Campaign for Accountability Comment on Financial Crimes Enforcement Network (Fincen)
Notice of Proposed Rulemaking
The Department of Treasury Financial Crimes Enforcement Network’s unprecedented proposal
to use its Section 311 authority to restrict cryptocurrency “mixing” 1 is worthwhile but may soon
be obsolete unless the scope of the regulation is broadened to include newer methods criminalgroups have adopted using virtual currencies. As recently documented by specialists incryptocurrency forensics, suspected terrorists and other criminal actors are now using a newtechnique called “chain hopping” to obscure the sources and destinations of cryptocurrencytransactions.
Section 311 of the USA PATRIOT Act allows the Treasury Department to identify a specificfinancial institution, a jurisdiction, a type of account, or a class of transactions as a “primarymoney laundering concern.”2 Once so designated, the Treasury Department has a menu ofoptions set out in statute for how to address the “primary money laundering concern,” ranging
from recordkeeping and reporting requirements, to a prohibition on the maintenance ofcorrespondent accounts.3 Treasury’s 311 authority has been used fewer than 30 times in the twodecades since it was adopted, 4 and in all of these cases has been used to target jurisdictions orspecific financial institutions. 5
Last week the Treasury Department used its 311 authority to target a “class of transactions” forthe first time, publishing a proposed rule that would impose recordkeeping and reporting
requirements on cryptocurrency exchanges that engage in transactions with so-called “mixers”.6
In essence, however, this proposal is fighting the last battle as the Department of Justice alreadyprosecutes such conduct. In August 2023, the Department of Justice indicted the founders ofTornado Cash for sanctions violations and money-laundering in connection with over $1 billion
in transactions in which prosecutors allege funds were deliberately pooled and commingled tohide criminal activity.7
Department of the Treasury, Financial Crimes Enforcement Network Press Release, FinCEN Proposes New
Regulation to Enhance Transparency in Convertible Virtual Currency Mixing and Combat Terrorist Financing,
October 19, 2023, available at https://www.fincen.gov/news/news-releases/fincen-proposes-new-regulationenhance-transparency-convertible-virtual-currency.
2Department of the Treasury, Fact Sheet: Overview of Section 311 of the USA PATRIOT Act, February 10, 2011,
available at https://home.treasury.gov/news/press-releases/tg1056.
3Id.
4
Financial Crimes Enforcement Network, Special Measures for Jurisdictions, Financial Institutions, or International
Transactions of Primary Money Laundering Concerns, available at https://www.fincen.gov/resources/statutes-andregulations/311-and-9714-special-measures.
5Id.
6
Ian Talley and Mengqi Sun, U.S. Targets Crypto Mixers Over Money Laundering Risks, Wall Street Journal,
October 19, 2023, available at https://www.wsj.com/articles/u-s-targets-crypto-mixers-over-money-laundering-riskse431def.
7U.S. Attorney’s Office for the Southern District of New York, Press Release: Tornado Cash Founders Charged With
Money Laundering and Sanctions Violations, August 23, 2023, available at https://www.justice.gov/usaosdny/pr/tornado-cash-founders-charged-money-laundering-and-sanctions-violations.
1

611 Pennsylvania Ave., S.E. #337 • Washington, D.C. 20003 • (202) 780-5750
campaignforaccountability.org

Department of the Treasury
Financial Crimes Enforcement Network
November 9, 2023
Page 2 of 3
According to a recent report by the forensics firm Elliptic, “existing preferred laundering
methods – such as using the now-sanctioned crypto mixer Tornado Cash – have been renderedineffective by enforcement actions.”8 Unfortunately, the ongoing crackdown has already spurred
sanctions violators and other criminals to adopt a new method known as “cross-chain crime” or“chain-hopping.”“Chain hopping” in the cryptocurrency world is a tactic used to obfuscate the origin anddestination of digital assets (cryptocurrencies) by transferring them between different digitalledgers (blockchains) or cryptocurrency networks.9 Blockchains are transaction histories that
reside on the open internet and are publicly accessible. Chain-hopping obscures the digital trailby shifting funds and currencies among multiple chains. This strategy is employed to make it
more difficult for law enforcement to track illicit financial transactions. 10
In its recent report, “The State of Cross-Chain Crime 2023,” Elliptic estimates that some $7billion has now been laundered through cross-chain crime.11 “Enforcement actions – such as
sanctions and seizures – are increasingly targeting traditional frontiers of crypto crime, including
mixers and non-compliant exchanges,” the firm reports. “This is leading to a “crimedisplacement” effect where criminals are resorting to cross-chain crime as an alternative.”12
One system identified by Elliptic as “the medium where terrorist organizations obtain thenecessary [digital currency]” is SunSwap.13 SunSwap is a platform for exchanging digitalcurrencies controlled by TRON, 14 an Asia-based cryptocurrency system controlled by a Chinese
national named Sun Yuchen, aka Justin Sun, who is currently the subject of a civil fraud andmarket manipulation complaint by the SEC. 15 Sun is reported to have direct ties to theCommunist Party of China. 16

