[Federal Register Volume 90, Number 85 (Monday, May 5, 2025)]
[Proposed Rules]
[Pages 18934-18949]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-07837]
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DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
RIN 1506-AB68
Special Measure Regarding Huione Group, as a Foreign Financial
Institution of Primary Money Laundering Concern
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: FinCEN is issuing a notice of proposed rulemaking (NPRM),
pursuant to section 311 of the USA PATRIOT Act, that proposes
prohibiting the opening or maintaining of a correspondent account in
the United States for, or on behalf of, Huione Group, a foreign
financial institution based in Cambodia found to be of primary money
laundering concern. The NPRM also would require covered financial
institutions to apply special due diligence to their foreign
correspondent accounts that is reasonably designed to guard against
their use to process transactions involving Huione Group.
DATES: Written comments on the notice of proposed rulemaking must be
submitted on or before June 4, 2025.
ADDRESSES: Comments must be submitted by one of the following methods:
Federal E-rulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments. Refer to Docket Number
FINCEN-2025-0004 in the submission.
Mail: Financial Crimes Enforcement Network, P.O. Box 39,
Vienna, VA 22183. Refer to Docket Number FINCEN-2025-0004 in the
submission.
Please submit comments by one method only and note that comments
submitted in response to this NPRM will become a matter of public
record.
FOR FURTHER INFORMATION CONTACT: The FinCEN Resource Center at
www.fincen.gov/contact.
SUPPLEMENTARY INFORMATION:
I. Statutory Provisions
Section 311 of the USA PATRIOT Act (section 311), codified at 31
U.S.C. 5318A, grants the Secretary of the Treasury (Secretary) the
authority to make a finding that ``reasonable grounds exist for
concluding'' that any of the following ``is of primary money laundering
concern:
(i) A jurisdiction outside of the United States;
(ii) One or more financial institutions operating outside of the
United States;
(iii) One or more classes of transactions within, or involving, a
jurisdiction outside of the United States; or
(iv) One or more types of accounts.\1\
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\1\ 31 U.S.C. 5318A(a)(1).
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Upon making such a finding, the Secretary is authorized to require
domestic financial institutions and domestic financial agencies to take
certain ``special measures.'' \2\ The five special measures set out in
section 311 are safeguards that may be employed to defend the U.S.
financial system from money laundering and terrorist financing risks.
The Secretary may impose one or more of these special measures to
protect the U.S. financial system from such threats. Through special
measures one through four, the Secretary may impose additional
recordkeeping, information collection, and reporting requirements on
covered domestic financial institutions and domestic financial
agencies--collectively, ``covered financial institutions.'' \3\ Through
special measure five, the Secretary may ``prohibit, or impose
conditions upon, the opening or maintaining in the United States of a
correspondent account or payable-through account'' for or on behalf of
a foreign banking institution, if such correspondent account or
payable-through account involves the foreign financial institution
found to be of primary money laundering concern.\4\
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\2\ On October 26, 2001, the President signed into law the
Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Public Law
107-56 (USA PATRIOT Act). Title III of the USA PATRIOT Act amended
the anti-money laundering (AML) provisions of the Bank Secrecy Act
(BSA) to promote the prevention, detection, and prosecution of
international money laundering and the financing of terrorism. The
BSA, as amended, is the popular name for a collection of statutory
authorities that FinCEN administers that is codified at 12 U.S.C.
1829b, 1951-1960 and 31 U.S.C. 5311-5314, 5316-5336, and includes
other authorities reflected in notes thereto. Regulations
implementing the BSA appear at 31 CFR Chapter X.
\3\ 31 U.S.C. 5318A(b)(1)-(4). The term ``covered financial
institution'' has the same meaning as provided at 31 CFR
1010.605(e)(1); see infra section V.A.3.
\4\ 31 U.S.C. 5318A(b)(5).
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Before making a finding that reasonable grounds exist for
concluding that a financial institution outside of the United States
(or other jurisdiction, account, or class of transactions) is of
primary money laundering concern, the Secretary is required to consult
with both the Secretary of State and the Attorney General.\5\ In
addition, in making a finding that reasonable grounds exist for
concluding that a financial institution outside of the
[[Page 18935]]
United States is of primary money laundering concern, the Secretary is
required to consider such information as the Secretary determines to be
relevant, including the following potentially relevant institutional
factors:
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\5\ 31 U.S.C. 5318A(c)(1).
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The extent to which such a financial institution is used
to facilitate or promote money laundering in or through a jurisdiction
outside the United States, including any money laundering activity by
organized criminal groups, international terrorists, or entities
involved in the proliferation of weapons of mass destruction (WMD) or
missiles.
The extent to which such a financial institution is used
for legitimate business purposes in the jurisdiction; and
The extent to which such action is sufficient to ensure,
with respect to transactions involving the jurisdiction and
institutions operating in the jurisdiction, that the purposes of
section 311 continue to be fulfilled, and to guard against
international money laundering and other financial crimes.\6\
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\6\ 31 U.S.C. 5318A(c)(2)(B)(i)-(iii). In addition, in the case
of a finding relating to a particular jurisdiction, section 311 sets
out certain ``jurisdictional factors'' that the Secretary may
consider, which are not relevant here. See 31 U.S.C.
5318A(c)(2)(A)(i)-(vii).
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In selecting one or more special measures, the Secretary ``shall
consult with the Chairman of the Board of Governors of the Federal
Reserve System, any other appropriate Federal banking agency (as
defined in section 3 of the Federal Deposit Insurance Act), the
Secretary of State, the Securities and Exchange Commission, the
Commodity Futures Trading Commission, the National Credit Union
Administration Board, and in the sole discretion of the Secretary, such
other agencies and interested parties as the Secretary may find
appropriate.'' \7\ When imposing special measure five, the Secretary
must do so ``in consultation with the Secretary of State, the Attorney
General, and the Chairman of the Board of Governors of the Federal
Reserve System.'' \8\ In addition, the Secretary is required to
consider the following factors:
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\7\ 31 U.S.C. 5318A(a)(4)(A).
\8\ 31 U.S.C. 5318A(b)(5).
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Whether similar action has been or is being taken by other
nations or multilateral groups;
Whether the imposition of any particular special measure
would create a significant competitive disadvantage, including any
undue cost or burden associated with compliance, for financial
institutions organized or licensed in the United States;
The extent to which the action or the timing of the action
would have a significant adverse systemic impact on the international
payment, clearance, and settlement system, or on legitimate business
activities involving the particular jurisdiction, institution, class of
transactions, or type of account; and
The effect of the action on United States national
security and foreign policy.\9\
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\9\ 31 U.S.C. 5318A(a)(4)(B)(i)-(iv).
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The authority of the Secretary to administer the Bank Secrecy Act
(BSA) and its implementing regulations, including the authority under
section 311 to make such a finding and to impose special measures, has
been delegated to FinCEN.\10\
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\10\ Pursuant to Treasury Order 180-01 (Jan. 14, 2020), the
authority of the Secretary to administer the BSA, including, but not
limited to, 31 U.S.C. 5318A, has been delegated to the Director of
FinCEN.
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II. Summary of NPRM
Huione Group \11\ is a financial services conglomerate based in
Phnom Penh, Cambodia.\12\ Huione Group's website is registered \13\ to
an individual with a listed location of Phnom Penh, Cambodia, but
Huione Group, the parent entity of the conglomerate, does not appear to
be registered as a business in any jurisdiction, though it was
originally incorporated in Hong Kong in 2018 as Huione Group
Limited.\14\ While several of Huione Group's subsidiaries are
registered outside of Cambodia, their operations are principally
carried out in Cambodia.
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\11\ As will be discussed in greater detail in section III,
Huione Group is the parent company of the following subsidiaries:
Huione Crypto, Haowang Guarantee, and Huione Pay PLC. FinCEN
assesses that this collective grouping of exchange services is a
single organization, and for that reason, FinCEN will
correspondingly refer to this collective as the Huione Group.
\12\ Cambodia Corporate Registry, Huione Search, https://www.businessregistration.moc.gov.kh/cambodia-master/service/create.html?targetAppCode=cambodia-master&targetRegisterAppCode=cambodia-br-companies&service=registerItemSearch (last accessed Mar. 27, 2025);
Huione Pay, Index, https://www.huionepay.com.kh/index/help; Huione
Group, About, which is no longer accessible and will be discussed
later in this section, formerly available at https://huione.com/html/about.jsp (last accessed Sept. 24, 2024). Huione Crypto has
numerous job announcements with a work location in Phnom Penh,
Cambodia. See Huione Crypto, Career Opportunities, https://www.huione.io/en-US/careerOpportunities (last accessed Mar. 27,
2025). Haowang Guarantee also lists job announcements with a work
location in Phnom Penh, Cambodia. See Haowang Guarantee, About,
https://www.hwdb.la/about/ (last accessed Mar. 27, 2025).
\13\ The registration is valid through June 3, 2025. See ICANN,
Huione.com, https://lookup.icann.org/en/huione.com (last accessed
Mar. 27, 2025).
\14\ Hong Kong Companies Registry, Huione Group Limited, at p.
54, https://www.cr.gov.hk/docs/wrpt/RNC063_2018.12.17-2018.12.23.pdf.
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For years, Huione Group has laundered illicit proceeds from
cybercrimes--namely, cyber heists carried out by the Lazarus Group,\15\
an entity sanctioned by Treasury's Office of Foreign Assets Control
(OFAC)--and Convertible Virtual Currency (CVC) investment scams carried
out by transnational criminal organizations (TCOs) based in Southeast
Asia.\16\
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\15\ The Lazarus Group is an agency, instrumentality, or
controlled entity of the government of the Democratic People's
Republic of Korea, that has stolen large volumes of Convertible
Virtual Currency in numerous and often widely reported cyber heists.
On September 13, 2019, the Lazarus Group was sanctioned by OFAC. See
Department of the Treasury, Press Release, Treasury Sanctions North
Korean State-Sponsored Malicious Cyber Groups, (Sept. 13, 2019),
https://home.treasury.gov/news/press-releases/sm774.
\16\ These scams are also referred to as ``pig butchering.'' See
FinCEN, FIN-2023-Alert005, FinCEN Alert on Prevalent Virtual
Currency Investment Scam Commonly Known as ``Pig Butchering'' (Sept.
8, 2023), https://www.fincen.gov/sites/default/files/shared/FinCEN_Alert_Pig_Butchering_FINAL_508c.pdf.
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Since its establishment, Huione Group has set up a network of
businesses, each playing a different role in its money laundering
enterprise. However, FinCEN's analysis of Huione Group has identified
the sharing of CVC infrastructure by Huione Group's constituent
entities, indicating that the entities, including the parent Huione
Group, are functionally operating as one and the same, despite the
various branding. Because Huione Group's subsidiaries have shared CVC
infrastructure with its constituent entities, the structure makes it
challenging to ascertain the specific subsidiary involved in any
particular transaction.
The overall Huione Group network offers unique services ranging
from an online marketplace selling items useful for carrying out cyber
scams to money laundering services that accept both fiat currencies and
CVC. Huione Group has also created its own stablecoin, a type of CVC
that is usually backed by a pre-determined quantity of fiat currency,
most often the U.S. dollar (USD). The stablecoin, ``USDH,'' which is a
ticker symbol for ``U.S. Dollar Huione,'' is pegged to the USD at a
one-to-one ratio and is represented as a stablecoin that cannot be
frozen. In contrast, many stablecoin issuers develop their stablecoins
to retain the ability to freeze funds, which they have sometimes done
in cases of known criminal activity, or at the request of law
enforcement. Because Huione Group claims that USDH cannot be frozen,
this service offers Huione Group's clientele a
[[Page 18936]]
virtually risk-free ecosystem to move or store CVC without the risk of
interception or ``freezing'' by law enforcement.
Finally, much of the illicit revenue laundered through Huione Group
originates from well-documented criminal activity, and numerous
publicly available reports describe the failings of Huione Group's
anti-money laundering/know your customer (AML/KYC) program. Despite
these reports and Huione Group's public acknowledgments of its
failings,\17\ FinCEN assesses that Huione Group has made no meaningful
steps to effectively address these AML/KYC deficiencies.
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\17\ Following negative public reporting about Huione Group in
July 2024, Huione Group provided a statement to ABC News, stating
that ``. . . because our [Huione Group's] services are all public,
covering Asia, Europe and America, and the privacy attributes of
[CVC] are superimposed, our KYC [know your customer] capabilities
are now seriously insufficient.'' See ABC News, Cambodian online
marketplace outed as one-stop shop for scammers' money laundering
and `detention equipment' needs (July 26, 2024), https://www.abc.net.au/news/2024-07-27/online-marketplace-for-money-laundering-and-scammers/104131624; see also The Record, Tether
freezes $29 million of cryptocurrency connected to Cambodian
marketplace accused of fueling scams (July 15, 2024), https://therecord.media/tether-freezes-29-million-crypto-connected-to-scam-marketplace; Elliptic, Huione Guarantee: The multi-billion dollar
marketplace used by online scammers (July 9, 2024, updated Mar. 27,
2025), https://www.elliptic.co/blog/cyber-scam-marketplace;
Elliptic, Huione: The Company Behind the Largest Ever Illicit Online
Marketplace Has Launched a Stablecoin (Jan. 14, 2025), https://www.elliptic.co/blog/huione-largest-ever-illicit-online-marketplace-stablecoin; Chainalysis, 2024 Crypto Crime Mid-year Update Part 2:
China-based CSAM and Cybercrime Networks on the Rise, Pig Butchering
Scams Remain Lucrative (Aug. 29, 2024), https://www.chainalysis.com/blog/2024-crypto-crime-mid-year-update-part-2/.
