On October 19, 2023, FinCEN announced a Notice of Proposed Rule Making (NPRM) that identifies international Convertible Virtual Currency Mixing (CVC mixing) as a class of transactions of primary money laundering concern. The NPRM highlights the risks posed by the extensive use of CVC mixing services by a variety of illicit actors throughout the world and proposes a rule to increase transparency around CVC mixing to combat its use by malicious actors including Hamas, Palestinian Islamic Jihad, and the Democratic People’s Republic of Korea (DPRK).
From FinCEN Director Andrea Gacki’s statement:
“CVC mixing offers a critical service that allows players in the ransomware ecosystem, rogue state actors, and other criminals to fund their unlawful activities and obfuscate the flow of ill-gotten gains. This is FinCEN’s first ever use of the Section 311 authority to target a class of transactions of primary money laundering concern, and, just as with our efforts in the traditional financial system, Treasury will work to identify and root out the illicit use and abuse of the CVC ecosystem.”
According to FinCEN, the lack of transparency surrounding international CVC mixing activity is an acute money laundering and national security risk. CVC mixing transactions are frequently used by criminals and state actors to facilitate a range of illicit activity, including, but not limited to, money laundering, sanctions evasion and WMD proliferation by the Democratic People's Republic of Korea (DPRK or North Korea), Russian-associated ransomware attacks, and illicit darknet markets. A recent assessment by FinCEN determined that the percentage of CVC transactions processed by CVC mixers that originated from likely illicit sources is increasing. Thus, FinCEN believes that increasing transparency in connection with this activity is a key component to denying illicit actors access to the U.S. and global financial systems. The NPRM would require covered financial institutions to report information about a transaction when they know, suspect, or have reason to suspect it involves CVC mixing within or involving jurisdictions outside the United States.
FinCEN’s press release can be found here.
The full NPRM is available at the Federal Register here.