Rule2024-23430
Imposition of Special Measure Prohibiting the Transmittal of Funds Involving PM2BTC
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 11, 2024
Effective
October 11, 2024
Issuing agencies
Treasury DepartmentFinancial Crimes Enforcement Network
Abstract
FinCEN is issuing notice of an order, pursuant to the Combating Russian Money Laundering Act, as amended by the National Defense Authorization Act for Fiscal Year 2022, to prohibit certain transmittals of funds by any covered financial institution involving PM2BTC, a financial institution operating outside of the United States determined to be of a primary money laundering concern in connection with Russian illicit finance.
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 198 (Friday, October 11, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 198 (Friday, October 11, 2024)]
[Rules and Regulations]
[Pages 82499-82506]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-23430]
[[Page 82499]]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Financial Crimes Enforcement Network
31 CFR Part 1010
Imposition of Special Measure Prohibiting the Transmittal of
Funds Involving PM2BTC
AGENCY: Financial Crimes Enforcement Network (FinCEN), Treasury.
ACTION: Final order.
-----------------------------------------------------------------------
SUMMARY: FinCEN is issuing notice of an order, pursuant to the
Combating Russian Money Laundering Act, as amended by the National
Defense Authorization Act for Fiscal Year 2022, to prohibit certain
transmittals of funds by any covered financial institution involving
PM2BTC, a financial institution operating outside of the United States
determined to be of a primary money laundering concern in connection
with Russian illicit finance.
DATES: This order is effective October 11, 2024.
FOR FURTHER INFORMATION CONTACT: The FinCEN Resource Center, 1-800-767-
2825 or electronically at <a href="/cdn-cgi/l/email-protection#0e687c6d4e6867606d6b6020696178"><span class="__cf_email__" data-cfemail="b8decadbf8ded1d6dbddd696dfd7ce">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Summary of Order
This order (1) sets forth FinCEN's determination that PM2BTC, an
unincorporated convertible virtual currency (CVC) exchanger (a type of
virtual asset service provider or VASP), is a financial institution
operating outside of the United States that is of primary money
laundering concern \1\ in connection with Russian illicit finance; and
(2) prohibits certain transmittals of funds involving PM2BTC by any
covered financial institution.
---------------------------------------------------------------------------
\1\ The application of FinCEN's authorities in this order is
specific only to section 9714 of the Combating Russian Money
Laundering Act, as amended. It is not intended to otherwise reflect
the applicability of, or obligations under, any provision of the
Bank Secrecy Act (BSA) or its implementing regulations, and FinCEN
has not considered the extent to which PM2BTC does business in the
United States.
---------------------------------------------------------------------------
As set out in this order, PM2BTC, a CVC exchanger offering CVC and
fiat currency exchange services with significant ties to, and
connections with, Russia, is of primary money laundering in connection
with Russian illicit finance through its facilitation of funds
transfers by illicit actors and association with a wide array of
illicit activities, including fraud schemes, sanctions evasion,
ransomware attacks, and child abuse.
II. Background
A. Statutory provisions
Section 9714(a) of the Combating Russian Money Laundering Act (Pub.
L. 116-283), as amended by section 6106(b) of the National Defense
Authorization Act for Fiscal Year 2022 (Pub. L. 117-81) (hereafter,
``section 9714''),\2\ provides, in relevant part, that, if the
Secretary of the Treasury (Secretary) ``determines that reasonable
grounds exist for concluding that one or more financial institutions
operating outside of the United States . . . is of primary money
laundering concern in connection with Russian illicit finance,'' the
Secretary may, ``by order, regulation, or otherwise as permitted by
law'': (1) require domestic financial institutions and domestic
financial agencies to take 1 or more of the special measures described
in 31 U.S.C. 5318A(b); \3\ or (2) prohibit, or impose conditions upon,
certain transmittals of funds (as defined by the Secretary) by any
domestic financial institution or domestic financial agency, if such
transmittal of funds involves any such institution. The authority of
the Secretary to administer both section 9714 and the Bank Secrecy Act
(BSA) has been delegated to FinCEN.\4\
---------------------------------------------------------------------------
\2\ Section 9714 (as amended) may be found in a note to 31
U.S.C. 5318A.
\3\ 31 U.S.C. 5318A grants the Secretary the authority, upon
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, to require domestic
financial institutions and domestic financial agencies to take
certain ``special measures.''
\4\ Pursuant to Treasury Order 180-01, the authority of the
Secretary of the Treasury (Secretary) to administer the BSA,
including, but not limited to, 31 U.S.C. 5318A, has been delegated
to the Director of FinCEN. Treasury Order 180-01 (Jan. 14, 2020). On
August 11, 2022, and in accordance with Treasury Order 101-05 and 31
U.S.C. 321(b), Treasury's Under Secretary for Terrorism & Financial
Intelligence re-delegated to the Director of FinCEN the authority of
the Secretary under section 9714.
---------------------------------------------------------------------------
The six special measures set out in section 9714 are prophylactic
safeguards that may be employed to defend the United States financial
system from money laundering and terrorist financing risks with a nexus
to Russian illicit finance. The Secretary may impose one or more of
these special measures in order to protect the U.S. financial system
from such threats. Specifically, the Secretary may impose any of the
five special measures set out in 31 U.S.C. 5318A, commonly known as
section 311 of the USA PATRIOT Act. Through special measure one, the
Secretary may require domestic financial institutions and domestic
financial agencies to maintain records, file reports, or both,
concerning the aggregate amount of transactions or individual
transactions.\5\ Through special measures two through four, the
Secretary may impose additional recordkeeping, information collection,
and reporting requirements on covered domestic financial institutions
and domestic financial agencies.\6\ Through special measure five, the
Secretary may prohibit, or impose conditions upon, the opening or
maintaining in the United States of correspondent or payable-through
accounts for or on behalf of a foreign banking institution, if the
class of transactions found to be of primary money laundering concern
may be conducted through such correspondent account or payable-through
account.\7\ In addition to the special measures set out in 31 U.S.C.
5318A, section 9714 also provides that the Secretary may impose a
special measure prohibiting, or imposing conditions upon, certain
transmittals of funds.\8\
---------------------------------------------------------------------------
\5\ See section 9714(a)(1); 31 U.S.C. 5318A(b)(1).
\6\ See section 9714(a)(1); 31 U.S.C. 5318A(b)(2)-(b)(4).
\7\ See section 9714(a)(1); 31 U.S.C. 5318A(b)(5).
\8\ See section 9714(a)(2).
---------------------------------------------------------------------------
B. PM2BTC
PM2BTC is a CVC exchanger, a category of VASP, that exists as a
collection of several exchange services. By its own account, PM2BTC is
comprised of the following exchange services: PM2BTC.ME, BTC2PM.ME,
PM2CASHIN.ME, BTC2CASHIN.ME, PM2WM.ME, and BTC2WM.ME.\9\
---------------------------------------------------------------------------
\9\ This statement was made by the BitcoinTalk user, ``pm2btc,''
which FinCEN assesses is the official account for PM2BTC, on the CVC
forum BitcoinTalk. See BitcoinTalk, PM2BTC Post, available at
<a href="https://bitcointalk.org/index.php?topic=639799.msg7140395#msg7140395">https://bitcointalk.org/index.php?topic=639799.msg7140395#msg7140395</a>
(last accessed Sept. 17, 2024).
