Huione closes branches in Phnom Penh and halts admissions

Huione Group's branches in Phnom Penh have closed and stopped cash withdrawals after the United States and the United Kingdom decided in October to remove the company from the international banking system. This action is part of a large-scale effort to disrupt Cambodia's scam economy, which generates an estimated $19 billion annually. Authorities describe Huione as "critical infrastructure" for these networks.

The closure led to large crowds outside closed branches, with images circulating on social media of people queuing in hopes of withdrawing cash. US Treasury officials have reported that at least $4 billion has been diverted through escrow services since 2021 (escrow refers to a third party overseeing a transaction) of Huione was traded, while other estimates put this amount at “at least” $11 billion. These amounts include money flows tied to the North Korean Lazarus Group and the $235 million WazirX hack.

The pressure on Huione is clearly increasing. Angela Ang, head of policy and strategic partnerships for APAC at TRM Labs, notes that the intensity of the measures began with the revocation of its banking license in Cambodia and its designation by FinCEN (the US Financial Intelligence Unit) as a primary money laundering problem. These recent developments may well be the final breaking point.

A look at Huione Group

Huione Group, founded around 2014 and headed by none other than Prime Minister Hun Manet's nephew, offers various financial services in Cambodia, primarily aimed at Chinese-speaking users. Its services include payments, invoice processing, and financial transfers.

Attention has focused primarily on Huione Guarantee, an escrow service offered by the company through a Telegram marketplace, where sellers and buyers of various services, including money laundering and scam templates, connect. Cambodia has become a hub for large-scale online fraud, with the UN estimating that more than 100.000 people were working in scam compounds in 2023, often under duress.

In this climate, Huione's role is significant; it has helped create and maintain the financial infrastructure for these operations. Pressure for action has grown steadily over the past year. In March 2023, Cambodia's financial regulator revoked Huione Pay's license due to compliance issues. Huione denied this, stating that a banking license was no longer required and pointing to hostile opponents.

On May 1st of this year, FinCEN took a new step by designating Huione as a primary money laundering concern. This led to the conglomerate being identified as a key player in Cambodia's fraud economy, which accounts for a staggering 60% of the national GDP. In October, the US and the UK finalized the sanctions, effectively banning the Huione Group from the US financial system. The US Treasury stated that Huione had been profiting from virtual currency scams and thefts for years.

Despite mounting pressure, Huione appears resilient so far. Alternative guarantee services have developed since the company's Telegram channels were taken offline, with Tudou Guarantee, 30% owned by Huione, experiencing rapid growth. Furthermore, Huione has launched USDH, a dollar-backed stablecoin on Tron. blockchain, as a way to position itself within the crypto space while simultaneously underlining the finesse of its network.

Frequently Asked Questions

What does the closure of Huione branches mean for the market?
The closure of these branches could have a significant impact on both local and international investors, especially given the disruptions to the Cambodian economy. The absence of such critical infrastructure could lead to greater sporadic inequality in the crypto market.

Why is Huione considered an integral part of the scam economy?
Huione served as the financial backbone for many scams operating in Cambodia and beyond, with a significant amount of sanctioned capital flowing through its channels, making it premeditated in the eyes of regulators.

What is the future of Huione after these sanctions?
Huione's future now depends heavily on its ability to adapt to the new reality of international financial sanctions, which could severely restrict its operations and even reduce the need for its services.