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This NPRM (1) sets forth FinCEN's finding, based on public and non-
public information, that Huione Group is a financial institution
operating outside of the United States of primary money laundering
concern; and (2) proposes that, under special measure five, covered
financial institutions be prohibited from opening or maintaining a
correspondent account for, or on behalf of, Huione Group.
III. Finding That Huione Group Is a Financial Institution Operating
Outside of the United States and a Foreign Financial Institution
As set forth above, section 311 authorizes FinCEN, through
delegated authority and in pertinent part, to make a finding ``that
reasonable grounds exist for concluding'' that ``[one] or more
financial institutions operating outside of the United States'' is ``of
primary money laundering concern.'' \18\ A prerequisite to such a
finding is that the relevant institution is a ``financial institution
operating outside of the United States.'' \19\
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\18\ 31 U.S.C. 5318A(a)(1).
\19\ 31 U.S.C. 5318A(a)(1) authorizes the imposition of special
measures on, among others, ``financial institutions operating
outside of the United States.'' Of the five special measures
authorized by the statute, the fifth measure authorizes
``Prohibitions or Conditions on Opening or Maintaining Certain
Correspondent or Payable-Through Accounts.'' The statute goes on to
define the terms correspondent account and payable-through account
in reference to payments made on behalf of a ``foreign financial
institution''--a term otherwise undefined. For the purposes of this
NPRM, and under these facts, FinCEN finds that Huione Group is both
a foreign financial institution and a financial institution outside
of the United States.
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The BSA defines a ``financial institution'' to be any of several
categories of entities, including money transmitters.\20\ The BSA
defines a money transmitter as including ``a licensed sender of money
or any other person who engages as a business in the transmission of
currency funds, or value that substitutes for currency.'' \21\ A money
transmitter does not require a particular license, corporate structure,
or physical location.
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\20\ See 31 U.S.C. 5312(a)(2).
\21\ 31 U.S.C. 5312(a)(2)(R) (allowing ``a licensed sender of
money or any other person . . .'' to constitute money transmitter).
FinCEN's implementing regulations define ``person'' broadly as ``an
individual, a corporation, a partnership, a trust or estate, a joint
stock company, an association, a syndicate, joint venture, or other
unincorporated organization or group, an Indian Tribe (as that term
is defined in the Indian Gaming Regulatory Act), and all entities
cognizable as legal personalities.'' 31 CFR 1010.100(mm).
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As detailed further below, much of Huione Group's illicit money
transmitting activity occurs through transactions in CVC. This is
consistent with the money transmitter definition, which includes
services in CVC. FinCEN's May 9, 2019, Guidance on CVC explains that
for the purposes of the BSA's implementing regulations, persons ``may
be a money transmitter . . . regardless of the technology employed for
the transmittal of value or the type of asset the person uses as value
that substitutes for currency, or whether such asset is physical or
virtual.'' \22\ For the reasons explained in the May 9, 2019, Guidance,
the term ``value that substitutes for currency'' includes CVC.\23\
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\22\ FinCEN, FIN-2019-G001, Application of FinCEN's Regulations
to Certain Business Models Involving Convertible Virtual Currencies
(May 9, 2019), at Section 1.2.3, https://www.fincen.gov/sites/default/files/2019-05/FinCEN%20Guidance%20CVC%20FINAL%20508.pdf.
\23\ Id. at Sections 1.2.1, 1.3.
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A. Huione Group and Its Three Identified Subsidiaries Are Each a
Financial Institution
Huione Group is a parent entity that controls three subsidiaries:
(i) Haowang Guarantee; (ii) Huione Pay PLC; and (iii) Huione Crypto
(collectively, the ``Subsidiaries''). Based on the following, FinCEN
finds that reasonable grounds exist to conclude that Huione Group and
each of the Subsidiaries engages in the business of money transmission,
and is thereby a financial institution under the BSA and its
implementing regulations.
1. Huione Group
Huione Group is a Cambodia based, Hong Kong-registered \24\ sole
proprietorship founded in or around 2014, appears to be owned and
controlled by an individual Cambodian national,\25\ and holds itself
out as the parent entity of the Subsidiaries.\26\ By its own account,
Huione Group began as a fiat currency exchange service and over the
past decade, expanded its commercial interests to include finance,
insurance, real estate entities,\27\ and most recently, CVC exchange
services.\28\ The Subsidiaries operate an interconnected payment
service provider, illicit online market, and a
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CVC exchanger (a type of virtual asset service provider or VASP).
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\24\ Hong Kong Companies Registry, Huione Group Limited, at p.
54, https://www.cr.gov.hk/docs/wrpt/RNC063_2018.12.17-2018.12.23.pdf.
\25\ See The Record, Tether freezes $29 million of
cryptocurrency connected to Cambodian marketplace accused of fueling
scams (July 15, 2024), https://therecord.media/tether-freezes-29-million-crypto-connected-to-scam-marketplace.
\26\ See, e.g., Elliptic, Huione: The Company Behind the Largest
Ever Illicit Online Marketplace Has Launched a Stablecoin (Jan. 14,
2025), https://www.elliptic.co/blog/huione-largest-ever-illicit-online-marketplace-stablecoin; Elliptic, Huione Guarantee: The
multi-billion dollar marketplace used by online scammers (July 9,
2024, updated Mar. 27, 2025), https://www.elliptic.co/blog/cyber-scam-marketplace; Chainalysis, 2024 Crypto Crime Mid-year Update
Part 2: China-based CSAM and Cybercrime Networks on the Rise, Pig
Butchering Scams Remain Lucrative (Aug. 29, 2024), https://www.chainalysis.com/blog/2024-crypto-crime-mid-year-update-part-2/;
ABC News, Cambodian online marketplace outed as one-stop shop for
scammers' money laundering and `detention equipment' needs (July 26,
2024), https://www.abc.net.au/news/2024-07-27/online-marketplace-for-money-laundering-and-scammers/104131624; Huione Crypto, Terms
and Conditions, https://www.huione.io/en-US/termsAndConditions/userAgreement (last accessed Mar. 27, 2025). The Huione Group
website is no longer accessible, which FinCEN assesses is more
likely than not caused by negative public attention following a
series of reports by blockchain analytic firms on money laundering
occurring at Huione Group.
\27\ Huione Group, Who We Are, formerly available at https://www.huione.com/html/about.jsp (last accessed Sept. 24, 2024).
\28\ Huione Crypto, Introduce, https://www.huione.io/en-US/introduce (last accessed Mar. 26, 2025).
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Huione Group, as an individual entity, coordinates the
Subsidiaries' activities by operating the customer service and public
relations functions of the Huione Group. Huione Group does this by
hosting Telegram channels to aid customers experiencing problems with
the services that the Subsidiaries provide.\29\ One of Huione Group's
Telegram channels also provides public relations commentary on behalf
of the whole of the Huione Group collective. Most recently, that public
relations channel responded to counter news media reports that the
Cambodian government revoked Huione Pay PLC's banking license.\30\
Lastly, Huione Group's Subsidiaries all have shared CVC infrastructure,
making it challenging to ascertain the specific subsidiary involved in
a particular transaction.
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\29\ Telegram, Huione Group Customer Service Center, https://t.me/huionekf/138 (last accessed Mar. 27, 2025).
\30\ Telegram, Huione Group Customer Service, Huione Statement
(Mar. 9, 2025), https://t.me/huionekf/346.
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FinCEN finds that reasonable grounds exist to conclude that Huione
Group is a money transmitter. By providing customer service and public
relations services on behalf of the Subsidiaries, Huione Group is
itself part of ``a network of people who engage as a business in
facilitating the transfer of money.'' Furthermore, through Huione
Group's apparent control of the Subsidiaries (each of which is itself a
money transmitter, and through Huione Group's coordination of the
Subsidiaries' business activities such that they form a self-contained
ecosystem of exchange, payment, and market services), Huione Group is
engaged as a business in the transmission of value that substitutes for
currency. Accordingly, FinCEN finds that reasonable grounds exist to
conclude that Huione Group is a financial institution as defined by the
BSA and as that term is used in section 311.
2. Haowang Guarantee (Formerly Known as Huione Guarantee) \31\
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\31\ On October 19, 2024, Huione Guarantee was rebranded as
Haowang Guarantee, announcing the change on September 30, 2024, and
offering customer discount following the rebrand to thank their
long-term customers. The reason for such a rebrand is unclear,
although it could be to distance itself from the recent negative
public reporting about Huione Group. Telegram, Haowang Guarantee
Customer Service Channel (Sept. 30, 2024), https://t.me/s/kefu (last
accessed Mar. 27, 2025).
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Haowang Guarantee describes itself as ``a professional e-commerce
platform that provides users with virtual digital products and
transaction services . . . [that] does not participate in nor
understand the specific business of the customer. . . . Huione cannot
verify or guarantee the process of funds or goods.'' \32\ Multiple
blockchain analytic firms have analyzed and reported on Haowang
Guarantee for facilitating the sale of contraband and illicit services.
For example, a public report issued by blockchain analytics company
Elliptic found that Haowang Guarantee appears to operate in a manner
similar to a darknet market.\33\ This assessment is based on the fact
that Haowang Guarantee offers a marketplace where third party merchants
can sell goods and services, including money laundering services and
equipment that can be used to detain people, which could be used for
illicit purposes such as enabling human trafficking.\34\ While FinCEN
does not have evidence that Haowang Guarantee operates on the darknet,
FinCEN assesses that Haowang Guarantee deals in the sale of illicit
goods and services in a manner similar to a darknet market but on the
open internet.\35\
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\32\ Haowang Guarantee, About, https://www.hwbd.la/about (last
accessed Mar. 27, 2025).
\33\ Darknet Markets almost exclusively accept CVC as payment
for a large range of illegal services and goods, including
ransomware-as-a-service (RaaS). CVC is often the payment method of
choice on darknet marketplaces because illicit actors who transact
on the darknet often incorrectly believe virtual currencies to be an
anonymous and untraceable means of exchange.
\34\ Elliptic, Huione Guarantee: The multi-billion dollar
marketplace used by online scammers (July 9, 2024, updated Mar. 27,
2025), https://www.elliptic.co/blog/cyber-scam-marketplace.
\35\ See Department of the Treasury, Press Release, Treasury
Sanctions Russia-Based Hydra, World's Largest Darknet Market, and
Ransomware-Enabling Virtual Currency Exchange Garantex (Apr. 5,
2022), https://home.treasury.gov/news/press-releases/jy0701.
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Chainalysis, a separate blockchain analytics company, found similar
results. In its 2024 Crypto Crime Mid-year Update Report, it determined
that Haowang Guarantee operates as a peer-to-peer marketplace that
connects buyers and sellers and facilitates transactions.\36\
Chainalysis reviewed blockchain data of Haowang Guarantee and
determined it had processed at least USD 49 billion worth of CVC since
2021. Chainalysis also determined that merchants operating on Haowang
Guarantee's marketplace offered various illicit services, including the
technology, infrastructure and resources to conduct cyber scams.\37\
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\36\ Chainalysis, 2024 Crypto Crime Mid-year Update Part 2:
China-based CSAM and Cybercrime Networks on the Rise, Pig Butchering
Scams Remain Lucrative (Aug. 29, 2024), https://www.chainalysis.com/blog/2024-crypto-crime-mid-year-update-part-2/.
\37\ Id.
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In addition, Elliptic reports that Haowang Guarantee provides money
laundering services to criminal organizations, helping them transfer
the proceeds of investment frauds and other cyber scams to the
legitimate banking sector undetected.\38\ Because Haowang Guarantee
offers ``virtual digital products and transaction services'' and
facilitates CVC (digital asset) transactions, FinCEN finds that there
are reasonable grounds to conclude that it is engaged as a business in
the transmission of value that substitutes for currency. Accordingly,
FinCEN finds that reasonable grounds exist to conclude that Haowang
Guarantee is a financial institution as that term is used in the BSA
and section 311.
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\38\ Elliptic, Huione: The Company Behind the Largest Ever
Illicit Online Marketplace Has Launched a Stablecoin (Jan. 14,
2025), https://www.elliptic.co/blog/huione-largest-ever-illicit-online-marketplace-stablecoin.
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3. Huione Pay PLC
As of January 2025, Huione Pay PLC was registered as a payment
services institution with the National Bank of Cambodia.\39\ Until
December 2023, there was a likely related entity, ``Huione Pay,''
registered as a money services business in Canada, which was
incorporated in the country as Huione Pay Inc.\40\ In March 2025,
Huione Group advertised its plans to expand Huione Pay PLC into new
markets, including in North America.\41\
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\39\ National Bank of Cambodia, List of Payment Service
Institutions (Dec. 31, 2024), https://www.nbc.gov.kh/download_files/data/english/En/EN-PSIs.pdf (last accessed Mar. 21, 2025).