---------------------------------------------------------------------------
Although PM2BTC--through each of its constituent exchange
services--is advertised as an automated web product, FinCEN assesses
that this collective grouping of exchange services should be considered
a single organization, and for that reason, FinCEN will correspondingly
refer to this collective, its activities, and its website as
``PM2BTC''. Indeed, notwithstanding the characterization in its
advertisements, PM2BTC holds itself out as a legal person insofar as
PM2BTC states--in its terms of service--that use of its exchange
services constitutes a contract between parties to an agreement, with
PM2BTC expressly identified as a party. Consistent with that
characterization in its terms of service, FinCEN assess that PM2BTC
also operates as a standard organization, comprised of its founders/
operators and employees, with consistent and
[[Page 82500]]
coordinated internal operations and customer service interfaces. As a
threshold matter, PM2BTC, including each of its constituent exchange
services, is operated, with other persons, by Sergey Sergeevich Ivanov
(Ivanov), a Russian national with an established history of advertising
the use of U.S.-based money services businesses for cashouts and drops
services on various Russian-speaking cybercrime forums, ties to top-
tier cyber criminals and cybercrime services, and apparent ties to
other online CVC exchanges and an associated payment processing service
associated with ransomware, bank fraud, malware, and other suspected
illicit activity. In addition, in its daily operations, PM2BTC relies
on developers and other personnel. As set out in its terms of service,
for example, PM2BTC's ``administration'' conducts anti-money laundering
(AML) checks of all the transactions it processes, with corresponding
authority to verify users and suspend the execution of the
transactions, as well as to assess a ``commission'' for processing the
transaction.\10\ Moreover, each of PM2BTC's constituent exchange
services offers an identical customer service point of contact--
``pm2btc''--on a Russian messaging platform, and the same email
address--``support@pm2btc[.]me''--with each apparently offering
customer service support through PM2BTC personnel.\11\ As such, FinCEN
assesses that, rather than a mere automated web product, PM2BTC is an
organization that operates as a service provider.\12\
---------------------------------------------------------------------------
\10\ See infra Part III.A.3, for further discussion of PM2BTC's
anti-money laundering program.
\11\ PM2BTC's websites, available at <a href="https://pm2btc.me">https://pm2btc.me</a>, <a href="https://pm2btc.me/terms">https://pm2btc.me/terms</a>, <a href="https://pm2wm.me">https://pm2wm.me</a>, <a href="https://pm2wm.me/terms">https://pm2wm.me/terms</a>, <a href="https://pm2cashin.me">https://pm2cashin.me</a>, <a href="https://pm2cashin.me/terms">https://pm2cashin.me/terms</a>, <a href="https://pm2cashin.me/terms">https://pm2cashin.me/terms</a>, <a href="https://pm2cashin.me/terms">https://pm2cashin.me/terms</a>, <a href="https://btc2wm.me">https://btc2wm.me</a>, <a href="https://btc2wm.me/terms">https://btc2wm.me/terms</a>, <a href="https://btc2pm.me">https://btc2pm.me</a>, <a href="https://btc2pm.me/terms">https://btc2pm.me/terms</a>, <a href="https://btc2cashin.me">https://btc2cashin.me</a>, <a href="https://btc2cashin.me/terms">https://btc2cashin.me/terms</a>, <a href="https://pm2btc.me">https://pm2btc.me</a> (last
accessed Sept. 17, 2024).
\12\ All references to PM2BTC's Terms of Service are sourced
from <a href="https://pm2btc.me/terms">https://pm2btc.me/terms</a> (last accessed Sept. 17, 2024).
---------------------------------------------------------------------------
Further, in light of its activities and the services it provides,
PM2BTC is a financial institution within the meaning of section 9714.
According to its official website,\13\ PM2BTC allows customers to
exchange between Russian Rubles (RUB) and various CVCs, including
Bitcoin (BTC), Litecoin (LTC), and Dash (DASH), as well as other CVC
offered by Russian money service businesses--Perfect Money \14\ and
WebMoney.\15\ As a general matter, the names of PM2BTC's constituent
exchange services denote the exchangeable direction of the offered CVC
or fiat currencies. For example, PM2BTC as an exchange service,
converts the digital currency Perfect Money--or ``PM''--into Bitcoin--
or BTC--and thus, taken together, the name of the exchanger--PM2BTC--
captures the service and direction of exchange. As a general matter,
transactions through PM2BTC's constituent exchange services follow
generally similar processes. By way of illustration, PM2BTC's official
PM2BTC.ME website details a transaction process whereby, for example,
PM2BTC connects to a customer's Perfect Money (PM) account and
coordinates the conversion of PM into BTC, subsequently receiving a
fixed fee. To carry out this type of exchange transaction, a customer
would enter their PM account information and a corresponding BTC wallet
address to which PM2BTC would send BTC. Once the order is submitted,
PM2BTC would effectuate the withdrawal of PM value and send BTC to the
customer-designated wallet, completing the transaction.\16\ Although
section 9714 does not expressly define the term ``financial
institution,'' FinCEN has long defined that term to apply to foreign
and domestic ``money transmitters,'' including persons that accept and
transmit value that substitutes for currency, such as CVC.\17\ VASPs,
such as PM2BTC, are ``money transmitters'' because they are engaged in
the transfer of funds as defined in 31 CFR 1010.100. PM2BTC is
therefore a financial institution within the meaning of section 9714.
---------------------------------------------------------------------------
\13\ Unless noted otherwise, all references to PM2BTC's official
website, web page, or policies are sourced from pages and links
accessed via <a href="https://pm2btc.me">https://pm2btc.me</a>, <a href="https://pm2btc.me/terms">https://pm2btc.me/terms</a>, <a href="https://pm2wm.me">https://pm2wm.me</a>, <a href="https://pm2wm.me/terms">https://pm2wm.me/terms</a>, <a href="https://pm2cashin.me">https://pm2cashin.me</a>, <a href="https://pm2cashin.me/terms">https://pm2cashin.me/terms</a>, <a href="https://btc2wm.me">https://btc2wm.me</a>, https://btc2wm/terms, <a href="https://btc2pm.me">https://btc2pm.me</a>, <a href="https://btc2pm.me/terms">https://btc2pm.me/terms</a>, <a href="https://btc2cashin.me">https://btc2cashin.me</a>, <a href="https://btc2cashin.me/terms">https://btc2cashin.me/terms</a> (last accessed Sept. 17, 2024).
\14\ Perfect Money, or PM, is a Russian financial service that
allows its users to make anonymous instant payments and to make
money transfers securely throughout the internet. Perfect Money,
available at <a href="https://perfectmoney.com/about.html">https://perfectmoney.com/about.html</a> (last accessed
Sept. 17, 2024); see also Ben [LNU], The unregulated Russian payment
and lending platform Perfect Money!, FinTelegram (Feb. 14, 2022),
available at <a href="http://fintelegram.com/r4i-the-unregulated-russian-payment-and-lending-platform-perfect-money">fintelegram.com/r4i-the-unregulated-russian-payment-and-lending-platform-perfect-money</a> (last accessed Sept. 17, 2024).
\15\ WebMoney, or WM, is a Russia based global online payment
system that facilitates online business activities. See WebMoney,
Terms of Use, available at <a href="https://debt.wmtransfer.com/Rules.aspx?lang=en">https://debt.wmtransfer.com/Rules.aspx?lang=en</a> (last accessed Sept. 17, 2024).
