U.S. law protects banks when they share personally identifiable information with each other about suspected scammers engaging in pig butchering and other forms of fraud, according to a senior Treasury official, who last week reiterated guidance issued in 2020 by the agency.
The reminder comes as pig butchering — a type of long-con fraud involving faux crypto investments — has become costlier to U.S. consumers, according to data from the FBI and the Financial Crimes Enforcement Network, an agency of the Department of the Treasury.
Investment fraud was the costliest type of crime last year tracked by the FBI's Internet Crimes Complaint Center, according to an FBI report. Losses to investment scams rose from $3.31 billion in 2022 to $4.57 billion in 2023 — a 38% increase — according to the report.
Likewise, FinCEN has received more than 9,000 reports related to pig butchering since issuing
This form of fraud led to the failure of a bank last year. Heartland Tri-State Bank in Eklhart, Kansas, failed after its CEO, Shan Hanes,
Last week, Daniels discussed the scam at
How pig butchering works
Pig butchering scams often start with an unsolicited, seemingly innocuous message.
"First, a scammer typically makes initial contact with a potential victim through text messages, direct messages on social media, or other communication tools and platforms," Daniels said.
These messages are designed to elicit a response with a variety of tactics. Some are as simple as "Hi," while others come across as potentially important, such as "Do you have time to chat with me?" or "Did you see the edits to the report?" Even if the potential victim suspects the message is misaddressed, they might respond anyway, just to be safe.
"Once the scammer elicits a response from a victim, the scammer will communicate with them over time to establish trust and build a relationship," Daniels said.
Once the scammer gains the victim's trust or establishes a relationship, the scammer will present the victim with a proposition: a supposedly lucrative investment opportunity in virtual currency. The scammer advises the victim to access the opportunity by visiting a specific website or app, which is designed to appear legitimate but is fraudulent and ultimately controlled or manipulated by the scammer.
"Once the victim invests with the scammer, the scammer will show the victim what appears to be extraordinary returns on the investment," Daniels said. "These returns are fabricated in an effort to further deceive the victim and encourage them to invest more."
As the victim's pace of investment slows or stops, the scammer often turns to more aggressive tactics to extract any final payments, such as by demanding that any attempted withdrawal of funds follow an additional payment by the victim for purported taxes or early withdrawal fees.
"Once the victim stops paying into the scam, the scammer will abruptly cease communication with the victim, taking all the victim's funds with them," Daniels said.
The difficulties with stopping the scams
Victims of pig butchering often ignore warnings from their bank about the potential fraud because they are convinced that the relationship and the investment are legitimate, according to Rep. Joyce Beatty, D-Ohio, the ranking member of the House subcommittee.
But as futile as warnings might seem, experts still encourage banks to warn their customers about fraud when a transaction appears suspicious. In a white paper released in April by Project Shamrock, an information-sharing coalition fighting organized crime — chiefly pig butchering — emanating from Southeast Asia, fraud-prevention experts encouraged banks to create "tailored warnings" about different types of fraud when customers transfer money.
"For example, in 2019, Santander integrated
Pig butchering scams often involve months of contact before the victim realizes what's going on. Suspicious activity report data from the past 12 months that was tagged as pig butchering indicates that "perpetrators were in contact with victims for more than 100 days during the duration of the scam," according to
This long-term planning can make it difficult for law enforcement to recover victims' money, but in cases where the victim realizes quickly that they've been swindled, there is a great deal of hope, according to Matthew Noyes, cyber policy and strategy director for the U.S. Secret Service.
"If we are alerted to a fraudulent transaction within a few days of it occurring, we, nearly at a 100% rate, recover those funds," Noyes told lawmakers during the hearing.
Fraudsters know this, according to Rep. Blaine Luetkemeyer, R-Mo., the chairman of the subcommittee. They are "incredibly adept with U.S. banking regulations," he said, adding that they will "prep their victims with ways to avoid suspicion," such as providing plausible explanations for why the person is sending a large wire transfer overseas.
Even so, banks can work together to see through this, according to U.S. banking law.
How and why to share information
Daniels emphasized in her written testimony that financial institutions may share with each other information regarding "individuals, entities, and organizations" for purposes of "identifying and, where appropriate, reporting activities that may involve possible money laundering."
Crucially, she said, banks only need a "reasonable basis for believing that the information" relates to potential fraud.
FinCEN spelled this out in
All of these crimes are covered because they are listed as "specified unlawful activities" under 18 U.S.C. § 1956, which is a section of the U.S. Code that sets forth definitions of money laundering, financing of terrorism, and certain other financial crimes.
And, per the same section of the PATRIOT Act, banks face "no limitations on the sharing of personally identifiable information" pursuant to the regulation, nor any "restrictions on the type or medium of information that can be shared," according to the fact sheet. So, this information can include anything from "video surveillance footage" to "cyber-related data such as IP addresses."
As of 2023, there were 7,790 financial institutions registered with FinCEN to participate in 314(b) information sharing, most of which were banks, credit unions, or securities and futures firms, according to Daniels.
Financial institutions that participate in the program can file joint SARs that reflect their shared understanding of activity of concern, which Daniels said are colloquially known as "super SARs" because of the insights they provide
"As with 314(a), we often receive feedback from law enforcement about the tremendous value of this program," Daniels said.