\40\ Financial Transactions and Reports Analysis Centre of
Canada (FINTRAC), Money Services Business Registry, Huione Pay Inc,
https://fintrac-canafe.canada.ca/msb-esm/reg-eng (last accessed Mar.
13, 2025).
\41\ Telegram, Huione Group Customer Service, Huione Statement
(Mar. 9, 2025), https://t.me/huionekf/346.
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Huione Pay PLC offers its customers the ability to trade CVC on
different blockchains, and to convert CVC to or from various fiat
currencies.\42\ Huione Pay PLC is registered with the Cambodian
Ministry of Commerce for ``other financial service activities.'' \43\
[[Page 18938]]
Part of Huione Pay PLC, Huione International Payments, acts as a
merchant on Haowang Guarantee's platform and exchanging CVC to
facilitate the transfer of the proceeds of cyber scams.\44\ Huione Pay
PLC holds the local equivalent of a money transmitting business license
issued by the Kingdom of Cambodia and engages in the exchange of CVC in
a manner consistent with the definition of a money transmitting
business. Accordingly, FinCEN finds that reasonable grounds exist to
conclude that Huione Pay PLC is a financial institution as that term is
used in the BSA and section 311.
---------------------------------------------------------------------------
\42\ Huione Pay website, Index, https://www.huionepay.com.kh/index/help (last accessed Mar. 27, 2025).
\43\ See Cambodia Corporate Registry, Huione Search, https://www.businessregistration.moc.gov.kh/cambodia-master/service/create.html?targetAppCode=cambodia-master&targetRegisterAppCode=cambodia-br-companies&service=registerItemSearch (last accessed Mar. 27, 2025).
On March 6, 2025, a media report indicated that Huione Pay PLC's
banking license was revoked by the Cambodian government. See Radio
Free Asia, Exclusive: World's Largest online black market' Loses
banking license (Mar. 6, 2025), https://www.rfa.org/english/cambodia/ 2025/03/06/huione-cambodia-cyberscam-cryptocurrency/.
Huione Group responded to the allegations, refuting them by noting
that Huione Pay PLC does not require a banking license for its
operations. Telegram, Huione Group Customer Service, Huione
Statement (Mar. 9, 2025), https://t.me/huionekf/346. However, as of
March 10, 2025, Huione Pay PLC is still listed as having an active
license for ``other financial services activities.'' See Cambodia
Corporate Registry, Huione Search, https://www.businessregistration.moc.gov.kh/cambodia-master/service/create.html?targetAppCode=cambodia-master&targetRegisterAppCode=cambodia-br-companies&service=registerItemSearch (last accessed Mar. 27, 2025).
\44\ FinCEN assesses that Huione International Payments is part
of Huione Pay PLC and that the entity supports Haowang Guarantee's
facilitation of transactions connected to money laundering
activities. See Elliptic, Huione Guarantee: The multi-billion dollar
marketplace used by online scammers (July 9, 2024, updated Mar. 27,
2025), https://www.elliptic.co/blog/cyber-scam-marketplace; The New
York Times, How Scammers Launder Money and Get Away With It (Mar.
23, 2025), https://www.nytimes.com/2025/03/23/world/asia/cambodia-money-laundering-huione.html.
---------------------------------------------------------------------------
4. Huione Crypto
Huione Crypto provides CVC trading services through its ``Huione
Exchange'' brand, which it owns and operates. Huione Exchange provides
a platform for its customers to trade CVC using either its ``peer to
peer'' or ``centrali[z]ed exchange platform.'' \45\ In other words,
Huione Crypto is a VASP operating under the Huione Group umbrella, and
other Huione Group entities use Huione Crypto's infrastructure to
engage in CVC transactions. Separately, Huione Crypto issues the USDH
stablecoin.\46\ By facilitating CVC value exchanges for its customers
through its trading platform, and by issuing a stablecoin that
facilitates the transfer of money outside the conventional financial
institution systems, Huione Crypto is engaged in money transmission as
described at 31 U.S.C. 5312(R). Accordingly, FinCEN finds that
reasonable grounds exist to conclude that Huione Crypto is a financial
institution as that term is used in the BSA and section 311.
---------------------------------------------------------------------------
\45\ Huione Crypto, Legal, https://www.huione.io/en-US/termsAndConditions/userAgreement (last accessed Mar. 27, 2025).
\46\ See supra Section II.
---------------------------------------------------------------------------
B. Huione Group Operates Outside the United States
1. Huione Group
Based on publicly available information, Huione Group is operated
by a Cambodian person, from Phnom Penh, Cambodia.\47\ Furthermore, the
Huione Group website is registered to a Cambodian address in Phnom
Penh, uses a Cambodian Top-Level Domain, and communicates predominately
in the Chinese language via a Cambodian website and Telegram Channel
operated from Cambodia. Accordingly, FinCEN finds that reasonable
grounds exist to conclude that Huione Group is operated from and
located in Cambodia and thus operates outside of the United States.
---------------------------------------------------------------------------
\47\ The Record, Tether freezes $29 million of cryptocurrency
connected to Cambodian marketplace accused of fueling scams (July
15, 2024), https://therecord.media/tether-freezes-29-million-crypto-connected-to-scam-marketplace; see also ICANN, Huione.com, https://lookup.icann.org/en/huione.com; Elliptic, Huione Guarantee: The
multi-billion dollar marketplace used by online scammers (July 9,
2024, updated Mar. 27, 2025), https://www.elliptic.co/blog/cyber-scam-marketplace.
---------------------------------------------------------------------------
2. Haowang Guarantee (Formerly Huione Guarantee)
Haowang Guarantee operates Telegram-based marketplace that allows
its customers to buy and sell goods and services, relying on other
Huione Group services and infrastructure to execute the exchanges.
Haowang Guarantee appears to serve, in significant part, fraudsters
based in Southeast Asia. FinCEN assesses that Haowang Guarantee
deliberately obfuscates its location in order to shield its enterprise
and customers from law enforcement. Haowang Guarantee is integrated
into Huione Group's operations and is apparently subject to Huione
Group's control. FinCEN assesses that it is operated from Cambodia and
Haowang Guarantee advertises job opportunities based in Phnom Phen,
Cambodia. Accordingly, FinCEN finds that reasonable grounds exist to
conclude that Haowang Guarantee is operated from and located in
Cambodia and thus operates outside of the United States.
3. Huione Pay PLC
Huione Pay PLC operates eight Cambodian domestic branch locations,
located in Battambang, Phnom Penh, Poipet, Siem Reap, and
Sihanoukville.\48\ Huione Pay PLC also advertises on social media that
it has operated a branch in Laukkaing,\49\ the capital of the Kokang
Self-Administered Zone in northern Burma and a known center for
criminal CVC investment scams, before a 2023-2024 crackdown shuttered
the majority of these operations.\50\ Huione Pay PLC is registered as a
payment services institution with the National Bank of Cambodia.\51\
Based on the foregoing, FinCEN finds that reasonable grounds exist to
conclude that Huione Pay PLC is operated from and located in Cambodia
and thus operates outside of the United States.
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\48\ Telegram, Huione Branch, https://t.me/huionestoreaddress/7
(last accessed Mar. 27, 2025).
\49\ Telegram, Huione Group Customer Service Center, https://t.me/huionekf/138 (last accessed Mar. 27, 2025).
\50\ Recorded Future, Myanmar rebels take control of `pig
butchering' scam city amid China pressure on junta (Jan. 8, 2024),
https://therecord.media/myanmar-rebels-control-pig-butchering-scam-hub.
\51\ National Bank of Cambodia, List of Payment Service
Institutions (Dec. 31, 2024), https://www.nbc.gov.kh/download_files/data/english/En/EN-PSIs.pdf (last accessed Mar. 21, 2025).
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4. Huione Crypto
Huione Crypto, under the name Huione Crypto Sp[oacute][lstrok]ka Z
Ograniczon[aogon] Odpowiedzialno[sacute]ci[aogon], is registered in
Poland.\52\ Despite its Polish registration, however, FinCEN assesses
that Huione Crypto operates in and from Cambodia.\53\ Huione Crypto is
registered as a Money Services Business (MSB) \54\ with FinCEN;
however, FinCEN has found no evidence consistent with activity in the
United States by this entity. FinCEN assesses that the ``Group''
referenced in Huione Crypto's Standard Terms and Conditions refers to
Huione Group, and that Huione Crypto's CVC services share
infrastructure with Huione Pay PLC and Haowang Guarantee, and
collectively comprise a single organization.
---------------------------------------------------------------------------
\52\ Polish corporate registration database, Huione Crypto
SP[Oacute][Lstrok]KA Z OGRANICZON[Aogon]
ODPOWIEDZIALNO[Sacute]CI[Aogon], https://www.biznes.gov.pl/en/wyszukiwarka-firm/wpis/krs/0001043802 (last accessed Mar. 27, 2025).
\53\ Huione Crypto, Career Opportunities, https://Huione.io/en-US/careerOpportunities (last accessed Mar. 27, 2025); Huione Crypto,
Legal, https://www.huione.io/en-US/termsAndConditions/userAgreement
(last accessed Mar. 27, 2025); Huione Pay PLC, www.huionepay.com.kh
(last accessed Mar. 27, 2025).
\54\ For more information on what type of business or activity
requires registration as a money service business, see FinCEN, Money
Services Business Definition, https://www.fincen.gov/money-services-business-definition.
---------------------------------------------------------------------------
Regardless of this distinction, FinCEN will discuss Huione Crypto
as a related, but distinct subsidiary of Huione Group. Huione Crypto
advertises jobs in Phnom Penh, Cambodia indicating it is likely
[[Page 18939]]
operated out of Cambodia, instead of Poland. Additionally, the Standard
Terms and Conditions of Huione Crypto state that the ``Group provides
the Services through www.7572.com, the Group's mobile application or
any Huione application programming interface.'' The listed web page
(www.7572.com) automatically redirects to the website of Huione Pay PLC
(www.huionepay.com.kh).\55\ Indeed, Huione Crypto's terms expressly
disclaim that persons inside the United States may not avail themselves
of Huione Group's services.\56\ Accordingly, FinCEN finds that
reasonable grounds exist to conclude that Huione Crypto is operated
from and located in Cambodia and thus operates outside of the United
States.
---------------------------------------------------------------------------
\55\ See FinCEN, MSB Registrant Search, Huione, https://www.fincen.gov/msb-state-selector.
\56\ Huione Crypto, Legal, https://www.huione.io/en-US/termsAndConditions/userAgreement (last accessed Mar. 27, 2025).
---------------------------------------------------------------------------
5. Huione Group's Registrations With FinCEN and Absence of United
States Operations
The most evidence of activity in the United States by Huione Group
or the Subsidiaries are three MSB registrations \57\ with FinCEN and an
address reported on two registrations.\58\ In April 2023, Huione Crypto
registered as a dealer in foreign exchange, and provided a business
address in Phnom Penh, Cambodia, while noting no branches in the United
States. In August 2024, Huione Pay Inc. registered to conduct multiple
MSB activities, including check cashing, dealing in foreign exchange,
and money transmission. Huione Pay Inc. provided an address in Denver,
Colorado associated with a virtual mail forwarding service, and it also
noted no branches in the United States. Finally, in February 2025,
Huione LTD registered as a dealer in foreign exchange, money
transmitter, and seller of money orders, and noted no branches in the
United States. Huione LTD appears to use the same Denver, Colorado mail
forwarding service as Huione Pay Inc. FinCEN has not identified any
actual physical location or other information suggesting Huione Group
or the Subsidiaries are actually operating in the United States.
---------------------------------------------------------------------------
\57\ FinCEN's MSB Registrant Search web page reflects only what
the registrant has provided to FinCEN, and FinCEN does not approve
or endorse any business that has registered as an MSB.
\58\ An examiner attempted to contact Huione Pay Inc. at the
Denver, Colorado location in November 2024, but the examiner did not
identify a Huione Pay representative, nor any other evidence of a
physical presence by Huione Pay.
---------------------------------------------------------------------------
Based on the foregoing, FinCEN assesses that Huione Group and the
Subsidiaries are predominately operated from and located in Cambodia,
with a limited connection--a corporate registration--to Poland. While
the three MSB registrations by Huione Crypto, Huione Pay Inc., and
Huione LTD suggest that Huione Group may intend to expand its business
to the United States in the future, as of the date of this NPRM, FinCEN
is not aware of any physical presence by Huione Group or the
Subsidiaries in the United States or any substantial business with
customers in the United States.
Accordingly, FinCEN finds that there are reasonable grounds to
conclude that Huione Group and the Subsidiaries are foreign financial
institutions that operate outside the United States.
IV. Finding That Huione Group Is of Primary Money Laundering Concern
Pursuant to 31 U.S.C. 5318A(a)(1), FinCEN finds that reasonable
grounds exist for concluding that Huione Group \59\ is of primary money
laundering concern. Below is a discussion of the relevant statutory
institutional factors FinCEN considered in making this finding related
to this Cambodia-based financial institution.