\16\ PM2BTC, available at <a href="https://pm2btc.me">https://pm2btc.me</a> (last accessed Sept.
17, 2024).
\17\ See, e.g., 31 U.S.C. 5312; 31 CFR 1010.100(t)(3);
1010.100(ff); 1010.605(f)(iv); see also FinCEN, FIN-2019-G001,
Application of FinCEN's Regulations to Certain Business Models
Involving Convertible Virtual Currencies (May 9, 2019); FinCEN, FIN-
2013-G001, Application of FinCEN's Regulations to Persons
Administering, Exchanging, or Using Virtual Currencies (Mar. 18,
2013).
---------------------------------------------------------------------------
Additionally, based on public and non-public information available
to FinCEN, PM2BTC operates outside the United States and, although it
is not incorporated in any jurisdiction, PM2BTC has significant ties
to, and connections with, Russia. Indeed, PM2BTC presents substantial
ties to the Russian financial sector and largely--but not exclusively--
offers exchange services between individual, often Russian users as
well as Russian financial institutions and financial services
platforms. As a threshold matter, the ``Exchange Regulations and AML &
KYC'' policies for certain of PM2BTC's constituent exchange services
expressly reference, and indicate a need to comply with, Russian law
under certain circumstances,\18\ as well as require users to
acknowledge that payments will be processed during the exchange's
working hours, set on Moscow Standard Time (MSK).\19\ More
significantly, PM2BTC provides services that, as noted above, permit
customers to exchange between Russian Rubles (RUB) and various CVCs. In
fact, each of PM2BTC's constituent exchange services automatically
converts the value of BTC the customer is preparing to send to the
service to its equivalent value in Russian Rubles.\20\ Among its
services, PM2BTC also provides specific services to users in, or
transacting in, Russia, including, for instance, offering services to
convert BTC to cash at certain Russian banks, permitting users only to
identify Russia for ``Receivers [sic] Country'' (meaning the service
will transmit funds to Russia), providing customers ready access to
numerous Russian banks and money service businesses, and offering
Cyrillic script user interfaces.
---------------------------------------------------------------------------
\18\ BTC2CASHIN Terms, available at <a href="https://btc2cashin.me/terms">https://btc2cashin.me/terms</a>
(last accessed Sept. 17, 2024); PM2CASHIN Terms, available at
<a href="https://pm2cashin.me/terms">https://pm2cashin.me/terms</a> (last accessed Sept. 17, 2024).
\19\ Id. According to the Central Intelligence Agency's World
Fact Book, UTC +3 is the time zone used in Moscow, Russia. Central
Intelligence Agency, World Factbook: Russia, available at <a href="https://www.cia.gov/the-world-factbook/countries/russia">https://www.cia.gov/the-world-factbook/countries/russia</a> (last accessed Sept.
17, 2024).
\20\ BTC2CASHIN, available at <a href="https://btc2cashin.me">https://btc2cashin.me</a> (last
accessed Sept. 17, 2024).
---------------------------------------------------------------------------
PM2BTC can carry out such transactions quickly, with most
transactions up to 30,000 RUB completed within 15-60 minutes, although
PM2BTC's website notes that transactions with Alfa-Bank require up to
two hours.\21\ In addition, PM2BTC
[[Page 82501]]
has ongoing arrangements with numerous Russian financial institutions
and financial service providers, including but not limited to JSC Alfa-
Bank (Alfa-Bank),\22\ Perfect Money, WebMoney, and Limited Liability
Company YooMoney (YooMoney).\23\ For instance, according to PM2BTC's
official BTC2CASHIN.ME website, PM2BTC's services that offer conversion
of BTC to cash for customers contain a drop-down menu called ``method
of obtaining'' for customers to select which of the financial
institutions they wish to transact with. The dropdown menu lists
numerous Russian banks and money service businesses, including, but not
limited to, Alfa-Bank and YooMoney.
---------------------------------------------------------------------------
\21\ PM2CASHIN, available at <a href="https://pm2cashin.me">https://pm2cashin.me</a> (last accessed
Sept. 17, 2024); BTC2CASHIN, available at <a href="https://btc2cashin.me">https://btc2cashin.me</a>
(last accessed Sept. 17, 2024), <a href="https://pm2cashin.me">https://pm2cashin.me</a> (last accessed
Sept. 17, 2024); BTC2CASHIN, available at <a href="https://btc2cashin.me">https://btc2cashin.me</a>
(last accessed Sept. 17, 2024).
\22\ On April 6, 2022, Treasury's Office of Foreign Assets
Control (OFAC) sanctioned Alfa-Bank and six of its subsidiaries
pursuant to E.O. 14024 for having operated in the Russian financial
services sector. Treasury, Press Release, U.S. Treasury Escalates
Sanctions on Russia for its Atrocities in Ukraine (Apr. 6, 2022),
available at <a href="https://home.treasury.gov/news/press-releases/jy0705">https://home.treasury.gov/news/press-releases/jy0705</a>.
\23\ On February 24, 2022, OFAC sanctioned YooMoney (also known
as Yoo Money, Yu Money, and Yandex Money). Treasury, Press Release,
U.S. Treasury Announces Unprecedented & Expansive Sanctions Against
Russia, Imposing Swift and Severe Economic Costs (Feb. 24, 2022),
available at <a href="https://home.treasury.gov/news/press-releases/jy0608">https://home.treasury.gov/news/press-releases/jy0608</a>;
see also Treasury, Press Release, U.S. Treasury Escalates Sanctions
on Russia for Its Atrocities in Ukraine (Apr. 6, 2022), available at
<a href="https://home.treasury.gov/news/press-releases/jy0705">https://home.treasury.gov/news/press-releases/jy0705</a>; Treasury,
Sanctions List Search, Limited Liability Company YooMoney, available
at <a href="https://sanctionssearch.ofac.treas.gov/Details.aspx?id=34597">https://sanctionssearch.ofac.treas.gov/Details.aspx?id=34597</a>. Yoo
Money is a Moscow, Russia based payment processor that was acquired
by PJSC Sberbank (Sberbank) on July 2, 2020, available at <a href="https://www.crunchbase.com/organization/yandex-money">https://www.crunchbase.com/organization/yandex-money</a> (last accessed on Sept.
17, 2024). The BTC2CASHIN.ME website uses the spelling ``Yu Money'',
but FinCEN assesses this is a transliteration variant and will
subsequently refer to the entity as ``Limited Liability Company
YooMoney''. See id.
---------------------------------------------------------------------------
III. Finding That PM2BTC Is of Primary Money Laundering Concern in
Connection With Russian Illicit Finance
Based on public and non-public information available to FinCEN,
FinCEN finds that reasonable grounds exist for concluding that PM2BTC,
a CVC exchanger with significant ties to and connections with Russia,
is a financial institution of primary money laundering concern in
connection with Russian illicit finance through its facilitation of
funds transfers by Russian-affiliated illicit actors and associated
with a wide array of illicit activities, including fraud schemes,
sanctions evasion, ransomware attacks, and child abuse.
