Treasury Sanctions Three Individuals for Facilitating Cryptocurrency Money Laundering Activities

A Bold Move to Curb Fraudulent Activities in Financial Markets

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has sanctioned three individuals operating in China for facilitating Democratic People’s Republic of Korea (DPRK) cryptocurrency money laundering activities used to fund weapons of mass destruction and missile programs.

The Sanctioned Individuals

Wu Huihui, a China-based over-the-counter (OTC) cryptocurrency trader
Cheng Hung Man, an OTC trader based out of Hong Kong
Sim Hyon Sop, who has also been charged by the Department of Justice (DOJ) for his role in money laundering conspiracies

The Allegations

Wu is accused of converting millions of dollars’ worth of stolen cryptocurrency into fiat currency on behalf of DPRK actors working with Lazarus Group, a North Korea-affiliated cybercriminal syndicate. Cheng directly supported Wu’s actions by using shell companies to help the DPRK circumvent U.S. sanctions and convert cryptocurrency into cash.

Sim helped the already-OFAC-designated Korea Kwangson Banking Corp (KKBC) orchestrate money-laundering schemes to support DPRK weapons production and purchase goods on behalf of the Korean government. Sim received tens of millions’ worth of cryptocurrency while acting as a representative of KKBC, much of which came from North Korean IT workers who fraudulently worked overseas.

The Impact

The trio’s activities have shed new light on North Korea’s cryptocurrency money laundering processes, revealing the use of mixers and shell companies to obfuscate the origin of ill-gotten funds. According to Chainalysis research, North Korea-linked hackers typically use mixers at a much higher rate than other illicit actors.

Consequences

As part of its efforts to reduce malicious cyber crimes in connection with cryptocurrencies, OFAC has designated the three individuals, who now carry secondary sanctions risk. This means that even non-U.S. persons may be subject to sanctions if they engage in significant transactions with Wu, Cheng, or Sim.

The move is seen as a significant blow to North Korea’s ability to fund its weapons programs and highlights the importance of cryptocurrency participants knowing their exposure to these individuals and entities associated with them.

The DOJ has charged one of the sanctioned individuals, Sim Hyon Sop, in an unsealed indictment released today.