---------------------------------------------------------------------------
\59\ As described in section III, Huione Group is a parent
entity that controls three subsidiaries: (a) Haowang Guarantee; (b)
Huione Pay PLC; and (c) Huione Crypto.
---------------------------------------------------------------------------
A. The Extent to Which Huione Group Is Used To Facilitate or Promote
Money Laundering, Including Any Money Laundering Activity by Organized
Criminal Groups, International Terrorist, or Entities Involved in the
Proliferation WMD or Missiles
Under section 311, in deciding to apply one or more special
measures, FinCEN may consider the extent to which the financial
institution is ``used to facilitate or promote money laundering''
including ``any money laundering activity by organized criminal groups,
international terrorists, or entities involved in the proliferation of
weapons of mass destruction or missiles.'' \60\ FinCEN assesses that
Huione Group is used to facilitate and promote money laundering,
particularly in support of illicit financial activities connected to
the Democratic People's Republic of Korea (DPRK) and Southeast Asia-
based TCOs. Because Huione Group has shared infrastructure with its
constituent entities, the structure makes it challenging to ascertain
the specific subsidiary involved in any particular transaction. FinCEN
bases this assessment on information available through both public and
non-public reporting, and after thorough consideration of each of the
following factors: (1) Huione Group provides services that DPRK
government entities use to launder the proceeds of cyber heists; (2)
TCOs based in Southeast Asia have used Huione Group to launder illicit
proceeds of cyber scams, including CVC investment scams; and (3) Huione
Group operates an illicit online market.
---------------------------------------------------------------------------
\60\ 31 U.S.C. 5318A(c)(2)(B)(i).
---------------------------------------------------------------------------
1. Huione Group Facilitates Transactions for DPRK Actors To Launder
Funds From Sanctions Evasion and Cyber Heists
DPRK-affiliated actors have extensively used the Huione Group to
launder stolen CVC for the benefit of the DPRK government and in
support of DPRK's WMD and ballistic missile programs, in violation of
U.S. and multilateral sanctions programs, including United Nation
Security Council Resolutions (UNSCRs). The United States has
consistently taken measures to counter DPRK's abuse of CVC and protect
the United States from DPRK's illicit financial activity.\61\ However,
as outlined in Treasury's 2024 National Proliferation Financing Risk
Assessment, DPRK has continued to advance its illicit exploitation of
new financial technology, including the theft and laundering of CVC, to
raise and move money to fund its illicit weapons programs.\62\ Indeed,
a United Nations Panel of Experts (UN POE) found that the malicious
cyber activities of the DPRK generates approximately 50 percent of its
foreign currency income. In its March 2024 annual report, the UN POE
indicated that it was investigating 17 CVC heists in 2023 for which the
DPRK may be responsible, valued at more than USD 750 million.\63\
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\61\ See FinCEN, READOUT: FinCEN Hosts Public-Private Dialogue
on Countering the DPRK's Illicit Cyber Activities (Aug. 31, 2023),
https://www.fincen.gov/news/news-releases/readout-fincen-hosts-public-private-dialogue-countering-dprks-illicit-cyber.
\62\ Department of the Treasury, National Proliferation
Financing Risk Assessment (Feb. 7, 2024), at pp. 2, 18, https://home.treasury.gov/system/files/136/2024-National-Proliferation-Financing-Risk-Assessment.pdf.
\63\ United Nations, S/2024/215, UN Panel of Experts Letter
(Mar. 7, 2024), at p. 60, https://documents.un.org/doc/undoc/gen/n24/032/68/pdf/n2403268.pdf.
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a. Background on CVC Heists Carried Out by DPRK
In the same March 2024 report, the UN POE noted it was
investigating 58 suspected cyberattacks by DPRK's Reconnaissance
General Bureau
[[Page 18940]]
(RGB),\64\ to which the Lazarus Group \65\ is related, on CVC companies
between 2017 and 2023, valued at approximately USD 3 billion. FinCEN
assesses that these funds likely bolstered DPRK's WMD development.\66\
The Federal Bureau of Investigation (FBI), the Cybersecurity and
Infrastructure Security Agency (CISA), and Treasury issued a joint
Cybersecurity Advisory to highlight the cyber threat associated with
cryptocurrency thefts and tactics used by the DPRK state-sponsored
advanced persistent threat group, since at least 2020.\67\ The U.S.
government has observed DPRK cyber actors targeting a variety of
organizations in the blockchain technology and cryptocurrency industry,
including cryptocurrency exchanges, decentralized finance protocols,
play-to-earn CVC video games, CVC trading companies, venture capital
funds investing in CVC, and individual holders of large amounts of
cryptocurrency or valuable non-fungible tokens.\68\ FinCEN assesses
that, over time, the DPRK's money laundering processes have become more
complex in order to evade OFAC sanctions, law enforcement, and BSA
reporting obligations from hacked entities or CVC entities used in the
laundering process. In fact, in August 2023, the FBI alerted the public
to several thefts from CVC companies that it attributed to the Lazarus
Group and warned that there could be another USD 40 million worth of
CVC being prepared for laundering through VASPs.\69\
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\64\ On January 2, 2015, OFAC sanctioned DPRK's RGB for being a
controlled entity of the Government of North Korea. See Department
of the Treasury, Press Release, Treasury Imposes Sanctions Against
the Government of The Democratic People's Republic Of Korea (Jan. 2,
2015), https://home.treasury.gov/news/press-releases/jl9733. RGB was
also previously listed in the annex to E.O. 13551 on August 30,
2010. Executive Order 13551, ``Blocking Property of Certain Persons
With Respect to North Korea,'' 75 FR 53837 (Aug. 30, 2010).
\65\ This group is commonly referred to by the cybersecurity
industry as Lazarus Group, APT38, BlueNoroff, and Stardust Chollima.
For the purposes of this NPRM, FinCEN will refer to this group as
Lazarus Group. See Department of the Treasury, Press Release,
Treasury Sanctions North Korean State-Sponsored Malicious Cyber
Group (Sept. 13, 2019), https://home.treasury.gov/news/press-releases/sm774.
\66\ Department of the Treasury, Press Release, Treasury Imposes
Sanctions Against the Government of The Democratic People's Republic
Of Korea (Jan. 2, 2015), https://home.treasury.gov/news/press-releases/jl9733.
\67\ Department of the Treasury, Press Release, Treasury
Sanctions North Korean State-Sponsored Malicious Cyber Groups (Sept.
13, 2019), https://home.treasury.gov/news/press-releases/sm774.
\68\ CISA, AA22-108A, TraderTraitor: North Korean State-
Sponsored APT Targets Blockchain Companies (Apr. 20, 2022), https://www.cisa.gov/news-events/cybersecurity-advisories/aa22-108a.
\69\ FBI, FBI Identifies Cryptocurrency Funds Stolen by DPRK
(Aug. 22, 2023), https://www.fbi.gov/news/press-releases/fbi-identifies-cryptocurrency-funds-stolen-by-dprk.
---------------------------------------------------------------------------
b. Huione Group's Laundering of Proceeds of DPRK Cyber Heists
Despite the 2023 FBI alert and other public reporting, Huione Group
has continued to receive and process these illicit proceeds. There is
wide reporting that Huione Group has received stolen CVC from multiple
heists linked to DPRK actors, namely the Lazarus Group.\70\ For
example, between June 2023 and February 2024, a CVC wallet used by the
Lazarus Group sent CVC valued at over USD 150,000 to Huione Group.\71\
---------------------------------------------------------------------------
\70\ The U.S. government has previously issued advisories to
publicly highlight the Lazarus Group's threat and tactics associated
with CVC theft targeting organizations in the blockchain and CVC
industry. See CISA, AA22-108A, TraderTraitor: North Korean State-
Sponsored APT Targets Blockchain Companies (Apr. 20, 2022), https://www.cisa.gov/news-events/cybersecurity-advisories/aa22-108a.
\71\ Reuters, Exclusive: North Korean hackers sent stolen crypto
to wallet used by Asian payment firm (July 15, 2024), https://www.reuters.com/technology/cybersecurity/north-korean-hackers-sent-stolen-crypto-wallet-used-by-asian-payment-firm-2024-07-15/.
---------------------------------------------------------------------------
FinCEN conducted blockchain analysis, using commercially available
blockchain analytic software, of flows of CVC associated with several
heists carried out by DPRK. This analysis identified that Huione Group
received a combined total of approximately USD 2.6 million worth of CVC
from the June 2, 2023 Atomic Wallet heist and the June 22, 2023
Coinspaid \72\ and Alphapo heists.\73\ In July 2024, Huione Group
received USD 35 million worth of stolen CVC, later attributed to the
Lazarus Group by the FBI, from the May 2024 heist targeting DMM, a
Japanese VASP.\74\ While the DMM heist was not initially attributed to
the Lazarus Group (or any other prohibited entity or jurisdiction), the
heist itself was widely reported by the time Huione Group received the
CVC, and FinCEN would expect covered financial institutions to have an
effective AML/KYC program to appropriately monitor transactions for red
flags indicating connections to high profile heist such as this. In
total, FinCEN's analysis has identified that Huione Group has received
at least USD 37.6 million worth of CVC from DPRK cyber actors stemming
from DPRK-attributed heists.
---------------------------------------------------------------------------
\72\ FBI, FBI Identifies Cryptocurrency Funds Stolen by DPRK
(Aug. 22, 2023), https://www.fbi.gov/news/press-releases/fbi-identifies-cryptocurrency-funds-stolen-by-dprk.
\73\ Id.
\74\ FBI, FBI, DC3, and NPA Identification of North Korean Cyber
Actors, Tracked as TraderTraitor, Responsible for Theft of $308
Million USD from Bitcoin.DMM.com (Dec. 23, 2024), https://www.fbi.gov/news/press-releases/fbi-dc3-and-npa-identification-of-north-korean-cyber-actors-tracked-as-tradertraitor-responsible-for-theft-of-308-million-from-bitcoindmmcom.
---------------------------------------------------------------------------
On multiple occasions between 2022 and 2024, a DPRK national with
deep ties to the RGB, DPRK's primary foreign intelligence organization,
worked with Huione Pay PLC officials to transfer CVC and fiat currency.
FinCEN assesses that senior Huione Pay PLC leadership was aware of the
individual's affiliation with DPRK. This DPRK national maintained
personal relationships with multiple Huione Pay PLC officials and
regularly met in person with at least one of these officials. In late
2023, the DPRK national worked with Huione Pay PLC officials to convert
CVC into fiat currency and subsequently transfer fiat currency to an
associate. In total, the DPRK national transferred CVC values at tens
of thousands USD to the Huione Pay PLC official. In mid-2023, the DPRK
national also planned to remit USD internationally to Hong Kong and
sought Huione Pay PLC officials help to do so.
Given the opacity of Huione Group and the inherent limitation of
blockchain analytics, FinCEN is largely unable to determine what DPRK
actors do with the CVC after they send it to Huione Group. However,
given the close connection between Huione Pay PLC officials and DPRK
nationals with close ties to DPRK's RGB, FinCEN assesses DPRK most
likely uses Huione Group to convert CVC to fiat currencies.
2. Huione Group's Laundering of Proceeds of Organized Criminal Groups'
Cyber Scams
Huione Group also has significant exposure to, and has facilitated
transactions associated with suspected fraud activity, including CVC
investment scams, also referred to as pig-butchering. FinCEN assesses
that Huione Group's extensive CVC services and its online marketplace,
Haowang Guarantee, has made Huione Group, a ``one stop shop'' for
criminals to launder CVC obtained through illicit activities, and
ultimately convert it to fiat currency.
a. Background on CVC Investment Scams
In 2023, FinCEN published an alert on the ``Pig Butchering'' CVC
investment scams.\75\ These scams are largely
[[Page 18941]]
perpetrated by criminal organizations based in Southeast Asia, who use
victims of human trafficking to conduct outreach to millions of
unsuspecting individuals around the world. The frontline scammers in
these schemes are themselves often victims of trafficking, including
forced labor, and are subjected to physical and mental abuse. The
traffickers also force victims to work up to 15 hours a day and, in
some cases, ``resell'' victims to other scam operations or subject them
to sex trafficking.\76\
---------------------------------------------------------------------------
\75\ FinCEN, FIN-2023-Alert005, FinCEN Alert on Prevalent
Virtual Currency Investment Scam Commonly Known as ``Pig
Butchering'' (Sept. 8, 2023), https://www.fincen.gov/sites/default/files/shared/FinCEN_Alert_Pig_Butchering_FINAL_508c.pdf.
\76\ Department of the Treasury, Press Release, Treasury
Sanctions Cambodian Tycoon and Businesses Linked to Human
Trafficking and Forced Labor in Furtherance of Cyber and Virtual
Currency Scams (Sept. 12, 2024), https://home.treasury.gov/news/press-releases/jy2576.