A. The Extent to Which PM2BTC Is of Money Laundering Concern in
Connection With Russian Illicit Finance
Based on blockchain analysis, FinCEN identified significant ties
between PM2BTC and a broad spectrum of illicit actors and illicit
activities. FinCEN's analysis, using the combined counterparty
information from two clusters attributed to PM2BTC by commercially
available blockchain analytic software found that a substantial
percentage of transactions processed through PM2BTC were associated
with wallet addresses linked to illicit actors and activity, including
fraud shops, illicit actors or organizations, sanctioned persons and
jurisdictions, ransomware attackers, darknet markets (DNMs), scam
operators, child abuse materials traffickers, and entities that are the
subject of FinCEN-imposed special measures. In addition to the specific
categories of illicit activity with which PM2BTC is associated, FinCEN
determined that PM2BTC facilitates a disproportionally high volume of
suspected illicit activity compared to peer exchange service providers.
Moreover, alarmingly, PM2BTC also employs a technique that is used to
stymie the ability to trace illicit funds to or from PM2BTC, which
permits illicit actors access to a money laundering platform and also
decreases the risk of this activity being identified by investigating
authorities.
1. PM2BTC's Disproportionate Volume of Transactions Involving Illicit
Activities
As a threshold matter, FinCEN found that a predominant percentage
of transactions processed through PM2BTC were linked to suspected
illicit activity. Based on analysis conducted using commercially
available blockchain analysis software A, FinCEN has determined that,
as a percentage of all funds transacted before July 2023, the
cumulative value of suspected illicit funds accounted for up to 43.1
percent of all CVC received by PM2BTC. Those funds were associated with
suspected illicit activities that include, in order of cumulative
value, fraud schemes, transfers of stolen funds, sanctions evasion,
terrorist financing, ransomware payments, and child abuse materials
transactions. Significantly, further analysis comparing transactions
through PM2BTC against transactions involving 1,244 other VASPs from
around the world indicated that, after adjusting for the relative size
of the other VASPs analyzed, PM2BTC is in the top one percent of direct
receiving exposure and the top two percent of indirect receiving
exposure to the categories deemed to be associated with suspected
illicit activity. In short, PM2BTC has exceedingly high exposure to,
and association with, transactions associated with suspected illicit
activity compared to peer VASPs throughout the world, presenting a
significant money laundering risk.
2. PM2BTC's Ties to Illicit Actors
PM2BTC's exposure to, and facilitation of, transactions associated
with suspected illicit activity is, importantly, consistent with its
long-standing associations with a wide range of illicit actors,
including, in particular, Russian ransomware groups, darknet markets,
and sanctioned persons.
For several years, PM2BTC processed, for example, a substantial
volume of transactions associated with the now-defunct Conti and
Trickbot ransomware gangs.\24\ According to blockchain analysis using
commercially available blockchain analytic software, between February
5, 2018, and February 2, 2021,
[[Page 82502]]
Trickbot, including its affiliates and associates, processed
approximately $4,299,457 of CVC through PM2BTC.\25\ Those transactions
constituted, by value, a significant majority of PM2BTC's ransomware-
related financial activity during the period. In addition, although the
Conti and Trickbot ransomware gangs are now defunct, PM2BTC continues
to process transactions involving CVC from sources attributed to other
variants of ransomware.
---------------------------------------------------------------------------
\24\ Based on public and non-public information, FinCEN assesses
that, on or around 2021, the Conti and Trickbot ransomware gangs had
effectively merged and were effectively one and the same. For
further details concerning Trickbot and its relation to Conti or
their collective Russia connections, see WIRED, Leaked Ransomware
Doc Show Conti Helping Putin from Shadows (Mar. 18, 2022), available
at <a href="https://www.wired.com/story/conti-ransomware-russia/">https://www.wired.com/story/conti-ransomware-russia/</a> (describing
Conti's pledged allegiance to Russia, its connection to Russian
cybercrime and Russia's intelligence apparatus); CPO Magazine, After
Declaring Support for Russian Invasion, Conti Ransomware Gang Hit
With Data Leak (Mar. 8, 2022), available at <a href="https://www.cpomagazine.com/cyber-security/after-declaring-support-for-russian-invasion-conti-ransomware-gang-hit-with-data-leak/">https://www.cpomagazine.com/cyber-security/after-declaring-support-for-russian-invasion-conti-ransomware-gang-hit-with-data-leak/</a>
(concerning Conti's relationship with Russian law enforcement);
CyberScoop, Conti Ransomware Group Announces Support of Russia,
Threatens Retaliatory Attack (Feb. 25, 2022), available at <a href="https://cyberscoop.com/conti-ransomware-russia-ukraine-critical-infrastructure/">https://cyberscoop.com/conti-ransomware-russia-ukraine-critical-infrastructure/</a>; Reuters, Russia-Based ransomware Group Conti Issues
Warning to Kremlin Foes (Feb. 26, 2022), available at <a href="https://www.reuters.com/technology/russia-based-ransomware-group-conti-issues-warning-kremlin-foes-2022-02-25/">https://www.reuters.com/technology/russia-based-ransomware-group-conti-issues-warning-kremlin-foes-2022-02-25/</a> (concerning Trickbot's
support of the Russian Government); Security Week, Conti Ransomware
`Acquires' Trickbot as it Thrives Amid Crackdowns (Feb. 21, 2022),
available at <a href="https://www.securityweek.com/conti-ransomware-acquires-trickbot-it-thrives-amid-crackdowns/">https://www.securityweek.com/conti-ransomware-acquires-trickbot-it-thrives-amid-crackdowns/</a>; WIRED, Inside Trickbot,
Russia's Notorious Ransomware Gang (Feb. 1, 2022), available at
<a href="https://www.wired.com/story/trickbot-malware-group-internal-messages/">https://www.wired.com/story/trickbot-malware-group-internal-messages/</a> (concerning the connection between Trickbot and Conti);
Department of Justice, Russian National Sentenced for Involvement in
Development and Deployment of Trickbot Malware (Jan. 25, 2024),
available at <a href="https://www.justice.gov/opa/pr/russian-national-sentenced-involvement-development-and-deployment-trickbot-malware">https://www.justice.gov/opa/pr/russian-national-sentenced-involvement-development-and-deployment-trickbot-malware</a>;
Treasury, United States and United Kingdom Sanction Additional
Members of the Russia-Based Trickbot Cybercrime Gang (Sept. 7,
2023), available at <a href="https://home.treasury.gov/news/press-releases/jy1714">https://home.treasury.gov/news/press-releases/jy1714</a> (concerning recent U.S. government actions against Trickbot).
\25\ This analysis takes into account only direct transfers
(e.g., where an address attributed to Trickbot transfers directly to
PM2BTC). It does not include indirect exposure in which Trickbot
sought to obfuscate the transactional path between their addresses
and PM2BTC, nor does it include any transfers in which Trickbot
first sent to another service and subsequently sent from that
service to PM2BTC. All transaction values throughout this Order
represent the USD exchange rate of the CVC at the time of the
transaction.
