On September 8, 2023, the Financial Crimes Enforcement Network (“FinCEN”) released an alert regarding a notorious virtual currency scam called “pig butchering,” because, unfortunately, it resembles the “fattening a hog before slaughter.” These scams are primarily perpetrated by criminal organizations in Southeast Asia where these scams are also called “Sha Zhu Pan.”
The unwitting victims are the so-called “pigs,” who, according to various U.S. law enforcement sources, have lost billions of dollars to this scam. Unfortunately, some victims have liquidated tax-advantaged accounts or taken out home equity lines of credit or second mortgages to purchase virtual currency, as part of falling victim to these scams. The alert highlights that pig butchering is linked to fraud and cybercrime, two of FinCEN’s stated national priorities.
As we discuss, FinCEN’s alert provides 15 “red flags” for financial institutions (“FIs”) to consider when attempting to detect, prevent and report potential suspicious activity relating to such scams. These “red flags” may serve not only to put FIs on guard for potential Suspicious Activity Report (“SAR”) filings under the Bank Secrecy Act (“BSA”), but they also may serve as considerations for FIs to try to detect and stop such activity, in order to cut off potential related civil suits by victim customers who may blame a FI for purportedly “allowing” the scam to occur.