---------------------------------------------------------------------------
Once trust or a relationship has been established, the scammer will
introduce the victim to a supposedly lucrative investment opportunity
in CVC and direct them to use CVC investment websites or applications
designed to appear legitimate, but are instead fraudulent and
ultimately controlled or manipulated by the scammer. When a victim's
pace of investment slows or stops, the scammer will use even more
aggressive tactics to extract any final payments. The scammer may
present the victim with supposed losses on the investment and encourage
them to make up the difference through additional deposits. If the
victim attempts to withdraw their investment, the scammer may demand
that the victim pay purported taxes or early withdrawal fees. Once the
victim is unable or unwilling to pay more into the scam, the scammer
will abruptly cease communication with the victim, taking the victim's
entire investment with them.\77\
---------------------------------------------------------------------------
\77\ FinCEN, FIN-2023-Alert005, FinCEN Alert on Prevalent
Virtual Currency Investment Scam Commonly Known as ``Pig
Butchering'' (Sept. 8, 2023), at p. 4, https://www.fincen.gov/sites/default/files/shared/FinCEN_Alert_Pig_Butchering_FINAL_508c.pdf.
---------------------------------------------------------------------------
b. Huione Group's Laundering of Proceeds of Cyber Scams, Including CVC
Investment Scams
Based on FinCEN analysis of non-public information, Huione Group
received at least USD 36 million worth of CVC investment scam proceeds
since at least August 2021. More broadly, the analysis identified that
in the aggregate, inclusive of the cyber scam proceeds, Huione Group
received approximately USD 300 million worth of CVC relating to other
cyber scams. Despite the limitations noted above, FinCEN assesses that,
after illicit actors send CVC to Huione Group, CVC is then converted to
fiat currency or different CVC, or withdrawn at a later point to move
to a different VASP, as part of the money laundering process.
3. Huione Group's Lax Anti-Money Laundering Policies and Procedures
The risks presented by Huione Group's association with illicit
actors and transactions linked to illicit activity are compounded by
either an absence of, or ineffective, AML/KYC policies and procedures
among Huione Group's components, as well as recent changes that have
served to obfuscate Huione Group's involvement in illicit activity. For
example, in July 2024, Huione Group was the subject of reporting by
several blockchain analytic firms describing the use of its various
services by TCOs for scam activity, including those offered by Haowang
Guarantee.\78\ Elliptic reported that Haowang Guarantee offered scam-
enabling products and services used by scam compound operators to
imprison and torture their workers. The products included tear gas,
electric batons, and electronic shackles, among other related devices.
The same month, in a post to its website in response to the adverse
media reporting, Haowang Guarantee confirmed that ``detention
equipment'' is not necessarily human trafficking.'' \79\ Subsequent to
these events, Huione Group, namely Huione Pay PLC, removed all
references to Haowang Guarantee from its websites.\80\
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\78\ See Chainalysis, 2024 Crypto Crime Mid-year Update Part 2:
China-based CSAM and Cybercrime Networks on the Rise, Pig Butchering
Scams Remain Lucrative (Aug. 29, 2024), https://www.chainalysis.com/blog/2024-crypto-crime-mid-year-update-part-2/; Elliptic, Huione:
The Company Behind the Largest Ever Illicit Online Marketplace Has
Launched a Stablecoin (Jan. 14, 2025), https://www.elliptic.co/blog/huione-largest-ever-illicit-online-marketplace-stablecoin.
\79\ Haowang Guarantee, To all public friends on social media
(July 17, 2024), https://www.yu444.com/gonggao/detail/2237.
\80\ Elliptic, Huione: The Company Behind the Largest Ever
Illicit Online Marketplace Has Launched a Stablecoin (Jan. 14,
2025), https://www.elliptic.co/blog/huione-largest-ever-illicit-online-marketplace-stablecoin.
---------------------------------------------------------------------------
Neither Huione Pay PLC nor Haowang Guarantee have published AML/KYC
policies.\81\ Huione Crypto does not have a published AML/KYC policy
either. Rather, it maintains a ``standard terms and conditions'' on its
website governing the use of its services. In relevant part, the
agreement prohibits the use of Huione Crypto's platform by citizens,
nationals or residents of particular countries, including the United
States, Iran or North Korea, as well as individuals sanctioned under
various national regimes, including those of the United States and
United Nations. The agreement also states that ``the [u]ser may not use
the interface or services to disguise the origin or nature of illicit
proceeds.'' \82\ However, the extent of the criminal and money
laundering activity on Huione Crypto's platforms that violate its terms
and conditions agreement reflects that its AML/KYC program is either
ineffective or unenforced.
---------------------------------------------------------------------------
\81\ Repeated searches of their respective websites, including
most recently on March 27, 2025, failed to yield any evidence of a
policy. Haowang Guarantee's website did contain cursory fraud
indicators available to customers, however, in FinCEN's assessment,
this falls short of reasonable policies and procedures aimed at
combatting money laundering. See Haowang Guarantee, Fangpian,
https://hwdb.la/fangpian (last accessed Mar. 27, 2025).
\82\ Huione Crypto, Legal, https://www.huione.io/en-US/termsAndConditions/userAgreement (last accessed Mar. 27, 2025).
---------------------------------------------------------------------------
Despite this, and as described in greater detail in section IV.
A.1-2, since at least August 2021, FinCEN identified--through analysis
of non-public information--that Huione Group received at least USD 37
million worth of illicit proceeds from sanctioned entities--including
DPRK entities--and at least USD 300 million worth of CVC from various
cyber and CVC scam activity. FinCEN's analysis identified that, in the
aggregate, Huione Group has received at least USD 4 billion worth of
illicit proceeds, between August 2021 and January 2025.\83\ This large-
scale, persistent use of Huione Group by DPRK actors and TCO-driven CVC
investment scams to launder their illicit proceeds belies the adequacy
or effectiveness of Huione Group's AML/KYC procedures.
---------------------------------------------------------------------------
\83\ By illicit category, Huione Group has received the
following proceeds in CVC, denominated in equivalent USD value: USD
1,363 from child sexual abuse material; USD 618,861 from Darknet
Markets/Illicit Cyber Vendors; USD 3,246 from FinCEN Primary Money
Laundering Concerns; USD 3,248,510,440 from Identified Illicit Cyber
actors; USD 47,393,602 from VASPs without KYC policies; USD
407,129,792 from OFAC Specially Designated Nationals (U.S.
sanctioned entities); USD 347,549,705 from Scams; USD 22,133,556
from seized and/or stolen funds; and 2,627,009 from terrorist
financing.
---------------------------------------------------------------------------
Huione Group itself has conceded the deficiencies in its AML
regime. In a July 2024 media statement, for example, Huione Group
stated ``our [Know Your Customer] capabilities are now seriously
insufficient.'' \84\ This statement was made after previously claiming
earlier that month--in response to public identification of one heist,
the proceeds of which were transmitted to Huione
[[Page 18942]]
Pay PLC--that it had not known that Huione Pay PLC ``received funds
indirectly'' from the heist, due to the layers of transactions between
the source of the heist and the Huione Group-owned wallets that
ultimately received the funds.\85\
---------------------------------------------------------------------------
\84\ See ABC News, Cambodian online marketplace outed as one-
stop shop for scammers' money laundering and `detention equipment'
needs (July 26, 2024), https://www.abc.net.au/news/2024-07-27/online-marketplace-for-money-laundering-and-scammers/104131624.
\85\ Reuters, Exclusive: North Korean hackers sent stolen crypto
to wallet used by Asian payment firm (July 15, 2024), https://www.reuters.com/technology/cybersecurity/north-korean-hackers-sent-stolen-crypto-wallet-used-by-asian-payment-firm-2024-07-15/.
---------------------------------------------------------------------------
4. Huione Group Is Expanding Problematic CVC-Related Operations Despite
Regulatory Prohibition
Further illustrating the money laundering risk posed by Huione
Group is the fact that a significant portion of its assessed illicit
transactional activity involves CVC, which the National Bank of
Cambodia, Huione Group's primary regulator, expressly prohibits. In a
2024 public statement, the National Bank of Cambodia stated that
payment firms are ``not allowed to deal or trade any cryptocurrencies
and digital assets.'' \86\ Despite this prohibition, Huione Group has
continued to develop its CVC services and has even expanded its CVC
offerings in recent months. In September 2024, Huione Group launched
USDH, a stablecoin it explicitly advertised as ``unfreezable'' and
``not restricted by traditional regulatory agencies.'' \87\ FinCEN
assesses that Huione Group is likely taking this unusual step to hamper
compliance with applicable anti-money laundering laws. Huione Group's
intentional launching of this ``unfreezable'' stablecoin differs from
other stablecoin issuers that generally respond to law enforcement
requests to freeze CVC tied to illicit activity. One particular example
of this contrast occurred in July 2024, when one stablecoin issuer
froze CVC valued at over USD 29 million that was located in a Huione
Group CVC wallet because it was ``associated with activities allegedly
linked to fraudulent and transnational criminal operations.'' \88\ By
offering USDH, which is ``unfreezable,'' even upon a lawful request
from law enforcement, Huione Group facilitates and profits from money
laundering, benefiting TCOs and DPRK actors exfiltrating the proceeds
of their crimes.
---------------------------------------------------------------------------
\86\ Id.
\87\ Huione Crypto, USDH is a stable currency in one word!,
https://huione.io/en-us/introduce (last accessed Mar. 27, 2025).
\88\ The Record, Tether freezes $29 million of cryptocurrency
connected to Cambodian marketplace accused of fueling scams (July
15, 2024), https://therecord.media/tether-freezes-29-million-crypto-connected-to-scam-marketplace.
---------------------------------------------------------------------------
Given the various aggravating factors described above, FinCEN finds
that the Huione Group--with its weak and ineffective AML policies,
procedures, and controls, provision of services that offer anonymity
and an ability to evade sanctions, and development of a stablecoin
designed to hinder the ability of law enforcement to recover the
proceeds of crime--is being used extensively to facilitate or promote
money laundering, in particular by organized criminal groups and
entities involved in the proliferation WMD or missiles.
B. The Extent to Which Huione Group Is Used for Legitimate Business
Purposes
Under section 311 and FinCEN's delegated authority, in deciding to
apply one or more special measure, FinCEN may consider the extent to
which the financial institutions ``are used for legitimate business
purposes.'' \89\ In addition to the payment and CVC exchange services
outlined in this NPRM, the Huione Group advertises ostensibly
legitimate business services, such as systems for telephone, water, and
electricity bill payments. Huione Group also offers a point-of-sale
system for Cambodian businesses, though there is no indication such a
system is operational in the United States.\90\ Huione Group's payment
services are also ubiquitous in Cambodia, most often in the form of
``quick response'' codes, generally referred to as ``QR'' codes. These
QR codes are common across Cambodia, and are used to pay hotel,
restaurant, and supermarket bills, among other general purchases. While
FinCEN does not know the full extent of Huione Group's legitimate
business activity, Huione Group's transactional volume since inception
is believed to be at least USD 49 billion worth of CVC since 2021,\91\
including licit and illicit volume. While FinCEN lacks insight into
most of Huione Groups fiat currency transaction activity, additional
FinCEN analysis revealed that Huione Group engaged in at least USD 41
million in cleared international transactions through U.S.
correspondent bank accounts, between December 2020 and December 2024.
---------------------------------------------------------------------------
\89\ 31 U.S.C. 5318A(c)(2)(B)(ii).
\90\ Huione Pay, Service Items: Omni-Directional Service,
https://www.huionepay.com.kh/index/service?lang=en (last accessed
Mar. 27, 2025).
\91\ Chainalysis, 2024 Crypto Crime Mid-year Update Part 2:
China-based CSAM and Cybercrime Networks on the Rise, Pig Butchering
Scams Remain Lucrative (Aug. 29, 2024), https://www.chainalysis.com/blog/2024-crypto-crime-mid-year-update-part-2/; The New York Times,
How Scammers Launder Money and Get Away With It (Mar. 23, 2025),
https://www.nytimes.com/2025/03/23/world/asia/cambodia-money-laundering-huione.html.
---------------------------------------------------------------------------
Huione Group's activity, through these constituent services,
indicates some legitimate business transiting the financial
institution. However, under the totality of circumstances, FinCEN
assesses that the benefits of any legitimate business activities Huione
Group conducts are outweighed by the substantial money laundering risks
it poses.
C. The Extent to Which Action Proposed by FINCEN Would Guard Against
International Money Laundering and Other Financial Crimes
Under section 311 and FinCEN's delegated authority, in deciding to
apply one or more special measures, FinCEN may consider the extent to
such action is ``sufficient to ensure,'' that the purpose of section
311 ``continue[s] to be fulfilled, and to guard against international
money laundering and other financial crimes.'' \92\ A finding that
Huione Group is of primary money laundering concern would make clear
the illicit finance risk it poses to domestic financial institutions,
and by extension, to their foreign correspondents. This awareness is
likely to cause those financial institutions, or their regulators, to
take their own action to mitigate the risks posed by Huione Group.
Moreover, such a finding and subsequent imposition of special measure
five, as proposed here, would protect the U.S. financial system from
money laundering and other financial crimes by severing Huione Group's
access to the U.S. financial system.
