Financial industry advocates are calling for federal
policies to address the “skyrocketing” numbers of “pig butchering” scams. The
Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and the
Department of Justice (DOJ) have issued warnings to financial institutions and
the broader public about the dangers of these types of crimes, which are often
perpetrated through online channels using virtual currencies.
“Pig butchering” resembles the practice of fattening a hog
before slaughter, according to alert published by FinCEN in September of last
year. Scammers, who reportedly refer to victims as “pigs,” leverage fictitious
identities, the guise of potential relationships and elaborate storylines to
“fatten up” the victim into believing they are in a trusted partnership.
The “butchering” or “slaughtering” component refers to the
stealing of the victim’s assets, causing them financial and emotional harm. In
many cases, the butchering phase involves convincing victims to invest in
virtual currency, or in some cases, over-the-counter foreign exchange schemes —
all with the intent of defrauding them of their investment.
Brian Laverdure, senior vice president of digital assets and
innovation policy for the Independent Community Bankers of America (ICBA), wrote
that scammers often use virtual currencies to perpetuate pig butchering crimes,
in a recent blog post stressing the need for policies aimed at addressing the
issue.
“The persistent growth of pig butchering scams emphasizes
the urgent need for greater regulation across the cryptocurrency ecosystem,”
Laverdure wrote. “Through our advocacy efforts, ICBA has urged policymakers to
prioritize national security and counter the illicit activities enabled by
cryptocurrency.”
He noted federal agencies’ efforts to curb certain illegal
activities involving cryptocurrencies, including a proposed rule issued
by FinCEN in October that would classify all transactions involving
“cryptocurrency mixers” — a broad term describing various technologies intended
to hide details about crypto transactions — as a “primary money-laundering
concern” and require financial institutions to adhere to enhanced reporting and
recordkeeping standards. Laverdure further explained that mixers are frequently
used by bad actors and ransomware operators, “to cover their tracks after they
steal crypto assets or obtain ransoms paid in crypto.”
“The government has tried to curb the use of mixers with
penalties against the major operators, but bad actors routinely flout any
limitations,” he wrote. “For example, North Korea’s Lazarus hacking group in
March returned to its favored mixer, Tornado Cash, to launder
millions of dollars in stolen assets. Tornado Cash was sanctioned by
Treasury’s Office on Foreign Assets Control in 2022 after it helped North Korea
launder hundreds of millions of dollars’ worth of stolen crypto assets.”
Ultimately, Laverdure argued, policymakers in the U.S. and around
the world “must actively contend with the risks posed by the crypto ecosystem”
by implementing “stronger legal and regulatory safeguards” to protect consumers
and the banking system.