Skip to main content

Looking for Valuant? You are in the right place!

Valuant is now Abrigo, giving you a single source to Manage Risk and Drive Growth

Make yourself at home – we hope you enjoy your new web experience.

Looking for DiCOM? You are in the right place!

DiCOM Software is now part of Abrigo, giving you a single source to Manage Risk and Drive Growth. Make yourself at home – we hope you enjoy your new web experience.

Prevent ‘pig butchering’ scams: Safeguarding against investment fraud

Terri Luttrell, CAMS-Audit, CFCS
February 28, 2024
Read Time: 0 min

Avoid fraud losses from investment schemes called 'pig butchering' scams

FinCrime professionals looking to prevent 'pig butchering' scams in the age of cryptocurrency can follow these steps to tighten security.

Would you like other articles like this in your inbox?

Modern investment fraud

What is a pig butchering scam?

Investment fraud schemes significantly threaten financial institutions and their customers in the ever-evolving financial crime landscape. One such scheme that has gained attention in recent years is known as "pig butchering", but what exactly is this type of scam? In the context of financial crime, this troubling analogy refers to a manipulation technique used to exploit vulnerabilities in a victim through frequent interactions, text messaging, and social engineering. Today, these usually involve investment schemes and cryptocurrency fraud.

Pig butchering scams originated in Southeast Asia and have escalated significantly in the United States. A scam usually begins with online contact via social media or dating apps, after that it often includes text messaging. Scammers build up a victim’s trust, then they gain access to their online account information, sometimes “fattening the pig” by soliciting more investment in cryptocurrency before “slaughtering the pig” and stealing the cryptocurrency.

The analogy is crude but accurate. “It’s a sophisticated con, and you can see that because it’s a long-term con,” said James Barnacle, who runs the FBI’s Financial Crimes Section. In fact, according to Barnacle, there were well over $3.5 billion of reported losses due to this type of fraud in 2023 and around 40,000 victims in the United States. He's even seen losses as large as $4 million. 

Victims are Exploited Financially and Emotionally 

In a recent NBC News report, Barry May, a divorced and retired insurance adjuster living in Mississippi, recounted his personal experience with “Anna,” who reached out to May over social media. First, the two started chatting on Facebook. Soon, Anna was sending explicit photos. May was smitten. She told him they could be together, but first, she needed a favor. Her aunt, she said, was holding $3 million of her money, and she needed May to invest in cryptocurrency so her aunt would release that money to her. 

She promised huge returns. May sold property and liquidated his 401(k), sending the woman more than $500,000 — his life savings. An account on a website appeared to show his holdings. May was about to take out a loan to send more until an FBI agent called. “They said this is a major fraud situation, and I’m not the only one,” May said. 

FinCEN updates

New FinCEN pig butchering advisory

An advisory released September 8, 2023 from the Financial Crimes Enforcement Network (FinCEN) underscores the growing concern about pig butchering scams. According to the advisory: 

  • The scam tactics have evolved, frequently including aggressive promotional campaigns and cold calls to potential victims. 
  • There has been an increased use of "money mules" in these scams. Money mules are individuals who, knowingly or unknowingly, transfer money acquired illegally on behalf of others. 
  • The advisory noted that fraudsters now use new financial products, such as decentralized finance (DeFi) platforms, to move illicit funds and obscure their transactions. 
  • FinCEN has identified red flags and behavior patterns that may indicate pig butchering scams, such as sudden and high-value investments from elderly customers, rapid withdrawal of funds after a large deposit, and the frequent use of privacy coins or mixers. 
  • Financial institutions are advised to report suspicious activities related to pig butchering scams using specific terms like "Pig Butchering Fraud Advisory" in the SAR narrative to streamline the processing and analysis of reports. 

Tightening security

Preventing pig butchering schemes

Pig butchering scams are a concern because they can go unnoticed for a long time, causing significant financial losses and damaging customers’ and institutions’ reputations. Crafty scammers exploit weaknesses in fraud and anti-money laundering (AML) compliance programs such as outdated technology, human error, or inadequate monitoring systems. 

Financial institutions can tackle the threat of pig butchering scams and other investment schemes to protect their clients. Below are some critical steps they can take:

Programs, Tools, & Data

  • Strengthen fraud detection and AML programs: Financial institutions must have a solid financial crime detection program. This means following regulatory guidelines, conducting thorough customer due diligence, assessing risks, and implementing a robust system to monitor and report suspicious activity. Regularly reviewing and improving policies and procedures is essential to stay one step ahead of emerging threats.

    A good first defense is investing in fraud detecting software that detects specific fraud in their clients' accounts, such as account takeover, ACH, new account, kiting, debit card, and check card fraud, along with following cybercrime security tips from the FBI. Therefore, fraud detection programs should also include the red flags identified in the FinCEN advisory on pig butchering.

  • Enhance data analytics capabilities: Data is a powerful tool. In fact, banks can leverage data analytics to identify unusual patterns and anomalies. Financial institutions can monitor customer behavior and transactional data by implementing robust data analytics tools, like Abrigo Connect, and spot potential pig butchering activities. Establishing baseline customer behavior patterns and promptly investigating deviations can help detect and prevent fraudulent activities.

Training & Education

  • Conduct regular employee training and include pig butchering scams: Financial institutions should educate their employees about the risks associated with pig butchering scams, other fraud schemes, and the FinCEN red flags. Building a culture of awareness and accountability empowers employees to be the first line of defense against fraudulent activity. Staffing shortages in AML and fraud departments of financial institutions are well publicized, so make sure you have adequate staffing levels to perform well.
  • Educate customers and members: Provide educational opportunities for your community so they know when to say “no” to investment scams. Explain the types of fraud schemes circulating. Help them understand cryptocurrency so they don’t fall victim to these scams. The goodwill your institution will gain in the community will be invaluable.

Customer awareness

Educating customers on pig butchering scams

The FBI identified potential ways individuals can recognize and deter cryptocurrency investment schemes. Use the following list to educate your customers on best practices for protecting their assets:

  • Verify the validity of any investment opportunity from strangers or long-lost contacts on social media websites.
  • Be on the lookout for domain names that look like legitimate financial institutions, especially cryptocurrency exchanges, but that have misspelled URLs or slight deviations in the name.
  • Do not download or use suspicious-looking apps as a tool for investing unless you can verify the app’s legitimacy.
  • If an investment opportunity sounds too good to be true, it likely is. Be cautious of get-rich-quick schemes.

Romance scams not only result in financial losses for clients; they can also lead to personal hardships, damaged credit scores, and even identity theft. As a result, the consequences can be dire for financial institutions. Massive financial losses can destabilize their operations, impact profitability, and harm their reputation. By combining fraud detection software, robust fraud and AML programs, employee education, and client awareness training, you can stay one step ahead of fraudsters, ensuring the security and trust of your institution and its stakeholders.

Navigate your BSA exam with tips from this on-demand webinar..

keep me informed Watch Webinar
About the Author

Terri Luttrell, CAMS-Audit, CFCS

Compliance and Engagement Director
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size.

Full Bio

About Abrigo

Abrigo enables U.S. financial institutions to support their communities through technology that fights financial crime, grows loans and deposits, and optimizes risk. Abrigo's platform centralizes the institution's data, creates a digital user experience, ensures compliance, and delivers efficiency for scale and profitable growth.

Make Big Things Happen.