---------------------------------------------------------------------------
\92\ 31 U.S.C. 5318A(c)(2)(B)(iii).
---------------------------------------------------------------------------
V. Proposed Special Measure
Having found that Huione Group is a financial institution operating
outside of the United States and is of primary money laundering concern
(particularly regarding its laundering of illicit proceeds from DPRK-
affiliated cyber heists and CVC investment scams carried out by TCOs
based in Southeast Asia), FinCEN proposes imposing a prohibition on
covered financial institutions under special measure five. Special
measure five authorizes the Secretary to impose conditions upon the
opening or maintaining in the United States of a correspondent account
or payable-through account, if such account ``involves'' a financial
institution of primary money laundering concern.\93\ Although Huione
Group does not have correspondent accounts with U.S. financial
institutions, it has
[[Page 18943]]
accounts with foreign financial institutions that maintain U.S.
correspondent accounts. Those U.S. correspondent accounts involve
Huione Group when transactions involving the financial institution are
processed through those accounts. Thus, FinCEN has determined that
special measure five will most effectively mitigate the risks posed by
Huione Group.
---------------------------------------------------------------------------
\93\ 31 U.S.C. 5318A(b)(5).
---------------------------------------------------------------------------
FinCEN considered the other special measures available under
section 311. As discussed further in section IV.E. below, it determined
that none of them would appropriately address the risks posed by Huione
Group.
In proposing this special measure, FinCEN consulted with
representatives and staff of the Board of Governors of the Federal
Reserve System, the Office of the Comptroller of the Currency, the
Secretary of State, the staff of the Securities and Exchange
Commission, the Commodity Futures Trading Commission, staff of the
National Credit Union Administration, the Federal Deposit Insurance
Corporation, and the Attorney General.\94\ These consultations involved
obtaining interagency views on the imposition of special measure five
and the effects that such a prohibition would have on the U.S. domestic
and international financial systems.
---------------------------------------------------------------------------
\94\ See 31 U.S.C 5318A(b)(5).
---------------------------------------------------------------------------
In addition, FinCEN considered the factors set forth in section
311, as set forth below.\95\
---------------------------------------------------------------------------
\95\ 31 U.S.C. 5318A(a)(4)(B)(i)-(iv).
---------------------------------------------------------------------------
A. Whether Similar Action Has Been or Is Being Taken by Other Nations
or Multilateral Groups Regarding Huione Group
In March 2025, at least one news outlet reported that the National
Bank of Cambodia stripped Huione Pay PLC of its banking license.\96\
FinCEN is not otherwise aware of any other nation or multilateral group
that has imposed, or is currently imposing, similar action against
Huione Group.
---------------------------------------------------------------------------
\96\ Radio Free Asia, Exclusive: World's Largest online black
market' Loses banking license (Mar. 6, 2025), https://www.rfa.org/english/cambodia/2025/03/06/huione-cambodia-cyberscam-cryptocurrency/.
---------------------------------------------------------------------------
B. Whether the Imposition of Any Particular Special Measure Would
Create a Significant Competitive Disadvantage, Including Any Undue Cost
or Burden Associated With Compliance, for Financial Institutions
Organized or Licensed in the United States
While FinCEN assesses that the prohibition proposed in this NPRM
would place some cost and burden on covered financial institutions,
these burdens are neither undue nor inappropriate in view of the threat
posed by the illicit activity facilitated by Huione Group. As described
above and according to public and non-public information, Huione Group
has no direct USD correspondent relationships with U.S. financial
institutions and instead, accesses USD through nested corresponding
relationships, outside the United States. These accounts may be used
for commercial payments, as well as foreign exchange and money markets.
Covered financial institutions and transaction partners have ample
opportunity to arrange for alternative payment mechanisms in the
absence of correspondent banking relationships with Huione Group.
As such, a prohibition on correspondent banking with Huione Group
is expected to impose minimal additional compliance costs for covered
financial institutions, which would most commonly involve adding Huione
Group to existing sanctions and money laundering screening tools.
FinCEN assesses that given the risks posed by Huione Group's
facilitation of money laundering, the additional burden on covered
financial institutions in preventing the opening of correspondent
accounts with Huione Group, as well as conducting due diligence on
foreign correspondent account holders and notifying them of the
prohibition, will be minimal and not undue.
C. The Extent to Which the Action or the Timing of the Action Would
Have a Significant Adverse Systemic Impact on the International
Payment, Clearance, and Settlement System, or on Legitimate Business
Activities of Huione Group
FinCEN assesses that imposing the proposed special measure would
have minimal impact upon the international payment, clearance, and
settlement system. As a comparatively small financial institution
responsible for a nominal amount of transaction volume in the region,
Huione Group is not a systemically important financial institution in
Cambodia, regionally, or globally. FinCEN views that prohibiting Huione
Group's access to U.S. correspondent banking channels would not affect
overall cross-border transaction volumes. Further, a prohibition under
special measure five would not prevent Huione Group from conducting
legitimate business activities in other foreign currencies.
D. The Effect of the Proposed Action on United States National Security
and Foreign Policy
As described above, evidence available to FinCEN demonstrates that
Huione Group serves as a significant conduit for money laundering by
TCOs engaged in CVC investment scams and DPRK-related actors engaging
in CVC heists. Imposing special measure five will: (1) close Huione
Group's access to USD; (2) inhibit Huione Group's ability to act as an
illicit finance facilitator for DPRK and TCOs engaged in CVC investment
scams; and (3) raise awareness of the way illicit actors exploit
weaknesses in vulnerable jurisdictions to circumvent sanctions and
finance WMD and ballistic missile proliferation.
E. Consideration of Alternative Special Measures
In assessing the appropriate special measure to impose, FinCEN
considered alternatives to a prohibition on the opening or maintaining
in the United States of correspondent accounts or payable-through
accounts, including the imposition of one or more of the first four
special measures, or imposing conditions on the opening or maintaining
of correspondent accounts under special measure five. Having considered
these alternatives and for the reasons set out below, FinCEN assesses
that none of the other special measures available under section 311
would appropriately address the risks posed by Huione Group and the
urgent need to prevent it from accessing USD through correspondent
banking.
With its public acknowledgements of its failure to address
significant AML/KYC deficiencies, Huione Group continues to present a
significant money laundering risk, particularly related to DPRK cyber
heists and TCO-run scams. Taken as a whole, Huione Group's history of
involvement in laundering proceeds of illicit activities, and its
creation of an unfreezable stablecoin, presents a heightened risk that
Huione Group will continue to be used by illicit actors. A key feature
of Huione Group's service offerings includes a marketplace to sell
items that enable CVC investment scams, and money laundering services
to launder the proceeds of the scams. Huione Group serves as a
significant node of the money laundering ecosystem that enables
criminals to both obtain necessary items to carry out various crimes,
and the services to launder the proceeds of those crimes.
Because of the nature, extent, and purpose of the obfuscation
engaged in by Huione Group, any special measure
[[Page 18944]]
intended to mandate additional information collection would likely be
ineffective and insufficient to determine the true identity of illicit
finance actors who transact with the group. For example, the provision
under special measure one, that ``the identity and address of the
participants in a transaction or relationship, including the identity
of the originator of any funds transfer'' be collected in records and
reports, could be circumvented by the operations of shell companies,
wherein the reported identity of the originator serves to obscure the
true beneficial owner or originator.\97\ This would be ineffective in
preventing illicit transactions. Huione Group's record of such
circumvention suggests that special measure one would not adequately
protect the U.S. financial system from the threats posed by the
financial institution. Further, the requirements under special measures
three and four, that domestic financial institutions obtain ``with
respect to each customer (and each such representative), information
that is substantially comparable to that which the depository
institution obtains in the ordinary course of business with respect to
its customers residing in the United States,'' are also likely to be
ineffective.\98\ Huione Group's use of nested correspondent account
access through layers of payment systems would render these alternative
measures ineffective. Only significant effort and expense by U.S.
institutions could fill this gap, which would impose a disproportionate
compliance burden, with no guarantee that the money laundering threat
would be addressed through customer due diligence research. FinCEN also
considered special measure two, which may require domestic financial
institutions to ``obtain and retain information concerning the
beneficial ownership of any account opened or maintained in the United
States by a foreign person.'' \99\ The agency determined that this
special measure would likely be ineffective since the concerns
involving Huione Group do not involve the opening or maintaining of
accounts in the U.S. by foreign persons.
---------------------------------------------------------------------------
\97\ 31 U.S.C. 5318A(b)(1)(B)(i).
\98\ 31 U.S.C 5318A(b)(3)(B).
\99\ 31 U.S.C. 5318A(b)(2).
---------------------------------------------------------------------------
FinCEN similarly assesses that merely imposing conditions under
special measure five would be inadequate to address the risks posed by
Huione Group's activities. Special measure five enables FinCEN to
impose conditions as an alternative to a prohibition on the opening or
maintaining of correspondent accounts.\100\ Given Huione Group's
longstanding ties to DPRK proliferation finance, coupled with money
laundering tied to CVC investment scams, and public acknowledgment of
failures of its AML/KYC program, FinCEN determined that imposing any
condition would not be an effective measure to safeguard the U.S.
financial system. FinCEN assesses that the billions of dollars' worth
of CVC and fiat laundered through Huione Group's exploitation of its
access to USD, and the exposure of U.S. financial institutions to
Huione Group's illicit activity, outweigh the value in providing
conditioned access to the U.S. financial system for any purportedly
legitimate business activity. Conditions on the opening or maintaining
of correspondent accounts would likely be insufficient to prevent
illicit financial flows through the U.S. financial system, given Huione
Group's inadequate AML/KYC program.
---------------------------------------------------------------------------
\100\ 31 U.S.C. 5318A(b)(5).
---------------------------------------------------------------------------
In sum, FinCEN assesses that any condition or additional
recordkeeping or reporting requirement would be an ineffective measure
to safeguard the U.S. financial system from the illicit behavior
facilitated by Huione Group. Such measures would not prevent Huione
Group from accessing the correspondent accounts of U.S. financial
institutions, thus leaving the U.S. financial system vulnerable to
processing illicit transfers that are likely to finance DPRK's nuclear
proliferation, or CVC investment scams, resulting in significant
national security and money laundering risk. In addition, no
recordkeeping or reporting requirements or conditions would be
sufficient to guard against the risks posed by a financial institution
that processes transactions that are designed to obscure the
transactions' true nature and are ultimately for the benefit of DPRK
and TCOs. Therefore, FinCEN has determined that a prohibition on
opening or maintaining correspondent banking relationships is the only
available special measure available under section 311 that can
adequately protect the U.S. financial system from the illicit finance
risk posed by Huione Group. For these reasons, and after thorough
consideration of alternate measures, FinCEN assesses that no measures
short of full prohibition on correspondent or payable-through banking
access would be sufficient to address the money laundering risks posed
by Huione Group.
VI. Section-by-Section Analysis
The goal of this proposed rule is to combat and deter DPRK-
affiliated money laundering and the laundering of proceeds from cyber
scams including, CVC investment scams carried out by TCOs through
Huione Group, and to prevent Huione Group from using the U.S. financial
system to enable its illicit finance behavior.
A. 1010.664(a)--Definitions
1. Definition of Huione Group
The term ``Huione Group'' means all subsidiaries, branches, and
offices of Huione Group operating as a financial institution in any
jurisdiction outside of the United States, including Haowang Guarantee
(formerly known as Huione Guarantee), Huione Pay PLC, and Huione Crypto
Sp[oacute][lstrok]ka Z Ograniczon[aogon]
Odpowiedzialno[sacute]ci[aogon] (d/b/a Huione Crypto).
2. Definition of Correspondent Account
The term ``correspondent account'' has the same meaning as the
definition contained in 31 CFR 1010.605(c)(1)(ii). In the case of a
U.S. depository institution, this broad definition includes most types
of banking relationships between a U.S. depository institution and a
foreign bank that are established to provide regular services,
dealings, and other financial transactions, including a demand deposit,
savings deposit, or other transaction or asset account, and a credit
account or other extension of credit. FinCEN is using the same
definition of ``account'' for purposes of this proposed rule as is
established for depository institutions in the final rule implementing
the provisions of section 312 of the USA PATRIOT Act, requiring
enhanced due diligence for correspondent accounts maintained for
certain foreign banks.\101\ Under this definition, ``payable-through
accounts'' are a type of correspondent account.
---------------------------------------------------------------------------
\101\ See 31 CFR 1010.605(c)(2)(i).
---------------------------------------------------------------------------
In the case of securities broker-dealers, futures commission
merchants, introducing brokers in commodities, and investment companies
that are open-end companies (mutual funds), FinCEN is also using the
same definition of ``account'' for purposes of this proposed rule as
was established for these entities in the final rule implementing the
provisions of section 312 of the USA PATRIOT Act, requiring due
diligence for correspondent accounts maintained for certain foreign
banks.\102\
---------------------------------------------------------------------------
\102\ See 31 CFR 1010.605(c)(2)(ii)-(iv).
