Protecting yourself from relationship-based financial fraud
Taking action is important
The Office of the Arbiter for Financial Services encourages all customers who believe they’ve been victims of financial scams to come forward with their enquiries and complaints. Remember, doing nothing is not an option, and delaying action will not bring closure.
Our office is here to help you navigate these challenging situations and seek potential resolutions. Don’t let shame or fear prevent you from taking action. By reporting your experience, you seek potential recourse for yourself and help protect others from falling victim to similar scams.
Contact us by phone or online first—we’re here to listen, guide, and assist you through this process. If necessary, we can also schedule a meeting at our offices.
Technical Note on ‘pig butchering’ scams
The Office of the Arbiter for Financial Services (OAFS) has issued a Technical Note providing guidance on ‘pig butchering’ scams (click to download). This document outlines how the Arbiter will approach complaints related to these sophisticated relationship-based frauds, which have seen a significant increase in recent years. The OAFS has received various complaints from victims, often involving substantial financial losses and emotional distress.
What are ‘pig butchering’ scams?
‘Pig butchering’ scams are complex frauds where scammers build relationships with victims over an extended period, usually weeks or months, before introducing fraudulent investment opportunities. The name comes from the idea of ‘fattening up’ the victim before ‘slaughtering’ them financially.
Examples include:
- Fake online trading platforms showing fictitious profits
- Investments in non-existent crypto-assets or tokens
- High-yield investment schemes promising unrealistic returns
How do these scams work?
1. Initial contact: Scammers approach victims through social media, dating apps, or messaging platforms.
2. Relationship building: Regular communication to establish trust and rapport.
3. Investment proposal: Introduction of a seemingly lucrative investment opportunity.
4. False gains: Artificial profits are shown to encourage further investment.
5. Unable to withdraw: Victims find they cannot access their funds or ‘profits’.
6. Further demands: Scammers request additional payments for various excuses.
What are service providers’ responsibilities?
The guidance places varying levels of responsibility on different types of financial service providers:
1. Banks and Credit Institutions
- Must have robust transaction monitoring systems
- Should intervene and alert customers about suspicious activities
- Need to record interactions with customers
2. Financial Institutions
- Should adopt strong onboarding procedures for corporate customers
- Must investigate suspicious transactions
3. Virtual Financial Assets Service Providers
- Should enhance onboarding processes for retail customers
- Must warn about risks associated with custodial wallets
- Need to monitor short-term transaction patterns
What are consumers’ responsibilities?
As a consumer, you play a crucial role in protecting yourself from these scams:
1. Be cautious: If an investment opportunity seems too good to be true, it probably is.
2. Verify identities: Always confirm the identity of individuals or companies you’re dealing with.
3. Research: Thoroughly investigate any investment opportunity before committing funds.
4. Protect personal information: Never share sensitive personal or financial details online.
5. Be wary of pressure tactics: Legitimate investments don’t require immediate action.
6. Use official channels: Only use official websites or apps for financial transactions.
7. Stay informed: Keep up-to-date with the latest scam tactics and warnings from authorities.
8. Trust your instincts: If something doesn’t feel quite right, it’s okay to step back and reevaluate things.
What should I do if I suspect I’m a victim?
If you believe you’ve fallen victim to a ‘pig butchering’ scam or any other financial fraud:
1. Act immediately: Time is crucial in these situations.
2. Contact your bank: Inform them about the suspicious transactions.
3. Report to authorities: File a report with the police.
4. Gather evidence: Collect all communications, transaction records, and any other relevant information.
5. Lodge a complaint: Contact the Office of the Arbiter for Financial Services if you need any information about lodging a complaint—they’re here to help!
Case studies
The following two case studies, based on decisions issued by the Arbiter for Financial Services, illustrate how sophisticated relationship-based financial frauds, known as 'pig butchering' scams, operate in practice.
The first case examines how a self-employed car instructor lost €65,446 through systematic transfers to crypto platforms over seven months. It highlights how fraudsters manipulate victims through social engineering and false promises of investment returns.
