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On January 29, the Izz ad-Din al-Qasam Brigades, a wing of Hamas, launched a campaign asking supporters to fund its military efforts by donating to a Bitcoin address.
The effort has major implications for cryptocurrency exchanges, wallet providers, and other companies that facilitate transactions in the crypto space.
The US government has declared Hamas a terrorist organization. Any connection with the financing of terrorism represents a significant risk. Cryptocurrency exchanges, wallet providers, and other crypto payment service providers can face serious consequences, such as fines and other penalties, if they facilitate interactions with the group without taking appropriate steps to disclose and report that information to law enforcement.
Moreover, crypto companies have a social responsibility to ensure that they are not misused by terrorist and extremist networks that aim to harm the innocent.
At Elliptic, understanding how terrorist financing occurs in the crypto space is one of our top priorities. But the connection between cryptocurrency and terrorism is, in our opinion, sometimes misunderstood.
The debate surrounding the terrorist use of cryptocurrencies is often polarized, characterizing the risk in extreme terms or dismissing it all together.
What is our opinion?
We see the financing of terrorism through cryptocurrency as a real risk that requires serious attention – but one that can be mitigated by using the right tools and ensuring compliance teams are aware of the risks.
Exposing Terrorist Networks: The Truth Behind Terrorist Financing Efforts
Hamas’ fundraising effort is the latest extremist cryptocurrency campaign to gain public attention, but it’s not the first.
Previous campaigns include al Sadaqah and Jahezona jihadist fundraising campaigns. A recent case in the US showed a woman using cryptocurrencies to launder the proceeds of stolen credit card fraud on behalf of ISIS. Considerable evidence points to right-wing, neo-Nazi extremists using cryptocurrencies to support their hate campaigns.
These cases suggest that terrorist and extremist networks are indeed exploring the potential of this new financial technology to further their efforts.
But it’s important to note that there are limits to what campaigns using cryptocurrencies can achieve.
First, jihadist activity involving cryptocurrencies appears to be limited to a relatively small number of isolated cases. As some observers have pointed out, since cryptocurrencies still play a small role in everyday financial transactions, terrorist groups may not find cryptocurrencies useful for many practical purposes.
Second, data analysis techniques like the ones we’ve introduced at Elliptic make it possible to learn how terrorist groups operate in the cryptospace and disrupt their activities—limiting the utility of cryptocurrencies for extremist fundraising purposes.
Using our Bitcoin blockchain analysis tools, we can see that the volume of funds generated during some of the most widely publicized terrorist financing campaigns was actually relatively small.
The al Sadaqah campaign, for example, has received just $1,037 worth of bitcoins in the more than a year and a half since it launched—hardly a large sum.
Even relatively successful terrorist financing campaigns face limitations.
For example, in the recent Hamas fundraising campaign, which raised $1,000 in just a few days after launch, our tools allowed our compliance users to see that funds were sent to and from several exchanges in the US and Europe.
These cryptocurrency exchanges were able to use Elliptic’s software to identify these transactions and take action against those accounts — a pattern we’ve seen in other cases, such as when neo-Nazi extremists closed their accounts on cryptocurrency exchanges.
Access to this kind of information also allows crypto exchanges and other service providers to provide law enforcement agencies with vital financial intelligence about terrorist campaigns.
Cryptocurrency and Terrorism: Building a Defense
None of this is to say that cryptocurrency financing of terrorism isn’t a real risk or that it can’t grow in scope and scale.
Even a small fundraiser can have deadly consequences when terrorists are involved. Although Europol indicated that to date there is no clear evidence that cryptocurrencies are directly funding specific attacks, it is certainly possible that this could change.
Moreover, there is recent evidence of jihadist and extremist groups using anonymity-enhancing cryptocurrencies like Monero, which pose challenges to detection and tracking.
But while there are certain challenges, exchanges and other service providers in the crypto space are not helpless against terrorist financing and can take steps to combat this form of cryptocurrency crime.
It is critical that your business has the tools needed to detect any possible links to terrorist activity and processes in place to quickly report any links to the police.
Are you ready?
Contact us to learn more about how our solutions can enable you to combat the financing of terrorism in the crypto space.
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