---------------------------------------------------------------------------
[[Page 18945]]
3. Definition of Covered Financial Institution
The term ``covered financial institution'' is defined by reference
to 31 CFR 1010.605(e)(1), the same definition used in the BSA rule (31
CFR 1010.610) requiring the establishment of due diligence programs for
correspondent accounts for financial institutions. In general, this
definition includes the following:
a bank;
a broker or dealer in securities;
a futures commission merchant or an introducing broker in
commodities; and
a mutual fund.
4. Definition of Foreign Banking Institution
The term ``foreign banking institution'' means a bank organized
under foreign law, or an agency, branch, or office located outside the
United States of a bank. The term does not include an agent, agency,
branch, or office within the United States of a bank organized under
foreign law.
5. Definition of Subsidiary
The term ``subsidiary'' means a company of which more than 50
percent of the voting stock or an otherwise controlling interest is
owned by another company.
B. 1010.664(b)--Prohibition on Accounts and Due Diligence Requirements
for Covered Financial Institutions
1. Prohibition on Opening or Maintaining Correspondent Accounts
Section 1010.664(b)(1) of the proposed rule would prohibit covered
financial institutions from opening or maintaining in the United States
a correspondent account for, or on behalf of, Huione Group.
2. Prohibition on Use of Correspondent Accounts Involving Huione Group
Section 1010.664(b)(2) of the proposed rule would require covered
financial institutions to take reasonable steps to not process a
transaction for the correspondent account of a foreign banking
institution in the United States if such a transaction involves Huione
Group. Such reasonable steps are described in 1010.664(b)(3), which
sets forth the special due diligence requirements a covered financial
institution would be required to take when it knows or has reason to
believe that a transaction involves Huione Group.
3. Special Due Diligence for Correspondent Accounts
As a corollary to the prohibition set forth in section
1010.664(b)(1) and (2), section 1010.664(b)(3) of the proposed rule
would require covered financial institutions to apply special due
diligence to all of their foreign correspondent accounts that is
reasonably designed to guard against such accounts being used to
process transactions involving Huione Group. As part of that special
due diligence, covered financial institutions would be required to
notify those foreign correspondent account holders that the covered
financial institutions know or have reason to believe provide services
to Huione Group, that such correspondents may not provide Huione Group
with access to the correspondent account maintained at the covered
financial institution. A covered financial institution may satisfy this
notification requirement using the following notice:
Notice: Pursuant to U.S. regulations issued under Section 311 of
the USA PATRIOT Act, see 31 CFR 1010.664, we are prohibited from
opening or maintaining in the United States a correspondent account
for, or on behalf of, Huione Group. The regulations also require us
to notify you that you may not provide Huione Group, including any
of its subsidiaries, branches, and offices access to the
correspondent account you hold at our financial institution. If we
become aware that the correspondent account you hold at our
financial institution has processed any transactions involving
Huione Group, including any of its subsidiaries, branches, and
offices, we will be required to take appropriate steps to prevent
such access, including terminating your account.
The purpose of the notice requirement is to aid cooperation with
correspondent account holders in preventing transactions involving
Huione Group from accessing the U.S. financial system. FinCEN does not
require or expect a covered financial institution to obtain a
certification from any of its correspondent account holders that access
will not be provided to comply with this notice requirement.
Methods of compliance with the notice requirement could include,
for example, transmitting a notice by mail, fax, or email. The notice
should be transmitted whenever a covered financial institution knows or
has reason to believe that a foreign correspondent account holder
provides services to Huione Group.
Special due diligence also includes implementing risk-based
procedures designed to identify any use of correspondent accounts to
process transactions involving Huione Group. A covered financial
institution would be expected to apply an appropriate screening
mechanism to identify a funds transfer order that on its face listed
Huione Group as the financial institution of the originator or
beneficiary, or otherwise referenced Huione Group in a manner
detectable under the financial institution's normal screening
mechanisms. An appropriate screening mechanism could be the mechanisms
used by a covered financial institution to comply with various legal
requirements, such as commercially available software programs used to
comply with the economic sanctions programs administered by the U.S.
Department of the Treasury's OFAC.
4. Recordkeeping and Reporting
Section 1010.664(b)(4) of the proposed rule would clarify that the
proposed rule does not impose any reporting requirement upon any
covered financial institution that is not otherwise required by
applicable law or regulation. A covered financial institution must,
however, document its compliance with the notification requirement
described above in section 1010.664(b)(3).
VII. Request for Comments
FinCEN is requesting comments for 30 days after the publication of
this NPRM. Given Huione Group's consistent and longstanding ties to
facilitating transactions for DPRK proliferation finance and cyber
scams including CVC investment scams, and its track record of
facilitating and promoting money laundering in support of DPRK and
TCOs' illicit activity, FinCEN assesses that a 30-day comment period
for this NPRM strikes an appropriate balance between ensuring
sufficient time for notice to the public and opportunity for comment on
the proposed rule, while minimizing undue risk posed to the U.S.
financial system in processing illicit transfers that are likely to
finance DPRK WMD proliferation, funds derived from cyber scams,
including CVC investment scams carried out by TCOs, and other illicit
activity. FinCEN invites comments on all aspects of the proposed rule,
including the following specific matters:
1. FinCEN's proposal of a prohibition under the fifth special
measure under 31 U.S.C. 5318A(b), as opposed to imposing special
measures one through four or imposing conditions under the fifth
special measure;
2. The form and scope of the notice to certain correspondent
account holders that would be required under the rule; and
[[Page 18946]]
3. The appropriate scope of the due diligence requirements in this
proposed rule.
VIII. Regulatory Impact Analysis
FinCEN has analyzed this proposed rule under Executive Orders
12866, 13563, the Regulatory Flexibility Act,\103\ the Unfunded
Mandates Reform Act,\104\ and the Paperwork Reduction Act.\105\
---------------------------------------------------------------------------
\103\ 5 U.S.C. 603.
\104\ 12 U.S.C. 1532, Public Law 104-4 (Mar. 22, 1995).
\105\ 44 U.S.C. 3507(a)(1)(D).
---------------------------------------------------------------------------
As discussed above, the intended effects of the imposition of
special measure five to Huione Group are twofold. The rule is expected
to: (1) combat and deter money laundering in facilitation of
proliferation financing associate with Huione Group; and (2) prevent
Huione Group from using the U.S. financial system to enable its illicit
finance behavior. In the analysis below, FinCEN discusses the economic
effects that are expected to accompany adoption of the rule as proposed
and assesses such expectations in more granular detail. This discussion
includes an explanation of how FinCEN's assumptions and methodological
choices have influenced FinCEN's conclusions. The public is invited to
comment on all aspects of FinCEN's practice.\106\
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\106\ See Section VII; see also Section VIII.D.
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A. Executive Orders
Executive Orders 12866 and 13563 direct agencies to assess costs
and benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits, of
reducing costs, of harmonizing rules, and of promoting flexibility.
It has been determined that this proposed rule is not a significant
regulatory action under section 3(f) of Executive Order 12866.
Accordingly, a regulatory impact analysis is not required.
B. Regulatory Flexibility Act
When an agency issues a rulemaking proposal, the Regulatory
Flexibility Act (RFA) requires the agency to ``prepare and make
available for public comment an initial regulatory flexibility
analysis'' (IRFA) that will ``describe the impact of the proposed rule
on small entities.'' \107\ However, section 605 of the RFA allows an
agency to certify a rule, in lieu of preparing an analysis, if the
proposed rulemaking is not expected to have a significant economic
impact on a substantial number of small entities. This proposed rule
would apply to all covered financial institutions and would affect a
substantial number of small entities. Nevertheless, for the reasons
described below, FinCEN assesses that these changes would be unlikely
to have a significant economic impact on such entities.
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\107\ 5 U.S.C. 603(a).
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Covered financial institutions would also be required to take
reasonable measures to detect use of their correspondent accounts to
process transactions involving Huione Group. All U.S. persons,
including U.S. financial institutions, currently must comply with OFAC
sanctions, and U.S. financial institutions generally have suspicious
activity reporting requirements and systems in place to screen
transactions to comply with OFAC sanctions and section 311 special
measures administered by FinCEN. The systems that U.S. financial
institutions have in place to comply with these requirements can easily
be modified to adapt to this proposed rule. Thus, the special due
diligence that would be required under the proposed rule--i.e.,
preventing the processing of transactions involving Huione Group and
the transmittal of notification to certain correspondent account
holders--would not impose a significant additional economic burden upon
small U.S. financial institutions. For these reasons, FinCEN certifies
that the proposals contained in this rulemaking would not have a
significant impact on a substantial number of small businesses.
FinCEN invites comments from members of the public who believe
there would be a significant economic impact on small entities from the
imposition of a prohibition under the fifth special measure regarding
Huione Group.
C. Unfunded Mandates Reform Act
Section 202 of the Unfunded Mandates Reform Act of 1995 \108\
(Unfunded Mandates Reform Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that may result
in expenditure by the state, local, and tribal governments, in the
aggregate, or by the private sector, of USD 100 million or more in any
one year, adjusted for inflation.\109\ If a budgetary impact statement
is required, section 202 of the Unfunded Mandates Reform Act also
requires an agency to identify and consider a reasonable number of
regulatory alternatives before promulgating a rule.\110\
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\108\ 12 U.S.C. 1532, Public Law 104-4 (Mar. 22, 1995).
\109\ Id.
\110\ Id.
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FinCEN has determined that this proposed rule will not result in
expenditures by state, local, and tribal governments in the aggregate,
or by the private sector, of an annual USD 100 million or more,
adjusted for inflation (USD 188.9 million).\111\ Accordingly, FinCEN
has not prepared a budgetary impact statement or specifically addressed
the regulatory alternatives considered.
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\111\ The Unfunded Mandates Reform Act requires an assessment of
mandates that will result in an annual expenditure of USD 100
million or more, adjusted for inflation. The U.S. Bureau of Economic
Analysis reports the annual value of the gross domestic product
(GDP) deflator in the first quarter of 1995, the year of the
Unfunded Mandates Reform Act, as 66.452, and as 125.532 in the third
quarter of 2024, the most recent available. See U.S. Bureau of
Economic Analysis, ``Table 1.1.9. Implicit Price Deflators for Gross
Domestic Product,'' https://www.bea.gov/itable/ (last accessed Jan.
17, 2025). Thus, the inflation adjusted estimate for USD 100 million
is 125.532/66.452 x 100 = USD 188.9 million.
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D. Paperwork Reduction Act
The recordkeeping and reporting requirements, referred to by the
Office of Management and Budget (OMB) as a collection of information,
contained in this proposed rule will be submitted by FinCEN to the OMB
for review in accordance with the Paperwork Reduction Act of 1995
(PRA).\112\ Under the PRA, an agency may not conduct or sponsor, and a
person is not required to respond to, a collection of information
unless it displays a valid control number assigned by the OMB. Written
comments and recommendations for the proposed prohibition can be
submitted by visiting www.reginfo.gov/public/do/PRAMain. Find this
particular document by selecting ``Currently under Review--Open for
Public Comments'' or by using the search function. Comments are welcome
and must be received by June 4, 2025. In accordance with requirements
of the PRA and its implementing regulations, 5 CFR part 1320, the
following information concerning the collection of information as
required by 31 CFR 1010.664 is presented to assist those persons
wishing to comment on the information collections.
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\112\ 44 U.S.C. 3507(a)(1)(D).
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The provisions in this proposed rule pertaining to the collection
of information can be found in sections 1010.664(b)(3)(i)(A) and
1010.664(b)(4). The notification requirement in section
[[Page 18947]]
1010.664(b)(3)(i)(A) is intended to aid cooperation from foreign
correspondent account holders in preventing transactions involving
Huione Group from being processed by the U.S. financial system. The
information required to be maintained by section 664(b)(4) will be used
by federal agencies and certain self-regulatory organizations to verify
compliance by covered financial institutions with the notification
requirement in section 1010.664(b)(3)(i)(A). The collection of
information would be mandatory.
Frequency: As required.
Description of Affected Financial Institutions: Only those covered
financial institutions defined in section 1010.664(a)(3) that are
engaged in correspondent banking with, or processing transactions
potentially involving, Huione Group as defined in section
1010.664(b)(1) and (2) would be affected.
Estimated Number of Potential Respondents: Approximately
15,710.\113\
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\113\ This estimate is informed by public and non-public data
sources regarding both an expected maximum number of entities that
may be affected and the number of active, or currently reporting,
registered financial institutions.
Table 1--Estimates of Covered Financial Institutions by Type
------------------------------------------------------------------------
Financial institution type Number of entities
------------------------------------------------------------------------
Banks with an FFR \a\.......................... \b\ 8,995
Banks without an FFR \c\....................... \d\ 395
Broker-dealers in securities \e\............... \f\ 3,320
Open end mutual funds \g\...................... \h\ 2,036
Futures commission merchants \i\............... \j\ 65
Introducing brokers in commodities \k\......... \l\ 899
------------------------------------------------------------------------
\a\ See 31 CFR 1010.100(t)(1); see also 31 CFR 1010.100(d).