Summary of the complaint
A consumer, a self-employed car instructor, filed a complaint against their bank after losing €65,447.30 between October 2022 and May 2023 through transactions they believed were crypto-asset investments. The consumer alleged fraudsters manipulated them into transferring funds via their bank account to a crypto platform, which turned out to be a sophisticated “pig butchering” scam. They argued the bank failed in its duty to monitor transactions for suspicious activity, detect anomalies, or intervene to prevent financial harm. The consumer sought a full refund, claiming the bank ignored red flags, such as the unusually high frequency and cumulative value of transactions inconsistent with their financial history.
Summary of the bank’s response
The bank denied liability, asserting all transactions were authorised by the consumer using secure authentication methods (e.g., 3D Secure) compliant with the Payment Services Directive (PSD2). It emphasised that the payments were directed to the consumer’s own crypto account with a licensed provider, requiring no additional scrutiny. The bank highlighted its adherence to transaction monitoring protocols, noting no irregularities in payment patterns or beneficiary details. It also cited terms and conditions stating authorised payments could not be reversed. The bank maintained that the consumer was responsible for initiating the transactions and the third-party crypto platform for subsequent fraud.
Arbiter’s analysis
The Arbiter acknowledged the consumer’s vulnerability to a well-documented scam but evaluated whether the bank breached its obligations under PSD2. Key considerations included the anomalous nature of the transactions: 30 payments (€45,447.30 via card, €20,000 via transfers) over seven months, far exceeding the consumer’s typical spending patterns. The Arbiter noted the bank failed to recognise “red flags,” such as the cumulative value (over 180% of the consumer’s annual income) and frequency of payments (e.g., 19 transactions in two months). While the bank monitored individual transactions, it neglected broader behavioural analysis, a requirement under regulatory standards.
The Arbiter referenced UK Financial Services Ombudsman previous cases, stressing that banks must intervene when transactions display hallmarks of fraud, even if authorised. The bank’s defence—relying solely on authentication—was deemed insufficient, as PSD2 mandates proactive risk assessment. However, the consumer’s delayed reporting and continued engagement with fraudsters partially mitigated the bank’s liability.
Decision and remedy
The Arbiter held the bank partially liable for transactions after 17 December 2022, when monitoring failures became evident. The bank was ordered to refund €24,695.82 (representing 10 post-December transactions), as earlier payments lacked sufficient grounds for intervention. Both parties bore their legal costs, reflecting shared responsibility. The Arbiter urged the bank to enhance transaction monitoring systems to prevent similar cases, aligning with evolving regulatory expectations for consumer protection in digital fraud scenarios.
The second case involves a senior risk officer at an insurance company who lost over €70,000 through multiple transfers to what she believed was a legitimate cryptocurrency investment platform.
Summary of the complaint
A financial services consumer fell victim to an online investment scam in June/July 2023, losing €70,100 through transfers from her bank accounts. The complainant, a senior risk officer at an insurance company, initially invested €250 in February 2023 on an online trading platform under the guidance of someone claiming to represent a UK-registered company. After gaining her trust over several months, the fraudster informed her of substantial profits that needed to be withdrawn through a cryptocurrency exchange platform. Under pressure and threats, she made multiple transfers to her own digital bank account, which were then converted to cryptocurrency and sent to the fraudsters.
Summary of the bank’s response
The bank defended its position by arguing that the complainant made transfers to her own account with another regulated bank and, therefore, did not trigger any fraud indicators. They maintained that any warnings would not have prevented the complainant from transferring funds to her own account, and that the subsequent transfers to third parties were beyond their control. The bank also emphasised that the complainant was a well-educated professional who made these transfers of her own accord.
Arbiter’s analysis
The Arbiter found that the transactions were abnormal compared to the complainant's account history. Within eleven days, she made ten payments totalling over €70,000, equivalent to approximately nine months of her salary. The Arbiter determined that by 6 July 2023, after €28,100 had been transferred through multiple transactions, the bank should have recognised the unusual pattern and intervened, particularly before the final two substantial payments of €18,000 and €24,000 were made. The analysis considered various factors, including the customer's profile, transaction patterns, and the cumulative amount of transfers.
Decision and remedy
The Arbiter ordered the bank to refund 40% of the last two payments (€42,000), amounting to €16,800. This partial compensation reflected the bank's failure to properly monitor and intervene in suspicious payment patterns while acknowledging the complainant's own responsibility as a qualified professional. The decision also included recommendations for banks to implement lower default daily transaction limits and enhance their payment monitoring systems to protect clients from sophisticated fraudsters better.