---------------------------------------------------------------------------
In addition to ties to ransomware-related transactions, PM2BTC has
a long history of facilitating transactions involving darknet \26\
markets, including the now-defunct Russia-linked darknet markets
Hydra--which was sanctioned by OFAC in April 2022 \27\--and Ferum
Shop.\28\ Darknet markets are fundamentally illicit in nature and can
operate largely as a result of the inherent anonymity of the darknet
infrastructure, facilitating illicit activity because of the difficulty
involved for law enforcement in identifying users, infrastructure, and
even domains associated with the sale of illicit goods and
services.\29\ FinCEN assesses that, between 2016 and 2022, PM2BTC
regularly processed transactions involving Hydra and Ferum Shop. For
instance, between June 15, 2016, and January 30, 2021, Hydra sent a
total of $41,361 worth of CVC to PM2BTC. Similarly, based on analysis
conducted using commercially available blockchain analytic software,
Ferum Shop sent a total of $3,453,610 worth of CVC to PM2BTC between
April 6, 2021, and February 8, 2022. In addition, although Hydra and
Ferum Shop have now been shut down,\30\ PM2BTC continues to process a
substantial volume of transactions, by value, associated with darknet
markets. Indeed, based on analysis conducted using commercially
available blockchain analytic software, PM2BTC processed transactions
valued at over $600,000 involving other darknet markets between July
22, 2023, and January 14, 2024.
---------------------------------------------------------------------------
\26\ ``Darknet'' is a term used to refer to networks that are
only accessible through the use of specific software or network
configurations. In particular, darknet content is not indexed by web
search engines, and is often accessed via anonymized, encrypted
systems like the software The Onion Router (TOR). Darknet markets
are online markets only accessible with the use of software like
TOR, and because such markets are not indexed, they can only be
found if the domain name and URL are already known to the user. As a
result of the inherent anonymity of the darknet infrastructure,
darknets facilitate criminal activity because of the difficulty
involved for law enforcement in identifying users, infrastructure,
and even domains associated with the sale of illicit goods and
services.
\27\ See Treasury, Press Release, Treasury Sanctions Russia-
Based Hydra, World's Largest Darknet Market, and Ransomware-Enabling
Virtual Currency Exchange Garantex (Apr. 5, 2022), available at
<a href="https://home.treasury.gov/news/press-releases/jy0701">https://home.treasury.gov/news/press-releases/jy0701</a>.
\28\ Elliptic, Elliptic Analysis: Russia Seizes Four Major Dark
Web Carding Sites with $263 million in crypto sales (Feb. 9, 2022),
available at <a href="https://www.elliptic.co/blog/russia-seizes-four-major-dark-web-carding-sites-with-263-million-in-crypto-sales">https://www.elliptic.co/blog/russia-seizes-four-major-dark-web-carding-sites-with-263-million-in-crypto-sales</a>.
\29\ FinCEN, Proposal of Special Measure Regarding Convertible
Virtual Currency Mixing, as a Class of Transactions of Primary Money
Laundering Concern, 88 FR 72701 (Oct. 23, 2023), available at
<a href="https://www.federalregister.gov/documents/2023/10/23/2023-23449/proposal-of-special-measure-regarding-convertible-virtual-currency-mixing-as-a-class-of-transactions">https://www.federalregister.gov/documents/2023/10/23/2023-23449/proposal-of-special-measure-regarding-convertible-virtual-currency-mixing-as-a-class-of-transactions</a>.
\30\ In February 2022, the Russian Ministry of Internal Affairs
took down four major illicit dark websites: Sky-Fraud Forum, Trump's
Dumps, UAS Store, and Ferum Shop. Elliptic, Elliptic Analysis:
Russia Seizes Four Major Dark Web Carding Sites with $263 million in
crypto sales (Feb. 9, 2022), available at <a href="https://www.elliptic.co/blog/russia-seizes-four-major-dark-web-carding-sites-with-263-million-in-crypto-sales">https://www.elliptic.co/blog/russia-seizes-four-major-dark-web-carding-sites-with-263-million-in-crypto-sales</a>. Because the Russian Ministry of Internal
Affairs carried out what amounts to a coordinated, simultaneous
takedown of multiple darknet markets, but indicated no coordination
with any international partners, FinCEN assesses Ferum Shop was at
least partially operated in Russia.
---------------------------------------------------------------------------
Finally, PM2BTC has long-standing and close ties to an array of
Russian or Russian-affiliated financial institutions that are the
subject of U.S. sanctions or other restrictions. As noted earlier,
PM2BTC has ongoing arrangements with numerous Russian financial
institutions and financial service providers, including but not limited
to YooMoney (an affiliate of Sberbank) and Alfa-Bank, each of which are
the subject of U.S. sanctions.\31\ In addition, since 2020, PM2BTC has
conducted an increasing volume of transactional activity with Garantex,
a Russian-affiliated VASP that was sanctioned by the United States in
April 2022.\32\ Between November 11, 2020, and September 20, 2023,
PM2BTC engaged in CVC transactions with a value of nearly $300,000
involving Garantex, and notably, the bulk of those transactions
occurred only after sanctions were imposed on Garantex. During largely
the same period, PM2BTC also engaged in a sizable volume of
transactions with Bitzlato Limited (Bitzlato), a Russian-affiliated CVC
exchanger identified by FinCEN in January 2023 as a financial
institution operating outside of the United States that was of primary
money laundering concern in connection with Russian illicit finance,
under section 9714.\33\ According to blockchain analysis conducted by
FinCEN using commercially available blockchain analytic software,
between May 10, 2018, and January 17, 2023, Bitzlato sent approximately
$154,429 worth of CVC to PM2BTC and, in turn, received approximately
$541,307 worth of CVC from PM2BTC.
---------------------------------------------------------------------------
\31\ See supra notes 22-23.
\32\ See Treasury, Press Release, Treasury Sanctions Russia-
Based Hydra, World's Largest Darknet Market, and Ransomware-Enabling
Virtual Currency Exchange Garantex (Apr. 5, 2022), available at
<a href="https://home.treasury.gov/news/press-releases/jy0701">https://home.treasury.gov/news/press-releases/jy0701</a>.
\33\ FinCEN, Imposition of Special Measure Prohibiting the
Transmittal of Funds Involving Bitzlato, 88 FR 3919 (Jan. 23, 2023)
available at <a href="https://www.federalregister.gov/documents/2023/01/23/2023-01189/imposition-of-special-measure-prohibiting-the-transmittal-of-funds-involving-bitzlato">https://www.federalregister.gov/documents/2023/01/23/2023-01189/imposition-of-special-measure-prohibiting-the-transmittal-of-funds-involving-bitzlato</a>.
---------------------------------------------------------------------------
Taken as a whole, PM2BTC's historic and ongoing facilitation of
transactions by, and associations with, illicit actors, including
ransomware groups, darknet markets, and sanctioned persons connected to
Russian illicit finance, combined with its access to international
markets presents substantial money laundering risk.
3. PM2BTC's Lax Anti-Money Launder Policies and Procedures
The risks presented by PM2BTC associations with illicit actors and
comparative high volume of transactional activity linked to suspected
illicit activity are compounded by PM2BTC's lax KYC and AML policies
and procedures, as well as recent technical changes that have the
effect of obscuring PM2BTC's involvement in transactions.
Although PM2BTC purports to maintain KYC and AML policies and
procedures, those policies and procedures appear inadequate and loosely
implemented. According to its website, PM2BTC ``adhere[s] to a number
of rules and implements a number of procedures aimed at preventing the
use of the service for the purpose of money laundering operations.''
