A recent report points at terror financing through cryptocurrencies. Terrorist organisations, including the Al-Qaeda, ISIS, Hamas, Yaqub Foundations, Merciful Hands, Katibat Tawhid, ITMC, Al-Qassam, Ansaar International and Al Ikhwan, attempted to finance their operations using cryptocurrency in 2021, according to a report released by Chainalysis, a Singapore-based blockchain data platform, on February 16, 2022.
Terrorism financing refers to the providing funds for such activities or delivering financial support to non-state actors.
The 2022 February Crypto Crime Report revealed that in 2019 and 2020, Al-Qaeda raised cryptocurrencies through Telegram channels and Facebook groups. Federal Bureau of Investigation (FBI), HIS (Homeland Security Investigations), and IRS-CI (Internal Revenue Service, Criminal Investigation) seized more than $1 million from a money service business (MSB) operator who facilitated some of these transactions, the report states.
The report noted that in early spring of 2021, al-Qassam Brigades, Hamas’s military wing, collected more than $100,000 in donations. Also, in July, the Israeli government seized much of it from associated MSBs (money services businesses).
On June 30, 2021, Israel’s National Bureau for Counter Terror Financing (NBCTF) announced the seizure of cryptocurrencies held by several wallets associated with donation campaigns carried out by Hamas. The action came after a sizeable growth in cryptocurrency donations to al-Qassam Brigades in May, following increased fighting between the group and Israeli forces, according to various media reports.
NBCTF seized not only Bitcoin, but Ether, Tether, XRP. The seizure was made possible through an investigation of open-source intelligence (OSINT) and blockchain data, according to the Chainalysis report.
This is the first terrorism financing-related cryptocurrency seizure to include such a wide variety of digital currencies, the report added.
But does this mean terror financing through cryptocurrencies is going up? Oriol Caudevilla, co-leader of the CBDC and Blockchain Working Group at the Global Impact FinTech Forum (GIFT), told Outlook Money that it is misleading to state that cryptos are used for more illicit activities than before. “Whilst it is true that illicit transactions totalled $14 billion in 2021, up 79 per cent from $7.8 billion the previous year, the rate of crypto-related crimes fell from 0.62 per cent of all crypto transactions in 2020 to 0.15 per cent in 2021, according to a report recently published by Chainalysis. But we need to look at the rate of crypto-related illicit activities, not at the total amounts involved,” says Hong Kong-based Caudevilla.
India-based crypto advisor and investor Ajeet Khurana believes that because cryptocurrency leaves an immutable record on the blockchain, it is far better in terms of law enforcement than currency notes. “The report by Chainalysis wouldn’t have been possible without that,” he said.
The Chainalysis report cautions that as terrorist organisations adopt further blockchain technologies and cryptocurrency fundraising techniques, it is critical for governments to keep up.
“Like other traditional transactional methods, it is also prone to misuse. One of the strong reasons why a progressive regulatory regime is necessary is to ensure all service providers are aware of their AML/CTF (anti-money laundering/counter-terrorism financing) risks and can enable systems to identify fraudulent transactions sooner,” says Vikram Subburaj, CEO, Giottus Crypto Exchange.
