On May 1, 2025, the Financial Crimes Enforcement Network (FinCEN) released a Notice of Proposed Rulemaking (NPRM) regarding the Huione Group, a foreign financial institution located in Cambodia. This proposal, enacted under section 311 of the USA PATRIOT Act, suggests prohibiting U.S. financial institutions from forming or maintaining correspondent banking relationships with Huione Group. The NPRM identifies Huione Group as a significant money laundering concern, based on its purported role in facilitating unlawful financial activities.
Following an investigation, FinCEN found that Huione Group was involved in laundering at least $4 billion in illegal proceeds between August 2021 and January 2025, with the funds distributed as follows:
- Approximately $37 million was linked to cyber thefts conducted by North Korea;
- Around $36 million originated from scams known as "pig butchering";
- About $300 million was related to various other cyber fraud schemes.
Background: Understanding Section 311 of the USA PATRIOT Act
Section 311 of the USA PATRIOT Act grants the Secretary of the Treasury the authority to identify foreign jurisdictions, financial institutions, or types of transactions that pose significant money laundering concerns. Upon such identification, the Secretary can impose special measures to mitigate risks to the U.S. financial system. These special measures can range from requiring enhanced record-keeping and reporting to prohibiting certain types of banking relationships.
The intention behind section 311 is to provide the U.S. government with flexible tools to protect the financial system from being exploited by money launderers and terrorist financiers. By targeting specific entities or jurisdictions, the U.S. aims to cut off illicit actors from accessing the global financial infrastructure.
Huione Group: A Profile of Concern
Huione Group, operating primarily out of Phnom Penh, Cambodia, is a conglomerate that includes several subsidiaries: Huione Crypto, Haowang Guarantee, and Huione Pay PLC. FinCEN's investigations have identified the group as being involved in activities that significantly contribute to international money laundering schemes.
Key Findings
1. Laundering Proceeds from Cybercrimes and Sanctions Evasion
FinCEN's analysis indicates that Huione Group has been utilized to launder funds associated with cyber heists, notably those executed by the Lazarus Group, a North Korean entity known for its cybercriminal activities. (Explore other blog posts about Lazarus Group here, here, and here.) These heists have targeted cryptocurrency exchanges and other digital asset platforms, resulting in the theft of substantial amounts of convertible virtual currency (CVC). The proceeds from these activities allegedly support the North Korean regime's evasion of international sanctions, which are intended to prevent the financing of its weapons programs.
The relationship between Huione Group and North Korean actors is particularly concerning due to the geopolitical implications. By facilitating the movement of illicit funds, Huione Group potentially undermines international efforts to curb North Korea's nuclear ambitions. This connection underscores the severity of the risk posed by the group's activities.
2. Facilitation of CVC Investment Scams
In addition to laundering cybercrime proceeds, Huione Group is reportedly involved in facilitating CVC investment scams, commonly referred to as "pig butchering" scams. (We have previously discussed pig-butchering scams in our blog post here.) These scams are orchestrated by transnational criminal organizations (TCOs) operating primarily in Southeast Asia. They involve deceiving victims into investing in fraudulent CVC schemes under the pretense of high returns. Once the funds are invested, they are channeled through networks like Huione Group, where they are layered and integrated to obscure their illicit origins.
The prevalence of these scams highlights the vulnerabilities in the global financial system, especially regarding digital assets. The ability of criminal organizations to exploit these vulnerabilities has significant implications for consumer protection and financial stability. It also raises questions about the adequacy of regulatory frameworks governing the use of digital assets.
3. Ineffective AML/KYC Practices
Another critical finding from FinCEN's analysis is the inadequacy of Huione Group's anti-money laundering (AML) and know-your-customer (KYC) practices. Despite being subject to various reports and criticisms, the group has not implemented effective measures to detect and prevent money laundering activities. This lack of robust compliance infrastructure is a significant factor contributing to its designation as a primary money laundering concern.
Public statements from Huione Group have acknowledged these deficiencies, citing challenges in maintaining effective KYC capabilities. Such admissions raise concerns about the group's ability to comply with international AML standards and its willingness to address identified shortcomings.
Proposed Special Measures
In response to these findings, FinCEN proposes to implement special measure five, under Section 311 of the USA PATRIOT Act, which involves prohibiting U.S. financial institutions from opening or maintaining correspondent accounts for Huione Group. This measure seeks to mitigate the risks by severing the group's access to the U.S. financial system, thereby limiting its ability to facilitate illicit financial activities.
Rationale for the Proposed Measures
1. Effectiveness in Addressing Risks
The proposed prohibition is considered the most effective measure to prevent Huione Group from engaging in activities that pose a risk to the U.S. financial system. Given the group's history and the complexity of its operations, other measures, such as enhanced reporting or additional due diligence requirements, may not adequately deter or monitor its activities. The prohibition aims to directly cut off the pathways through which illicit funds are processed.
2. Impact on Legitimate Business Activities
While the prohibition may impact some legitimate business activities conducted by Huione Group, FinCEN's analysis suggests that a substantial portion of the group's transactions are linked to illicit activities. By focusing on correspondent banking relationships, FinCEN seeks to target specific channels through which money laundering risks are most pronounced, minimizing the impact on legitimate operations to the extent possible.
3. Alignment with International Efforts
Although similar actions have not been widely adopted by other countries, FinCEN's proposal aligns with broader international efforts to combat money laundering and financial crimes. The global nature of financial networks means that actions taken in one jurisdiction can have ripple effects worldwide. This proposal underscores the importance of international cooperation and coordination in tackling these issues.
Broader Implications for the Financial Sector
The proposed measures against Huione Group have significant implications for the financial sector, both domestically and internationally. For U.S. financial institutions, the prohibition necessitates a reevaluation of existing correspondent banking relationships and the implementation of enhanced due diligence procedures. Institutions must ensure compliance with the proposed rule to avoid potential penalties and reputational damage.
On an international level, FinCEN's actions may prompt other jurisdictions to reassess their regulatory frameworks and cooperation mechanisms. The designation of Huione Group as a primary money laundering concern highlights the need for robust AML/CFT (counter-financing of terrorism) measures that can effectively address the challenges posed by digital assets and transnational financial crimes.
Conclusion
FinCEN's proposal to impose special measures against Huione Group represents an important development in efforts to maintain the integrity of the U.S. financial system. This action is part of a broader initiative by the Treasury Department to address financial entities that contribute to cybercrime and sanctions evasion, particularly in regions with weaker regulatory environments. By concentrating on issues such as crypto-related fraud, state-sponsored cybercrime, and international money laundering networks, FinCEN highlights its commitment to using the tools available under Section 311. This strategy addresses immediate threats while emphasizing the need for global collaboration to combat money laundering and financial crimes.
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