\34\ Moreover, as set out in its terms of service, PM2BTC retains the
ability to, and may, suspend the execution of transactions until
verification is carried out in accordance
[[Page 82503]]
with the Financial Action Task Force (FATF) recommendations and
``request from the User identification data and data confirming the
source of funds.'' \35\
---------------------------------------------------------------------------
\34\ PM2BTC Terms, available at <a href="https://pm2btc.me/terms">https://pm2btc.me/terms</a> (last
accessed Sept. 17, 2024); BTC2CASHIN Terms, available at <a href="https://btc2cashin.me/terms">https://btc2cashin.me/terms</a> (last accessed Sept. 17, 2024); BTC2WM Terms
available at <a href="https://btc2wm.me/terms">https://btc2wm.me/terms</a> (last accessed Sept. 17, 2024);
BTC2PM Terms, available at <a href="https://btc2pm.me/terms">https://btc2pm.me/terms</a> (last accessed
Sept. 17, 2024); PM2WM Terms available at <a href="https://pm2wm.me/terms">https://pm2wm.me/terms</a>
(last accessed Sept. 17, 2024); PM2CASHIN Terms available at <a href="https://pm2cashin.me/terms">https://pm2cashin.me/terms</a> (last accessed Sept. 17, 2024).
\35\ BTC2WM Terms, available at <a href="https://btc2wm.me/terms">https://btc2wm.me/terms</a> (last
accessed Sept. 17, 2024); BTC2PM Terms available at <a href="https://btc2pm.me/terms">https://btc2pm.me/terms</a> (last accessed Sept. 17, 2024); BTC2CASHIN Terms,
available at <a href="https://btc2cashin.me/terms">https://btc2cashin.me/terms</a> (last accessed Sept. 17,
2024).
---------------------------------------------------------------------------
However, in practice, PM2BTC appears to only require users to
provide the following information in order to conduct a transaction:
(1) the type of CVC involved; (2) the value of the CVC to be sent or
received; and (3) an email address (required ``in order to communicate
with the User, if necessary, to notify about Service's profitable
offers'').\36\ Such limited information is not consistent with FATF
recommendations. There appears to be no requirement to provide a name,
date of birth, address, national identification, or any other proof of
identification--all necessary to meaningfully establish and verify the
identity of users and core features of the FATF's guidance on necessary
official identity data points for an effective KYC and AML program.\37\
Indeed, in contrast to PM2BTC's claim that it adheres to FATF
standards, it represents that it offers ``[c]omplete anonymity of
exchanges'' and that ``[t]here is no need to register or undergo any
verification to make an exchange.'' \38\
---------------------------------------------------------------------------
\36\ BTC2CASHIN, available at <a href="https://btc2cashin.me">https://btc2cashin.me</a> (last
accessed Sept. 17, 2024); see also, BTC2PM available at <a href="https://btc2pm.me">https://btc2pm.me</a> (last accessed Sept. 17, 2024); BTC2WM, available at
<a href="https://www.btc2wm.me">https://www.btc2wm.me</a> (last accessed Sept. 17, 2024); PM2BTC,
available at <a href="https://pm2btc.me">https://pm2btc.me</a> (last accessed Sept. 17, 2024);
PM2CASHIN, available at <a href="https://pm2cashin.me">https://pm2cashin.me</a> (last accessed Sept.
17, 2024); PM2WM, available at <a href="https://pm2wm.me">https://pm2wm.me</a> (last accessed Sept.
17, 2024).
\37\ FATF, Guidance on Digital Identity (Mar. 2020), at 63,
available at <a href="https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/Guidance-on-Digital-Identity.pdf">https://www.fatf-gafi.org/content/dam/fatf-gafi/guidance/Guidance-on-Digital-Identity.pdf</a>.
\38\ This statement was made by the BitcoinTalk user,
``pm2btc,'' which FinCEN assesses is the official account for
PM2BTC, on the CVC forum BitcoinTalk. See BitcoinTalk PM2BTC Post,
available at <a href="https://bitcointalk.org/index.php?topic=639799.msg7140395#msg7140395">https://bitcointalk.org/index.php?topic=639799.msg7140395#msg7140395</a> (last accessed Sept.
17, 2024).
---------------------------------------------------------------------------
Notwithstanding its purported policies and procedures, FinCEN
assesses that PM2BTC has implemented technical changes to its wallet
arrangement that have the effect of obscuring its involvement when
transacting with other VASPs. On or around July 2023, FinCEN assesses
that PM2BTC implemented a cyclical infrastructure setup--a continuous
creation of new wallets which are rotating and temporary--that avoids
the reuse of wallets and, contrary to standard practice among VASPs,
impedes any capacity to capture long-term transactional histories that
would allow financial institutions to identify PM2BTC as the
counterparty to a transaction. This typology is not wholly new and, for
instance, has been employed by several VASPs of concern, some of whom
are subjected to OFAC sanctions. In FinCEN's assessment, this typology
can be, and has been, used to facilitate evasion of U.S. sanctions.
Here, FinCEN assesses that PM2BTC's cyclical infrastructure setup is an
effort to avoid blockchain forensics-based transaction monitoring--an
outcome that is already evident in the precipitous decline in
observable transactions associated with suspected illicit activity
since July 2023. FinCEN assesses that this decline in such observable
transactions is a result of PM2BTC's efforts to avoid blockchain
activity monitoring, and is not a true reflection of PM2BTC's actual
business activity with illicit actors.
Taken together, PM2BTC's lax implementation of KYC and AML policies
and procedures and adoption of a technical arrangement that inhibits
effective blockchain analysis increases the risk PM2BTC poses to the
international and U.S. financial systems.
B. Whether the Money Laundering Concern Posed by PM2BTC Outweighs Any
Legitimate Business Activity It May Conduct
The record amply demonstrates that PM2BTC's services are used, to
an unusually large extent by comparison to other CVC exchanges, to
facilitate illicit activities by illicit actors. Although PM2BTC offers
services that could potentially be used by licit actors, those services
may be found at other VASPs, including VASPs located in jurisdictions
with robust AML/CFT frameworks and regulatory oversight. Legitimate
actors have access to a broad range of comparable services that provide
for appropriate transparency and can support international efforts to
protect the integrity of the international financial system, including
transactions involving CVC. Accordingly, given the extensive flow of
illegitimate funds through PM2BTC, FinCEN assesses that the need to
protect U.S. financial institutions from the money laundering risks
presented by PM2BTC outweighs any potential legitimate utility its
services may provide.
IV. Imposition of Special Measure Prohibiting Transmittals of Funds
Involving PM2BTC
Having found that PM2BTC is a financial institution operating
outside the United States that is of primary money laundering concern
in connection with Russian illicit finance, FinCEN has determined that
the imposition of a special measure prohibiting certain transmittals of
funds involving PM2BTC is warranted.\39\
---------------------------------------------------------------------------
\39\ In connection with this action, FinCEN consulted with staff
at the following Departments and agencies with regard to the
proposed order and prohibition: the Department of Justice; the
Department of State; the Board of Governors of the Federal Reserve
System; the Federal Deposit Insurance Corporation; the Securities
and Exchange Commission; the Commodity Futures Trading Commission;
the Office of the Comptroller of the Currency; and the National
Credit Union Administration Board. Those consultations involved
sharing drafts and information for the purpose of obtaining
interagency views on the imposition of a prohibition on certain
transmittals of funds by any domestic financial institution from or
to PM2BTC, or from an account or CVC address administered by or on
behalf of PM2BTC, and the effect that such a prohibition would have
on the domestic and international financial system. Each of the
Departments and agencies concurred in the issuance of this order.
