Guidance on considerations that the Arbiter will adopt in determining complaints related to ‘pig butchering’ type of scams
Technical Note
The Office of the Arbiter for Financial Services has released a comprehensive guidance document on ‘pig butchering’ scams. This technical note outlines the considerations that the Arbiter will adopt in determining complaints related to these sophisticated relationship-based financial fraud schemes, which have rapidly increased in recent years.
The document begins by providing background information on ‘pig butchering’ scams, explaining how scammers establish relationships with victims over an extended period to gain their trust before introducing fraudulent investment opportunities. It then delves into the specific characteristics of these scams, distinguishing them from other types of fraud such as Authorised Push Payment (APP) fraud.
A significant part of the guidance focuses on the payment transaction monitoring obligations of different types of financial service providers. These include banks, financial institutions, and Virtual Financial Assets Service Providers. The document emphasises these entities’ varying levels of responsibility in protecting their clients from fraud schemes.
The Arbiter provides specific guidance for each service provider category, urging banks and credit institutions to upgrade their payment monitoring systems and intervene when unusual patterns emerge. Financial institutions are advised to adopt more robust onboarding procedures for corporate customers, while Virtual Financial Assets Service Providers are reminded of their fiduciary obligations and the need for enhanced mechanisms to mitigate scams.
The document concludes by stressing the importance of the financial industry going beyond regulatory requirements to maintain consumer confidence. It also reminds consumers to exercise caution and be aware of crypto-assets risks. The Arbiter notes that future adjudication awards will reflect the push for institutions to invest in upgrading their monitoring systems to ensure a safe payments infrastructure.
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