How Banks Can Prevent Pig Butchering Scams?

$75 billion – that’s the total pig butchering scammers have stolen from victims globally, between 2020 to 2024.  

Pig butchering scam is one of the biggest threats in today’s financial world. The scam is best known for its deceptive and calculated approach, involving fraudsters building trust to lure victims to invest in fake investment schemes.  

Or you can say, it’s a type of fraud where fraudsters ‘flatten’ the victim with trust before ‘butchering’ them financially. This scam is more than just a financial fraud, it’s a psychological trap that targets emotions.  

And, for financial institutions the risks are higher – apart from the financial loss to the customers, pig butchering can erode the customer’s trust in the financial institution and also affect the reputation.  

If you’re a financial institution looking to protect your customers against pig butchering, keep reading. This blog post covers how you can combat pig butchering scams effectively, protect their customers, and strengthen defenses.  

What Is a Pig Butchering Scam?  

The term “pig butchering” may sound unusual, but it describes a type of scam where fraudsters “fatten” their victims before “butchering” their bank accounts. Here’s how:  

• The fraudster slides into the victim’s DM through social media, dating apps, or more.  

• They start building trust, often posing as friends, business associates, or romantic interests.  

• Once the confidence is secured, the fraudster lures the victim into fraudulent investment schemes.  

• The scammer may then pressurize the victim to invest more money.  

• And then, when the victim tries to withdraw money, their account is locked.  

• The fraudster cuts off all the communication and disappears.  

And the numbers are staggering! In 2023 alone, the pig butchering scam cost victims over $3.5 billion, that’s about 40,000 victims in the USA. (Source)  

Some people even lost up to $4 million each. Enough amount to make your wallet weep.  

 Check out this recent case where FBI arrested three people, including two Chinese nationals for allegedly using shell companies to launder more than $13 million in investment scams – Pig Butchering.    

Now the question is, what can financial institutions do to prevent pig butchering?  

How Financial Institutions Can Prevent Pig Butchering? 

Educate customers about the red flags 

Knowledge is power! The best way to combat pig butchering scams is to educate the customers about the warning signs and how to spot the red flags.  

Financial institutions can host webinars, send newsletters, create videos, or even come up with some awareness campaigns around the growing scam tactics. 

Leverage fraud detection tools 

Equip your financial institution with the top-notch fraud prevention tool like Velocity that can analyze the transactions in real-time, detect suspicious activities, and generate alerts quickly.  

Velocity’s fraud prevention software leverages AI and ML to identify anomalies, mitigate potential threats, and generate SARs. The tool ensures proactive monitoring, reduction in false positives, and most importantly accuracy in detection. 

Provide training to the staff 

Employees play a huge role in detecting fraud. Banks should focus on providing comprehensive training to the staff to spot red flags related to pig butchering quickly.  

Training can empower the staff to recognize early signs of pig butchering, handle customer queries, and escalate potential cases to the fraud prevention team effectively. 

Stay updated with the changing regulations 

Collaboration is the key! Pig butchering scams often operate across borders, making collaboration essential.  

Banks should stay updated with the latest regulatory requirements, participate in information-sharing networks like FinCEN and FATF, and report suspicious activities to authorities.  

If you’re a bank, you need to gear up with:  

• A fraud detection software that can quickly detect suspicious activities so that you can take immediate action.  

• Advanced technology that can help you predict scams before they can actually happen and impact your business operations.  

• Top-notch compliance team that can leverage the software and reduce false positives.  

FinCEN Updates  

FinCEN warns about the red flags related to pig butchering like:  

• Large and sudden investments from old customers,  

• Quick withdrawals after deposits  

• Frequent use of coins to hide transactions   

Financial institutions are encouraged to:  

• Report any suspicious activities using terms like ‘pig butchering fraud advisory’ in the report to make analysis and response easier.  

• File SARs using the key term ‘FIN-2023-PIGBUTCHERING.’  

• Guide potential victims to report to the FBI’s IC3 or SEC’s reporting system.  

Mitigate the Risk of Pig Butchering with Velocity  

Pig butchering is a reminder of the growing sophistication of fincrimes. And financial institutions with the right strategies, tools, and team, can easily prevent these fincrimes.  

Velocity’s fraud prevention software leverages AI and ML to detect suspicious activities in real-time, generate SARs, and reduce false positives. This can also help to strengthen customers’ trust, and foster collaboration across industries.  

With Velocity by your side you can protect your customers’ trust, safeguard your reputation, and stay ahead of the fraudsters. To know more, book a demo!  

Schedule a demo!