Imposition of Special Measure Prohibiting the Transmittal of Funds Involving PM2BTC

<RULE> DEPARTMENT OF THE TREASURY <SUBAGY>Financial Crimes Enforcement Network</SUBAGY> <CFR>31 CFR Part 1010</CFR> <SUBJECT>Imposition of Special Measure Prohibiting the Transmittal of Funds Involving PM2BTC</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Financial Crimes Enforcement Network (FinCEN), Treasury. <HD SOURCE="HED">ACTION:</HD> Final order. <SUM> <HD SOURCE="HED">SUMMARY:</HD> 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. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> This order is effective October 11, 2024. </EFFDATE> <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> The FinCEN Resource Center, 1-800-767-2825 or electronically at <E T="03">frc@fincen.gov.</E> </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">I. Summary of Order</HD> 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  <SU>1</SU> <FTREF/> in connection with Russian illicit finance; and (2) prohibits certain transmittals of funds involving PM2BTC by any covered financial institution. <FTNT> <SU>1</SU>  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. </FTNT> 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. <HD SOURCE="HD1">II. Background</HD> <HD SOURCE="HD2">A. Statutory provisions</HD> 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”), <SU>2</SU> <FTREF/> 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);  <SU>3</SU> <FTREF/> 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. <SU>4</SU> <FTREF/> <FTNT> <SU>2</SU>  Section 9714 (as amended) may be found in a note to 31 U.S.C. 5318A. </FTNT> <FTNT> <SU>3</SU>  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.” </FTNT> <FTNT> <SU>4</SU>  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. </FTNT> 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. <SU>5</SU> <FTREF/> 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. <SU>6</SU> <FTREF/> 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. <SU>7</SU> <FTREF/> 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. <SU>8</SU> <FTREF/> <FTNT> <SU>5</SU>   <E T="03">See</E> section 9714(a)(1); 31 U.S.C. 5318A(b)(1). </FTNT> <FTNT> <SU>6</SU>   <E T="03">See</E> section 9714(a)(1); 31 U.S.C. 5318A(b)(2)-(b)(4). </FTNT> <FTNT> <SU>7</SU>   <E T="03">See</E> section 9714(a)(1); 31 U.S.C. 5318A(b)(5). </FTNT> <FTNT> <SU>8</SU>   <E T="03">See</E> section 9714(a)(2). </FTNT> <HD SOURCE="HD2">B. PM2BTC</HD> 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. <SU>9</SU> <FTREF/> <FTNT> <SU>9</SU>  This statement was made by the BitcoinTalk user, “pm2btc,” which FinCEN assesses is the official account for PM2BTC, on the CVC forum BitcoinTalk. <E T="03">See</E> BitcoinTalk, PM2BTC Post, <E T="03">available at https://bitcointalk.org/index.php?topic=639799.msg7140395#msg7140395</E> (last accessed Sept. 17, 2024). </FTNT> 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 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. <SU>10</SU> <FTREF/> 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—“ <E T="03">support@pm2btc[.]me</E> ”—with each apparently offering customer service support through PM2BTC personnel. <SU>11</SU> <FTREF/> As such, FinCEN assesses that, rather than a mere automated web product, PM2BTC is an organization that operates as a service provider. <SU>12</SU> <FTREF/> <FTNT> <SU>10</SU>   <E T=" ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 61k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━