\b\ Bank data is as of Jan. 17, 2025, from Federal Deposit Insurance
Corporation BankFind (https://banks.data.fdic.gov/bankfind-suite/bankfind bankfind). Credit union data is as of Sept. 2024 from the National
Credit Union Administration Quarterly Data Summary Reports (https://ncua.gov/analysis/credit-union-corporate-call-report-data/quarterly-data-summary-reports).
\c\ 31 CFR 1020.210(b).
\d\ The Board of Governors of the Federal Reserve System Master Account
and Services Database contains data on financial institutions that
utilize Reserve Bank financial services, including those with no
federal regulator. FinCEN used this data to identify 395 banks and
credit unions utilizing Reserve Bank financial services with no
federal regulator. (https://www.federalreserve.gov/paymentsystems/master-account-and-services-database-existing-access.htm).
\e\ 31 CFR 1010.100(t)(2).
\f\ According to the Securities and Exchange Commission (SEC), there are
3,320 broker-dealers in securities as of Mar. 2025 from website
``Company Information About Active Broker-Dealers'' (https://www.sec.gov/foia-services/frequently-requested-documents/company-information-about-active-broker-dealers).
\g\ See 31 CFR 1010.100(t)(10); see also 31 CFR 1010.100(gg).
\h\ According to the SEC, in 2024 there were 2,036 open-end registered
investment companies that report on Form N-CEN. (https://www.sec.gov/dera/data/form-ncen-data-sets).
\i\ 31 CFR 1010.100(t)(8).
\j\ According to the Commodity Futures Trading Commission (CFTC), there
are 65 futures commission merchants as of November 30, 2024. See
Financial Data for FCMs, https://www.cftc.gov/MarketReports/financialfcmdata/index.htm.
\k\ 31 CFR 1010.100(t)(9).
\l\ According to the National Futures Association, there are 899
introducing brokers in commodities as of Dec. 31, 2024 from website
``NFA Membership Totals'' (https://www.nfa.futures.org/registration-membership/membership-and-directories.html).
Estimated Number of Expected Respondents: Approximately 127.\114\
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\114\ While this regulation applies to all covered institutions
described in Table 1, in practice the burden will only be imposed on
select institutions that maintain correspondent accounts for foreign
banks. Table 2 below presents an estimate of this subpopulation of
banks, brokers or dealers in securities, mutual funds, futures
commission merchants, and introducing brokers in commodities based
on data from the most recent calendar year end.
Table 2--Estimates of Affected Financial Institutions by Type
------------------------------------------------------------------------
Financial institution type Number of entities
------------------------------------------------------------------------
Banks with an FFR.............................. \a\ 60
Banks without an FFR........................... \b\ 17
Broker-dealers in securities................... \c\ 26
Open end mutual funds.......................... \d\ 16
Futures commission merchants................... \e\ 1
Introducing brokers in commodities............. \f\ 7
------------------------------------------------------------------------
\a\ Data are from the FFIEC Central Data Repository for Reports of
Condition and Income (Call Reports) and Uniform Bank Performance
Reports (UBPRs), available for most FDIC-insured institutions. Using
this source of data, FinCEN determines that as of Q3 2024,
approximately 60 banks (as defined by FinCEN regulations, see 31 CFR
1010.100(d)) will be affected by this rule on any given year.
Specifically, we determine that there are approximately 60 banks that
report non-zero values for deposit liabilities of banks in foreign
countries. Deposit liabilities in a foreign country is an indication
that a bank maintains correspondent accounts with a foreign financial
institution.
\b\ The Board of Governors of the Federal Reserve System Master Account
and Services Database contains data on financial institutions that
utilize Reserve Bank financial services, including those with no
federal regulator. FinCEN used this data to identify an additional 17
international banking entities with no federal regulator and that do
not file Call Reports, but that are also likely to maintain
correspondent accounts with a foreign financial institution.
[[Page 18948]]
\c\ Broker dealers, unless they are publicly traded, are not required to
make reports indicating whether or not they have foreign correspondent
accounts or hold foreign deposits. FinCEN reviewed financial statement
data from 10-Q and 6-K filings with the SEC, and identified nine
publicly traded broker dealers with U.S. operations that reported
foreign deposits. FinCEN also examined Suspicious Activity Reports
(SARs) filed by broker dealers in 2024 to identify another two non-
publicly traded broker dealers who appeared likely to be maintaining
foreign deposits. However, because many broker dealers are not
publicly traded and did not file SARs, FinCEN conservatively estimates
that the proportion of broker dealers with foreign correspondent
accounts will be similar to the proportion for banks (approximately
0.8%). 0.8% of 3,320 active broker dealers is approximately 26 broker
dealers assumed to have foreign correspondent accounts.
\d\ Mutual funds, futures commission merchants, and introducing brokers
in commodities generally use intermediary U.S. banks to move and
maintain client deposits and funds for investment. Therefore, it is
unlikely that many of these institutions will maintain direct
correspondent accounts with foreign financial institutions outside of
their existing upstream banking relationships. However, because these
institutions may in some cases receive deposits from, make payments or
other disbursements, or otherwise transact directly with foreign
financial institutions, FinCEN conservatively estimates that the
proportion of mutual funds with foreign correspondent accounts will be
similar to the proportion for banks (approximately 0.8%). 0.8% of
2,036 active mutual funds is approximately 16 mutual funds assumed to
have foreign correspondent accounts.
\e\ 0.8% of 65 active futures commission merchants is approximately one
futures commission merchants assumed to have foreign correspondent
accounts.
\f\ 0.8% of 899 active introducing brokers in commodities is
approximately seven introducing brokers in commodities assumed to have
foreign correspondent accounts.
Estimated Average Annual Burden in Hours per Affected Financial
Institution:
Imposing special measure five requirements as described in this
proposed rule is expected to result in a new, incremental recordkeeping
burden on certain covered financial institutions as described above.
Each anticipated component of this is outlined below.
Each affected covered financial institution is expected to incur a
recordkeeping burden associated with preparing and retaining the
materials necessary to demonstrate compliance with the proposed
requirements. This is expected to include records related to:
B. Documenting the reasonable steps the financial institution
undertakes to ensure no transactions involving Huione Group are
processed for a foreign correspondent account, including:
1. Any investigative activities undertaken when the financial
institution knows or has reason to believe that a foreign bank's
correspondent account has been or is being used to process transactions
involving Huione Group.
2. Any subsequent activities undertaken to prevent such access,
including, where necessary, termination of the correspondent account.
C. Notifying, and documenting that the financial institution has
provided notice to, foreign correspondent account holders that the
financial institution knows or has reason to believe provide services
to Huione Group, that such correspondents may not provide Huione Group
with access to the correspondent account maintained at the financial
institution.
D. Documenting the reasonable steps it took with respect to special
due diligence requirements, including but not limited to, the reasoning
that informed decisions to adopt (or not adopt) new measures adding to
its existing risk-based approach, and those new measures, if adopted.
The estimated average annual burden associated with the collection
of information in this proposed rule is, in total, one business day, or
eight hours per affected financial institution.
Estimated Total Annual Burden: Approximately 1,016 hours.\115\
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\115\ 127 expected respondents multiplied by eight hours per
respondent equals 1,016 total annual burden hours.
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Estimated Total Annual Cost: Approximately $121,920.\116\
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\116\ The wage rate applied here is a general composite hourly
wage ($85.55), scaled by a private-sector benefits factor of 1.42
($120.07 = $85.55 x 1.42), that incorporates the mean wage data
(available for download at https://www.bls.gov/oes/tables.htm, ``May
2023--National industry-specific and by ownership'') associated with
the six occupational codes (11-1010: Chief Executives; 11-3021:
Computer and Information Systems Managers; 11-3031: Financial
Managers; 13-1041: Compliance Officers; 23-1010: Lawyers and
Judicial Law Clerks; 43-3099: Financial Clerks, All Other) for each
of the nine groupings of NAICS industry codes that FinCEN determined
are most directly comparable to its eleven categories of covered
financial institutions as delineated in 31 CFR parts 1020 to 1030.
The benefit factor is 1 plus the benefit/wages ratio, where as of
June 2023, Total Benefits = 29.4 and Wages and salaries = 70.6
(29.4/70.6 = 0.42) based on the private industry workers series data
downloaded from https://www.bls.gov/news.release/archives/ecec_09122023.pdf (accessed Dec. 22, 2024). Given that many
occupations provide benefits beyond cash wages (e.g., insurance,
paid leave, etc.), the private sector benefit is applied to reflect
the total cost to the employer. 1,016 total annual burden hours
multiplied by $120 per hour equals a total annual cost of $121,920.
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FinCEN invites comments on: (a) whether the proposed collection of
information found in section 1010.664(b)(4) is necessary for the proper
performance of the mission of FinCEN, including whether the information
would have practical utility; (b) the accuracy of FinCEN's estimate of
the burden of the proposed collection of information; (c) ways to
enhance the quality, utility, and clarity of the information required
to be maintained; (d) ways to minimize the burden of the required
collection of information, including through the use of automated
collection techniques or other forms of information technology; and (e)
estimates of capital or start-up costs and costs of operation,
maintenance, and purchase of services to report the information.
List of Subjects in 31 CFR Part 1010
Administrative practice and procedure, Banks, Banking, Brokers,
Crime, Foreign banking, Terrorism.
Authority and Issuance
For the reasons set forth in the preamble, FinCEN proposes amending
31 CFR part 1010 as follows:
Part 1010--GENERAL PROVISIONS
0
1. The authority citation for part 1010 continues to read as follows:
Authority: 12 U.S.C. 1829b and 1951-1959; 31 U.S.C. 5311-5314,
5316-5336; title III, sec. 314, Pub. L. 107-56, 115 Stat. 307; sec.
2006, Pub. L. 114-41, 129 Stat. 458-459; sec. 701 Pub. L. 114-74,
129 Stat. 599; sec. 6403, Pub. L. 116-283, 134 Stat. 3388.
0
2. Add Sec. 1010.664 to read as follows:
Sec. 1010.664 Special measures regarding Huione Group.
(a) Definitions. For purposes of this section, the following terms
have the following meanings.
(1) Huione Group. The term ``Huione Group'' means all subsidiaries,
branches, and offices of Huione Group operating as a financial
institution in any jurisdiction outside of the United States, including
Haowang Guarantee (formerly known as Huione Guarantee), Huione Pay PLC,
and Huione Crypto Sp[oacute][lstrok]ka Z Ograniczon[aogon]
Odpowiedzialno[sacute]ci[aogon] (d/b/a Huione Crypto).
(2) Correspondent account. The term ``correspondent account'' has
the same meaning as provided in 1010.605(c)(l)(ii).
(3) Covered financial institution. The term ``covered financial
institution'' has the same meaning as provided in 1010.605(e)(1).
(4) Foreign banking institution. The term ``foreign banking
institution'' means a bank organized under foreign law, or an agency,
branch, or office
[[Page 18949]]
located outside the United States of a bank. The term does not include
an agent, agency, branch, or office within the United States of a bank
organized under foreign law.
(5) Subsidiary. The term ``subsidiary'' means a company of which
more than 50 percent of the voting stock or an otherwise controlling
interest is owned by another company.
(b) Prohibition on accounts and due diligence requirements for
covered financial institutions--(1) Prohibition on opening or
maintaining correspondent accounts for Huione Group. A covered
financial institution shall not open or maintain in the United States a
correspondent account for, or on behalf of, Huione Group.
(2) Prohibition on processing transactions involving Huione Group.
A covered financial institution shall take reasonable steps not to
process a transaction for the correspondent account in the United
States of a foreign banking institution if such a transaction involves
Huione Group.
(3) Special due diligence of correspondent accounts to prohibit
transactions. (i) A covered financial institution shall apply special
due diligence to its foreign correspondent accounts that is reasonably
designed to guard against their use to process transactions involving
Huione Group. At a minimum, that special due diligence must include:
(A) Notifying those foreign correspondent account holders that the
covered financial institution knows or has reason to believe provide
services to Huione Group that such correspondents may not provide
Huione Group with access to the correspondent account maintained at the
covered financial institution; and
(B) Taking reasonable steps to identify any use of its foreign
correspondent accounts by Huione Group, to the extent that such use can
be determined from transactional records maintained in the covered
financial institution's normal course of business.
(ii) A covered financial institution shall take a risk-based
approach when deciding what, if any, other due diligence measures it
reasonably must adopt to guard against the use of its foreign
correspondent accounts to process transactions involving Huione Group.
(iii) A covered financial institution that knows or has reason to
believe that a foreign bank's correspondent account has been or is
being used to process transactions involving Huione Group shall take
all appropriate steps to further investigate and prevent such access,
including the notification of its correspondent account holder under
paragraph (b)(3)(i)(A) of this section and, where necessary,
termination of the correspondent account.
(4) Recordkeeping and reporting. (i) A covered financial
institution is required to document its compliance with the
notification requirement set forth in this section.
(ii) Nothing in paragraph (b) of this section shall require a
covered financial institution to report any information not otherwise
required to be reported by law or regulation.
Dated: May 1, 2025.
Andrea M. Gacki,
Director, Financial Crimes Enforcement Network.
[FR Doc. 2025-07837 Filed 5-2-25; 8:45 am]
BILLING CODE 4810-02-P