Crypto fraud with “pig slaughtering” shines a spotlight on the need for a development in fraud prevention for finance

An FBI warning Monday about the rise of a crypto scheme called pig slaughtering shines a spotlight on the need for financial institutions to implement more sophisticated fraud detection programs amid their own digital transformation efforts.

Scammers who slaughter pigs usually make contact and develop long-term communication with victims through various social media or dating applications. After gaining the victims’ trust over time, they convince the victims to invest in fake cryptocurrency platforms. The fake websites or apps allow victims to track their investments and show huge gains, often spurring further investments.

While the general public needs to learn how to identify and avoid scams, “governments, financial institutions and security firms should also take responsibility for managing the growing risks,” Jan Santiago, deputy director of the Global Anti-Scam Org, told SC Media.

Even if the fraud targets consumers, the onus often lies with financial institutions to incorporate fraud prevention mechanisms that can flag suspicious transactions, especially as digital transformation in recent years has made it easier for fraudsters to carry out attacks.

James Brodhurst, principal consultant at Resistant AI, said in a recent article in PaymentsJournal that as fintech firms leverage software-as-a-service to extend the reach of their business, they need to counter online fraud-as-a-service tactics deployed “at a level never seen before” and “with shockingly little risk.”

He said AI and machine learning tools can “push back and try to beat cybercriminals at their own game,” by increasing detection rates and protecting automated systems from compromise.

The Global Anti-Scam Org also suggested that banks and trading platforms improve automated alerts, reminding investors immediately as soon as a suspicious transaction is detected. They should also explain how a particular type of fraud works in detail to the general public to increase security awareness.

That last point is consistent with the FBI’s own recommendations to consumers, which follow general best standards: verify the validity of any investment opportunity; be on the lookout for domain names that purport to be legitimate financial institutions, particularly cryptocurrency exchanges; misspelled URLs, often with little deviation from the actual financial institutions’ websites, should raise red flags; and don’t download or use apps that look suspicious as an investment tool unless you can verify their legitimacy.

To address growing vulnerabilities within the crypto market, financial institutions and cybersecurity organizations should raise their own awareness as well, and take the time to explore tools that may not typically be part of traditional banking systems, said Chen Arad, co-founder and CEO of Solidus Labs, a crypto- native provider of risk monitoring and market monitoring. He specifically pointed to Web3 – the internet service built using decentralized blockchains.

And given that recovering funds after a crypto-fraud is committed is notoriously difficult, largely due to the immutability and anonymity of digital currency, managing upfront risk becomes critical, Arad added. “Crypto is a great opportunity to transform and monitor financial risk.”