‘Pig butchering’ scams spawn alerts; ‘red flags’ listed for uncovering emerging con

The scam known as “pig butchering” has prompted consumer and bank alerts Thursday from the inspector general for the federal bank deposit insurance agency, which listed red flags for banks to watch for the scam’s emergence.

The scam, as described by the Federal Deposit Insurance Corp. (FDIC) office of inspector general (OIG), is a type of confidence and investment fraud in which the victim is gradually lured into making increasing monetary contributions, generally in the form of cryptocurrency, to a seemingly sound investment before the scammer disappears with the contributed monies.

The term “pig butchering” comes from the scam’s resemblance to the practice of fattening hogs before slaughter. The scam operates by victims (referred to as “pigs”) investing in, for example, supposedly legitimate virtual currency investment opportunities before they are conned out of their money. The Financial Crimes Enforcement Network (FinCEN, the Treasury Department’s financial crimes unit) has asserted that scammers may leverage fictitious identities, the guise of potential relationships, and elaborate storylines to “fatten up” the pigs into believing they are in trusted partnerships before they defraud the victims of their assets—the so-called “butchering.”

The OIG told banks to watch for three red flags signaling the scam:

  • A customer with no prior interactions with virtual exchanges suddenly exchanges large sums of fiat currency from their bank account for virtual currency or transfers money to virtual asset service providers (VASPs).
  • A customer’s account shows frequent and large withdrawals of money or multiple wire transfers to a VASP-when in the past, there was limited or no activity in the account.
  • A customer appears distressed or anxious to access funds immediately to meet the timeline of a virtual currency investment opportunity or a bank receives calls from a victim requesting the cancellation of a transfer.

To mitigate risks, the FDIC urged banks to focus on “Know Your Customer” (KYC) requirements, immediately freeze accounts and conduct compliance checks, and Contact recipients of outbound transactions.

Pig Butchering Scam Alert

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