Elliptic Blog, $7 Billion in Crypto Laundered Through Cross-Chain Services, October 5, 2023, available athttps://www.elliptic.co/blog/7-billion-in-crypto-laundered-through-cross-chain-services.
9Merkle Science, Glossary: Your Guide to Blockchain Terminologies, available athttps://www.merklescience.com/glossary#C-name-section.
10
Elliptic Blog, Oct. 5, 2023.
11Id.
12
Elliptic, Report on the State of Cross-Chain Crime, p. 6, (October 2023), available athttps://www.elliptic.co/resources/state-of-cross-chain-crime2023#:~:text=The%20State%20of%20Cross%2Dchain%20Crime%202023&text=As%20criminals%20and%20hack
ers%20shift,chain%20and%20cross%2Dasset%20methods (“Elliptic 2023 Report”).
13
Id. at 6.
14
Id. at 19.
15
U.S. Securities and Exchange Commission, Press Release, SEC Charges Crypto Entrepreneur Justin Sun and His
Companies for Fraud and Other Securities Law Violations, March 22, 2023, available athttps://www.sec.gov/news/press-release/2023-59.
16
Eliza Gkristi, Justin Sun Joins Research Project at Communist Party School, CoinDesk, July 27, 2021, available athttps://www.coindesk.com/markets/2021/07/27/justin-sun-joins-research-project-at-communist-partyschool/?outputType=amp.
8

Department of the Treasury
Financial Crimes Enforcement Network
November 9, 2023
Page 3 of 3
Two of the most widely used dollar-denominated cryptocurrencies, Tether’s USDT and Circle’sUSDC, are traded on SunSwap.17 In April of this year, Circle, a US based issuer of dollardenominated cryptocurrency that has no primary prudential regulator, announced the launch of a
new “cross-chain protocol” to facilitate chain hopping between blockchains.18 Given that Circle’s
USDC “stablecoin” was one of the digital currencies publicly identified by the Israeli
government in July 2023 as linked to funding terrorism19 and there is currently $400 million ofUSDC on the TRON blockchain,20 these monies are at risk of being employed in “chainhopping” transactions between the 15 blockchains in which they currently operate with unclearAnti-Money Laundering (AML) standards.
The Treasury Department should consider the use of 311 authority with respect to protocols thatenable unregulated “chain hopping” on blockchains controlled by Chinese nationals that work
directly with the CCP, such as TRON, and any stablecoins listed on those blockchains as a“primary money laundering concern”.

Circle Blog, Where to Get Tron USDC: A Guide for USDC TRC20 Via Exchanges, April 7, 2023, available athttps://www.circle.com/blog/where-to-get-tron-usdc; SunSwap, “SunSwap 2.0 Interface Documentation,” V 1.0.4 at
3, available at https://www.sunswap.com/docs/sunswapV2-interfaces_en.pdf; CoinMarket Cap, “SunSwap V2”,
available at https://coinmarketcap.com/exchanges/justswap/ (last visited November 7, 2023).
18
Circle Website, Cross-Chain Transfer Protocol: United the Ecosystem, https://www.circle.com/en/cross-chaintransfer-protocol (last visited November 8, 2023).
19
Arda Akartuna, Israel Orders Seizure of Crypto Wallets Worth $94 Million Linked to Palestinian Islamic Jihad,
Elliptic Blog, July 6, 2023, available at https://www.elliptic.co/blog/analysis/israel-orders-seizure-of-crypto-walletsworth-94-million-linked-to-palestinian-islamic-jihad; Israel Ministry of Justice, Money Laundering and TerrorFinancing Prohibition Authority, Press Release, Terrorism Financing Public Alert: FIU-Israel Calls All Global
Regulated Entities for Increased Vigilance Towards Terrorism Financing Campaigns in Response to the Ongoing
War and State of Emergency, July 11, 2023, Update August 11, 2023, available athttps://www.gov.il/en/departments/news/new_07_11_23.
20
Circle Website, Experience the Power of TRON USDC, available at https://www.circle.com/en/usdcmultichain/tron (last visited November 8, 2023).
17