---------------------------------------------------------------------------
A. Whether the Prohibition of Certain Transmittals of Funds Involving
PM2BTC Will Address the Money Laundering Concern in a Manner Consistent
With U.S. National Security and Foreign Policy Interests
Given PM2BTC's extensive association with suspected illicit
activity and illicit actors, FinCEN assesses that imposing a
prohibition on certain transmittals of funds involving PM2BTC is
necessary to safeguard U.S. national security and the U.S. financial
system, as well as serve key U.S. national security objectives. In
light of the predominant percentage of transactions linked to known or
suspected illicit activity processed through PM2BTC, prohibiting
certain transmittals of funds involving PM2BTC will insulate the U.S.
financial system from international money laundering and other
financial crimes.
In particular, prohibiting certain transmittals of funds involving
PM2BTC will further ongoing U.S. efforts to curtail suspected Russian-
associated illicit activity and financial transactions. Targeting
illicit proceeds obtained by ransomware actors, especially those with a
nexus to Russia, is, for instance, a high priority for the United
States. Recent actions by FinCEN, OFAC, and intergovernmental task
forces have also focused on Russia-related illicit finance threats.
Prohibiting certain transmittals of funds involving PM2BTC will serve
the United States' national security and foreign policy interests by
protecting U.S. businesses and interests from known ransomware threat
actors, by publicly countering a financing mechanism used by illicit
entities, including entities that seek to further the Russian state's
aims of political and
[[Page 82504]]
economic destabilization. Similarly, such a prohibition would sever a
pathway that might facilitate circumvention of U.S. economic sanctions,
supporting the efficacy of U.S. sanctions and complementing previous
actions taken by the U.S. government.
Additionally, this action reinforces the expectations of AML/CFT
compliance in the virtual asset ecosystem in order to improve the
identification and reporting of suspicious activity by financial
institutions around the world.
B. Whether the Prohibition of Certain Transmittals of Funds Involving
PM2BTC Would Impose Burdens on Legitimate Activity of PM2BTC or Third
Parties
FinCEN assesses that prohibiting certain transmittal of funds
involving PM2BTC will impose limited burdens on legitimate activities
currently transacted through PM2BTC and, indeed, will have a positive
systemic impact on the international payment, clearance, and settlement
system.
By U.S. and international standards, PM2BTC represents a limited
percentage of total received BTC (directly and indirectly). As of April
15, 2024, PM2BTC's total received value was between .0002 and 0.0014
percent (respectively) of the largest U.S.-domiciled CVC VASP
(hereinafter referred to as ``VASP 1''). PM2BTC's transaction history
with VASP 1 totals just over $32 million in CVC over nearly 11 years.
By contrast, a CVC price and volume aggregator estimates that VASP 1
processed more than $3 billion in transfers daily \40\ as of April 17,
2024. By comparison, PM2BTC's largest U.S.-based counterparty
(hereinafter referred to as ``VASP 2'') sent approximately $147 million
worth of CVC to PM2BTC between 2018 and 2024, which amounted to
approximately 0.002 percent of VASP 2's overall sending activity. As
such, there is no evidence that PM2BTC is a major participant in the
international payment system or relied upon by the international
banking community. Indeed, given its size and limited international
presence, the legitimate business services that it offers would be
readily available through other regulated institutions. Further, as
noted in the February 16, 2022, Financial Stability Board's Assessment
of Risks to Financial Stability, direct connections between CVC as a
whole, and systemically important financial institutions and core
financial markets, are limited at present. Volatility and disruptions
in the CVC ecosystem have been contained within the CVC markets and
have not significantly spilled over to financial markets and
infrastructures.\41\
---------------------------------------------------------------------------
\40\ CoinGecko, Exchanges, available at <a href="https://www.coingecko.com/en/exchanges">https://www.coingecko.com/en/exchanges</a> (last accessed Sept. 17, 2024).
\41\ Financial Stability Board, Assessment of Risks to Financial
Stability from Crypto-assets (Feb. 16, 2022), at 5, available at
<a href="https://www.fsb.org/wp-content/uploads/P160222.pdf">https://www.fsb.org/wp-content/uploads/P160222.pdf</a> (last accessed
Sept. 17, 2024).
---------------------------------------------------------------------------
Given widespread availability of other VASP services, as well as
PM2BTC's predominant use for suspected illicit activity, imposing a
prohibition on certain transmittals of funds involving PM2BTC will
merely remove from transaction chains a VASP that facilitates illicit
or otherwise unduly risky transactions that pose a risk to the
international financial system. This action will not have an adverse
impact on the international payment, clearance, and settlement system
or on legitimate business activities currently involving PM2BTC.
Moreover, FinCEN assesses that imposing a prohibition on certain
transmittals of funds involving PM2BTC will not present a significant
competitive disadvantage for financial institutions organized or
licensed in the United States given PM2BTC's relatively small size and
the relatively limited burden that compliance with this order would
impose. Given the small size of PM2BTC and the comparatively low value
of activity between U.S. financial institutions and PM2BTC, FinCEN
assesses that this would impose neither an undue cost nor substantial
burden these financial institutions. Further, compliance with the
prohibition on certain transmittals of funds set out in this order
requires no tools or competencies other than those already employed by
domestic financial institutions to maintain their current AML/CFT
compliance programs. In order to ensure that is the case, FinCEN has
elected to provide within this order for the rejection of certain
transmittals of CVC that are received from or originate at PM2BTC and
outline the steps a covered financial institution should take in such
circumstances.
In providing for the rejection of CVC under certain limited
circumstances, FinCEN acknowledges that, at this time, there are
technological limitations that may limit or preclude covered financial
institutions from declining CVC transfers originating at addresses
outside of their control, and compliant institutions may find
themselves in receipt of CVC from PM2BTC despite a desire and effort to
limit such exposure.\42\ This order allows covered financial
institutions the flexibility to act with discretion based on the facts
and circumstances of a particular transaction and comply with this
order, even where the originating address is no longer accessible,
where, for example, (1) CVC transfers originated from PM2BTC but were
held for an extended period of time in an unhosted wallet, or (2) the
covered financial institution's risk mitigation procedures would
preclude returning funds to PM2BTC. Moreover, by providing for the
rejection of CVC, this order ensures that covered financial
institutions will not be subject to an undue cost or burden associated
with compliance.
---------------------------------------------------------------------------
\42\ FinCEN notes that CVC payment systems are often designed to
limit the control of specific financial institutions over
transactions and to prevent rejections of funds by persons or
entities other than the sender of funds. As a result, although
covered financial institutions may institute an internal prohibition
on the sending of CVC transactions to another address or entity,
FinCEN assesses that there are few, if any, readily available ways
for covered financial institutions to ``reject'' incoming CVC
transactions (prior to receipt).
---------------------------------------------------------------------------
C. Whether Any Other Reasonable Alternatives or Special Measures Would
Adequately Address the Money Laundering Concern
FinCEN considered other special measures available pursuant to
section 9714 prior to selecting the prohibition reflected in this
order.\43\ However, prohibiting certain transmittals of funds involving
PM2BTC is the only means of adequately addressing the money laundering
concern in connection with Russian illicit finance posed by PM2BTC.
