According to a recent report published by Chainalysis, Al-Qaeda, ISIS, Hamas, Yaqub Foundations, Merciful Hands, Katibat Tawhid, ITMC, Al-Qassam, Ansaar International and Al Ikhwan and other terrorist organizations around the world are attempting to finance their operations with cryptocurrencies.
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.
The Chainalysis report cautions that as terrorist organizations 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”, Vikram Subburaj, CEO, Giottus Crypto Exchange told Indian newspaper The Outlook.
Crypto, which also is known as virtual currencies (VCs) – which include cryptocurrencies such as Bitcoin, as well as a range of other digital value-transfer methods – are innovative new technologies that enable digital transactions and the delivery of financial products and services in new online networks, environments and marketplaces. Consequently, some observers view VCs as important for furthering competition in payments services, expanding financial inclusion and enabling greater efficiency and speed in cross-border value transfer. Like other financial products and services, VCs have features that present risks for facilitating criminality, including money laundering and terrorist financing (TF). The borderless, peer-topeer (P2P) nature of certain VCs offers the prospect for terrorist actors to transfer funds outside the regulated sector and beyond the purview of anti-money laundering and countering the financing of terrorism (AML/CFT) authorities. VCs also feature varying levels of anonymity and pseudonymity, which can enable the concealment of illicit activity. Instances of VCs’ illicit use in cybercrime and in encrypted Dark Web marketplaces are well documented. However, there are still only a small number of publicly-documented and confirmed cases of TF involving VCs. In their current form and at current levels of adoption, VCs may not present terrorist actors with substantial advantages over other methods of funding and financing they already utilize. Nonetheless, the public record demonstrates that religiously and politically-inspired extremist actors have utilized VCs, if in relatively low-volume and unsystematic fashion, and may be seeking to expand their use. The prospect exists for TF through VCs to mature and to grow, even if the precise nature, scale and scope of this risk remains difficult to anticipate. In the near-term, terrorist use of VCs is most likely to involve occasional use for specific and limited purposes, including:
- raising funds or procuring illicit items on the Dark Web;
- soliciting donations in crowdfunding campaigns conducted on social media and encrypted messaging platforms; and
- transmitting funds internationally among members of terrorist networks using P2P value transfers.
How cryptocurrency is being used by terrorists in South Asia?
In May 2020, the Philippine Institute for Peace, Violence and Terrorism Research (PIPVTR) reported that Islamic State (ISIS)-linked terror groups had conducted their first transactions in cryptocurrencies. According to the report, a terrorist-linked money laundering operation involving cryptocurrencies generated funds, which were then allegedly used to finance the activities of terror networks operating in the conflict-ridden Mindanao region in the southern Philippines.
While the adoption of cryptocurrency is not unprecedented among ISIS supporters, this case signals a reinvigorated push to diversify funding tactics for terrorism in Southeast Asia. As such, this article explores the propensity for Southeast Asian militants to adopt cryptocurrency for fund raising, fund moving, and fund using for terrorist purposes.
ISIS has long been interested in cryptocurrency. In a high-profile case from 2015, a 17-year-old in the US state of Virginia was jailed for providing ISIS supporters online with advice on using the virtual currency Bitcoin to conceal financial donations. He had also written a prominently referenced blog titled “Bitcoin and the Charity of Jihad”.
In Southeast Asia, an early proponent of using cryptocurrency for terrorism financing was Bahrun Naim, an Indonesian Islamic State fighter based in Syria (now deceased). In his online manual published in 2016, Naim listed Bitcoin as one of the fund-moving methods to launder the proceeds from “carding” (fraudulent credit card transactions). At the time, Indonesia’s Financial Intelligence Unit PPATK (Indonesian Financial Transaction Reports and Analysis Centre) reported Bahrun Naim had moved monies to his associates using PayPal, with the funds originated from Bitcoin. The money was eventually used to fund a suicide attack at the Solo Police Headquarters, Central Java, in July 2016.
Indonesian elements with ties to Al-Qaeda have also shown interest in Bitcoin. In October 2018, the Abu Ahmed Foundation (AAF), an Indonesian extremist charity that supports the Al-Qaeda -linked rebel group Hayat Tahrir al-Sham (HTS) in Syria, conducted fund-raising using cryptocurrency. The charity had encouraged supporters to donate using cryptocurrencies such as Bitcoin, Monero, Dash, and Verge.
Overall, the use of cryptocurrencies by Islamist militants in Southeast Asia is relatively low. This is partly attributed to the limited pool of tech-savvy militants in the region. In 2016, an Indonesian pro-ISIS cell based in Majalengka, West Java, had mooted the idea of raising funds in Bitcoin, but did not proceed as it was deemed too “complicated.” Another inhibiting factor is internet connectivity, a basic requirement for using cryptocurrency, something that is still lacking in areas such as Mindanao in the southern Philippines, where many pro-ISIS groups operate.
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