NEACH’s 2024 Financial Fraud Forum to Address “Pig Butchering” and Latest Fraud Attacks
Fraudsters target older Americans, and according to the most recent data from the Financial Crimes Enforcement Network (FinCEN), these attacks continue to rise. In an analysis of Bank Secrecy Act (BSA) reports submitted between June 15, 2022, and June 15, 2023, Elder Financial Exploitation (EFE) suspicious activity totaled 155,415 reports, with roughly $27 billion affected.
“Elder Abuse is getting worse because the Baby Boomers are [one of the largest] populations,” says Patty Presta, AAP, NCP, NEACH’s Director of Education in a recent Wrestling Payments podcast episode. “They are all getting older and cognitive decision-making is shifting. We are going to see [Elder Financial Exploitation] on the rise because number one, there are more elders, and number two, you have so many sophisticated scams going on.”
Enter pig butchering
Once such scam, dubbed “pig butchering,” has moved fraud from more traditional payments systems to that of cryptocurrency. In this scheme, a fraudster establishes a relationship with an individual, frequently an elder American, spends some time “fattening the pig before slaughter,” by building trust, and then encourages them to invest in crypto. Similar to Romance Scams, these attacks prey on established connections to extrapolate money: In many cases, fraudsters allow their victims to see returns in early phases to fuel confidence in the scheme and entice additional investment.
A September 2023 alert from FinCEN describes it this way:
Once trust or a relationship has been established, the scammer will introduce the victim to a
supposedly lucrative investment opportunity in virtual currency and direct them to use virtual
currency investment websites or applications designed to appear legitimate, but which are fraudulent and ultimately controlled or manipulated by the scammer… Once the victim invests with the scammer, the scammer will show the victim extraordinary returns on the investment that have been fabricated. The scammer may even allow the victim to withdraw a small amount of that investment to further build the victim’s confidence before urging the victim to invest more.
And, unfortunately, it’s working. According to March 2024 academic paper from a team at the University of Texas at Austin, pig butchering has accounted for more than $75 billion in lost resources since 2020—and those numbers continue to rise.
These frauds attack from multiple vantage points: new areas of technology that the victim may not fully understand; a desire for a “quick win” in investments; potential loneliness or a desire to feel a real connection with an individual; and a sense of urgency—invest now or lose the opportunity. And fraudsters enact the scheme with advanced technology at their disposal.
A fraud by any other name
But, according to Detective Matthew Hogan, Connecticut State Police, Task Force Officer - CT Financial Crimes Task Force USSS, Cryptocurrency Working Group, FIs can still identify and detect the signs of pig butchering scams, because they follow the same model as other fraud rings.
“You’re still dealing with money mules, with Romance Scams— instead of using wire transfers they are using crypto. They are modifying the vehicle of transport of money. The frauds are all the same, they are just moving with the times and slightly more enhanced,” he sums up in a forthcoming episode of the Wrestling Payments podcast. (An expert on pig butchering, Hogan will be leading the session, “Show Me the Bacon! Investment Scams Without Borders” next week at NEACH’s 2024 Financial Fraud Forum.)
In short, Hogan’s saying that if it looks like a pig and smells like a pig, it’s a pig.
Four tips for helping customers and members
That may be true, but by the time you, as the FI, become aware of the issue, in many cases, the money has already been lost. So, how can you proactively address EFE? What should you tell your customers or members to help them protect themselves?
“First, if it’s too good to be true, it probably is. That’s proved to be true,” Hogan noted. Reiterating the importance of a healthy dose of skepticism around any money transfer can help incite a necessary pause before your customer or member acts.
In addition, Hogan emphasizes that when investments are positioned as very low risk, they likely are elevated risk. Seeing astronomical returns can be very exciting—think about the euphoria associated with gambling wins—and that can be hard to circumvent in customers or members. But Hogan champions reminding customers and members of the importance of staying guarded with their finances and to hit pause before making investments. This encouragement from their trusted banking partner may help them to think a little harder before they pull out any funds.
Third, and probably one of the most important points, Hogan urges FIs to reiterate to their customers and members that they shouldn’t be sending money, in any form, to someone they’ve never met, because “if you’ve never met the person in person, you’re probably not talking to a real person.”
This one can be hard, because your customers and members may feel they have a bond with the perpetrator; they don’t want to believe they are being duped. However, if you can get ahead of that connection and educate them not to send money in any form—P2P apps like Venmo or Cash App, gift cards, crypto, etc.—if they haven’t met the person in person, it may help to create a screening barrier at the early stages of the dialogue and protect them from all types of scams.
Finally, Hogan implores FIs to push their customers or members to report any attack to local authorities. “That’s the biggest problem we have,” he noted. “Seniors are definitely scared to report it for many reasons. They don’t want to lose their ability to pay—they don’t want to get those rights taken away from them—or they’re just scared in general, embarrassed. It’s good for community and regional banks because you guys have that person-to-person contact, whereas the big banks of the world don’t really have that any more or they’ve removed the brick-and-mortar, and I think that’s a big problem down the road for what we’re talking about.”
He points out that while the victim may be embarrassed, they are in good company with millions of others who have been deceived—and reporting the attack will help break the cycle and protect others from becoming victims.
He reiterates that law enforcement has seen it all. “I’ve talked to a million victims at this point, and we’ve heard every story you can think of. If you are a victim, don’t be afraid to report it,” he indicates.
Presta agrees and encourages FIs to train their staff, frontline in particular, to keep an eye out for EFE. “The bad guys are always one step ahead of us. We have to educate everybody in the financial institution on elder abuse,” she concludes.
To support that education, the FDIC Office of the Inspector General also just issued pig butchering “scam alerts” for both banks and consumers. These resources may help in driving that needed knowledge, within your institutions and directly to your customers and members.
For more on what you can do to safeguard your customers or members from fraud, join us for NEACH’s 2024 Financial Fraud Forum, taking place in just under a week: 9:00 a.m. - 12:30 p.m. EDT, Wednesday, June 12, and Thursday, June 13, 2024.
To hear more conversation on these important topics, take a listen to “Payments and Protecting the Vulnerable with Guest Patty Presta,” on NEACH’s Wrestling Payments podcast, and keep an eye out for the forthcoming episode featuring Hogan and Ryan McKinnon, CAMS, Senior Deposit Operations Fraud Analyst, South Shore Bank, breaking down these and other fraud topics.
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AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.
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