---------------------------------------------------------------------------
\43\ Pursuant to section 9714, these measures include: (1) the
special measures described in 31 U.S.C. 5318A, including the
imposition of additional recordkeeping, information collection, and
reporting requirements on covered U.S. financial institutions and/or
the prohibition or imposition of conditions upon the opening or
maintaining of correspondent or payable-through accounts for or on
behalf of a foreign banking institution; and (2) the imposition of
conditions on the transmittal of funds, as an alternative to a
prohibition on the transmittal of funds.
---------------------------------------------------------------------------
In particular, none of the special measures described in 31 U.S.C.
5318A would effectively address the illicit finance threat posed by
PM2BTC.\44\ Any
[[Page 82505]]
additional recordkeeping, information collection, or reporting
requirements, as described in 31 U.S.C 5318A(b)(1)-(4), would be
insufficient to guard against the risks posed by covered financial
institutions processing transmittals of funds involving PM2BTC. Such
measures may allow such transfers to continue to benefit of illicit
actors connected to Russian illicit finance. Further, placing
conditions upon or prohibiting the opening or maintaining in the United
States of a correspondent account or payable-through account by any
domestic financial institution or domestic financial agency for or on
behalf of a foreign banking institution, as described in 31 U.S.C
5318A(b)(5), is similarly inadequate because the types of CVC
transactions that PM2BTC facilitates do not rely on correspondent or
payable-through accounts, and FinCEN is unaware of such relationships
between PM2BTC and U.S. or foreign financial institutions. In addition,
PM2BTC's recordkeeping is incomplete, so imposing additional
recordkeeping requirements is not likely to be successful or sufficient
to address the risks it poses. For these reasons, FinCEN assesses that
the prohibition on certain transmittals of funds, including CVC,
involving PM2BTC is the most appropriate special measure.
---------------------------------------------------------------------------
\44\ Likewise, imposing conditions on transmittals of funds,
pursuant to section 9714(a)(2), would be insufficient to address the
threat. While imposing conditions, rather than a full prohibition,
may be appropriate in circumstances where the institution provides
services for legitimate business that are not easily replicated or
where a complete prohibition on transactional activity would
otherwise unduly harm legitimate economic activity, PM2BTC provides
a service that is easily obtainable for legitimate customers through
other providers, and in this case the value of any legitimate
activity it may conduct is outweighed by the significant proportion
of illicit financial activity identified and its lack of mandatory
KYC.
---------------------------------------------------------------------------
D. Whether the Special Measure Prohibiting Certain Transmittals of
Funds Should Be Imposed by Order or Regulation
Pursuant to section 9714, the Secretary may impose specified
special measures, including a prohibition on certain transmittals of
funds, ``by order, regulation or otherwise as permitted by law.'' In
determining the appropriate approach in this instance, FinCEN
considered imposing special measures by order or regulation. Although
PM2BTC is not a large participant in the international payment system,
FinCEN determined that proceeding by an order is the most appropriate
course of action given the imminent threats posed by the illicit actors
whose transactions and access to funds PM2BTC facilitates as well as
the ongoing transactions associated with suspected illicit activity
that continue to be processed through PM2BTC.
A copy of this order will be published in the Federal Register. To
the extent PM2BTC or other parties have information relevant to this
order, they may submit it to FinCEN at <a href="/cdn-cgi/l/email-protection#492f3b2a092f20272a2c27672e263f"><span class="__cf_email__" data-cfemail="96f0e4f5d6f0fff8f5f3f8b8f1f9e0">[email protected]</span></a>.
V. Order
A. Definitions
1. PM2BTC
The order defines PM2BTC, a CVC exchanger comprised of a collection
of the services PM2BTC.ME, BTC2PM.ME, PM2CASHIN.ME, BTC2CASHIN.ME,
PM2WM.ME, and BTC2WM.ME, to mean all subsidiaries, branches, and
offices of PM2BTC operating in any jurisdiction, as well as any
successor entity.
2. Convertible Virtual Currency (CVC)
The order defines convertible virtual currency (CVC) as a medium of
exchange that either has an equivalent value as currency, or acts as a
substitute for currency, but lacks legal tender status. Despite having
legal tender status in at least one jurisdiction, for the purpose of
this order, Bitcoin is included as a type of CVC.
3. Covered Financial Institution
The order defines a covered financial institution as having the
same meaning as ``financial institution'' in 31 CFR 1010.100(t).
4. CVC Exchanger
The order defines a CVC exchanger as any person engaged as a
business in the exchange of CVC for fiat currency, funds, or other CVC.
5. Recipient
The order defines recipient as the person to be paid by the
recipient's covered financial institution.
6. Successor Entity
The order defines successor entity as any person that replaces
PM2BTC by acquiring its assets, in whole or in part, and/or carrying
out the affairs of PM2BTC under a new name.
7. Transmittal of Funds
The order defines transmittal of funds as the sending and receiving
of funds, including CVC.
8. Meaning of Other Terms
All terms used but not otherwise defined herein shall have the
meaning set forth in 31 CFR Chapter X and 31 U.S.C. 5312.
B. Prohibition of the Transmittal of Funds Involving PM2BTC
1. Prohibition
A covered financial institution is prohibited from engaging in a
transmittal of funds from or to PM2BTC, or from or to any account or
CVC address administered by or on behalf of PM2BTC.
2. Rejection of Funds and Condition on the Transfer of Rejected Funds
A covered financial institution will be deemed not to have violated
this Order where, upon determining that it received CVC that originated
from PM2BTC or from an account or CVC address administered by or on
behalf of PM2BTC, that covered financial institution rejects the
transaction, preventing the intended recipient from accessing such CVC
and returning the CVC to PM2BTC, or to the account or CVC address from
which the CVC originated.
C. Order Period
The terms of this order are effective October 11, 2024, with no
cessation date.
D. Reservation of Authority
FinCEN reserves its authority pursuant to section 9714 to impose
conditions on certain transmittals of funds from or to PM2BTC, or from
or to any account or CVC address administered by or on behalf of
PM2BTC.
E. Other Obligations
Nothing in this order shall be construed to modify, impair, or
otherwise affect any requirements or obligations to which a covered
financial institution is subject pursuant to the BSA, including, but
not limited to, the filing of Suspicious Activity Reports (SARs), or
other applicable laws or regulations, such as the sanctions
administered and enforced by the U.S. Department of the Treasury's
Office of Foreign Assets Control.
F. Penalties for Noncompliance
The covered financial institution, and any of its officers,
directors, employees, and agents, may be liable for civil or criminal
penalties under 31 U.S.C. 5321 and 5322 for violating any of the terms
of this order.\45\
---------------------------------------------------------------------------
\45\ Section 6106(b) of the National Defense Authorization Act
for Fiscal Year 2022 (Pub. L. 117-81) amended section 9714 of the
Combatting Russian Money Laundering Act (Pub. L. 116-283) to, among
other things, provide that the penalties set forth in 31 U.S.C. 5321
and 5322 shall apply to violations of any order, regulation, special
measure, or other requirement imposed under section 9714, in the
same manner and to the same extent described in sections 5321 and
5322.
---------------------------------------------------------------------------
G. Validity of Order
Any judicial determination that any provision of this order is
invalid shall not affect the validity of any other provision of this
order, and each other
[[Page 82506]]
provision shall thereafter remain in full force and effect.
Jimmy L. Kirby,
Deputy Director, Financial Crimes Enforcement Network.
[FR Doc. 2024-23430 Filed 10-10-24; 8:45 am]
BILLING CODE 4810-02-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on October 11, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.