shows signs of multiple red flags. Red flags, and the formal alert by FinCEN can be found here: FinCEN_Alert_Pig_Butchering_FINAL_508c.pdf
RSS Feed
