FCC RegUpdate

On September 8, 2023, the Financial Crimes Enforcement Network (FinCEN) issued an alert regarding a virtual currency scam known as ‘Pig Butchering.’ Scammers employ ‘butchering’ or ‘slaughtering’ tactics to steal victims’ assets, causing both financial and emotional harm. They often convince victims to invest in virtual currencies or participate in exchange schemes.

Here are the key indicators of potential scams:

Behavioral Red Flags:

  • Customers with no prior experience in virtual currency attempt to exchange large amounts of fiat currency or initiate high-value transfers to virtual asset platforms (VASPs).
  • A customer expresses interest in significant returns from an investment opportunity involving virtual currency, introduced by a new contact who approached them unsolicited online or via text message.
  • An individual instructs a customer to exchange fiat currency for virtual currency at a kiosk and deposit the virtual currency at a specified address.
  • A customer appears distressed or anxious about accessing funds to meet the demands or timeline of a virtual currency investment opportunity.

Financial Red Flags:

  • A customer liquidates savings accounts before maturity, such as deposit certificates, and attempts to wire the fiat currency to a Virtual Asset Transfer or exchange it for virtual currency.
  • A customer obtains a HELOC, home equity loan, or second mortgage, which can be used to purchase virtual currency or be wired to a Virtual Asset Service (VAS).
  • A customer receives a deposit of virtual currency slightly above their previous transfer amount, followed by larger outgoing transfers.
  • Inactive or limited accounts with large balances consistently show significant withdrawals of money, often transferred to a VASP or exchanged for virtual currency.
  • A customer sends multiple electronic funds transfers (EFTs) or wire transfers to a VASP or sends part of their available balance from an account or wallet they maintain with a VASP and notes that the transaction is for ‘taxes,’ ‘fees,’ or ‘penalties.’
  • A customer with a short history of small EFTs to a VASP abruptly stops sending EFTs and sends high-value wire transfers to holding companies, limited liability corporations, and individuals.

Technical Red Flags:

  • System monitoring reveals that customer accounts are frequently accessed using unique IP addresses, device IDs, or geographies, with logins from various device IDs and names, contradicting typical patterns.
  • A customer is reportedly investing in virtual currency through a service with a poorly written website, dubious customer testimonials, and amateurish design.
  • A customer encounters a website claiming to be a legitimate VASP but displays warning signs like misspelled domain names.
  • A customer reports downloading an application from a third-party website rather than a reputable third-party store or a device manufacturer’s official store.