The United States And Middle Eastern Countries Join To Target A “Secret” Hamas Investment Portfolio Worth $1 Billion; How Cryptocurrencies Have Emerged As A Major Tool For Funding Terror.

Cryptocurrencies, Hamas

In recent times, the world has witnessed a growing concern regarding the means through which violent groups and designated terrorist organizations secure funding for their nefarious activities.

At the forefront of this debate is the role of cryptocurrency in facilitating terror financing; cryptocurrency, with its unique characteristics, has emerged as an attractive option for those seeking anonymity and expediency in financial transactions.

A US official stated that the Treasury Department is working with members of the Gulf Cooperation Council: Saudi Arabia, Qatar, Kuwait, Oman, Bahrain and the United Arab Emirates to target Hamas’s investment portfolio, believed to be worth $1 Billion.

The US and Saudi officials called an emergency meeting on Tuesday in Riyadh of the Terrorist Financing Targeting Center, which includes the United States and the GCC nations initially scheduled to take place in November but held sooner following the Hamas terror attack in Israel.

The US official said there has been a redoubling of efforts since Hamas’ October 7 attack on Israel to use the TFTC, which was created in 2017, to go after Hamas, Hezbollah and other Iranian-aligned militant groups, including by sharing relevant, timely and actionable information.

Last week, according to a US official, the Treasury levelled sanctions on individuals who are managing assets in a “secret” Hamas investment portfolio likely valued at between $400 million and $1 billion; the official added that the portfolio is generating significant amounts of revenue for Hamas.

How Hamas is using cryptocurrency to raise funds
Treasury has said Hamas’s global portfolio of investments includes companies operating “under the guise of legitimate businesses” in Sudan, Algeria, Turkey, the United Arab Emirates and other nations.

Brian Nelson, Treasury’s under-secretary for terrorism and financial intelligence, said during prepared remarks at the emergency TFTC meeting, “We cannot tolerate a world in which Hamas and other terrorist organizations’ fundraisers live and operate with impunity, abusing the financial system, to sustain their terror.”

Nelson urged the Gulf nations to share more information on the parts of the Hamas financial ecosystem “vulnerable to disruption” and called on member countries to take action.

“From our perspective, not acting against Hamas and its terrorism is a disservice to the Palestinian people,” Nelson said. “From a financial standpoint, we can clearly see that Hamas has exacerbated economic hardships for decades in the Gaza strip by diverting humanitarian assistance to support its campaign of terror, and we must publicly condemn these actions.”

Deputy Treasury Secretary Wally Adeyemo, in yet another step aimed at disrupting Hamas funding, plans to travel to Europe on Friday, the Treasury Department announced.

Adeyemo plans to work with European partners to “deny Hamas and other terrorist organizations the ability to raise and use funds.”

Last week, Treasury’s Financial Crimes Enforcement Network laid out new rules aiming at the ability of Hamas and other terror groups to use cryptocurrencies for fundraising. FinCEN proposed designating foreign cryptocurrency “mixers” – platforms that make digital funds harder to track – as money laundering and national security risks.

Role Of Cryptocurrencies In Funding Terror Activities
Recent developments have raised concerns about the financial channels that violent groups and designated terrorist organizations utilize to fund their illicit activities and the role of cryptocurrency in facilitating these transactions has come under scrutiny.

The Financial Action Task Force (FATF), a global organization responsible for addressing issues like money laundering and terror financing, has issued a warning that cryptocurrency assets may become a sanctuary for criminal and terrorist financial transactions.

One key factor contributing to this concern is the relatively low level of regulation in the cryptocurrency sphere when compared to traditional financial systems; while some regions are in the process of developing regulations, digital currencies currently enjoy a higher degree of autonomy.

What makes cryptocurrency an attractive option for illicit financial activities?

To send or receive cryptocurrency, all a user needs is a crypto wallet, which can be easily set up without the stringent checks and balances required for a regular bank account.

Moreover, cryptocurrency addresses consist of pseudonyms, represented only by strings of letters and numbers, which means that people can send and receive cryptocurrency without disclosing their real identities.

Furthermore, the process of sending and receiving digital funds is instantaneous, even across international borders.

Is cryptocurrency entirely untraceable?

To some extent, yes. Blockchains like Bitcoin and Ethereum maintain a permanent record of transactions, allowing authorities to view the funds sent or received from a wallet and information about other wallets it has interacted with.

However, pseudonyms can conceal a person’s identity, although they are not foolproof, and a thorough examination of a cryptocurrency’s blockchain can potentially reveal the true identities behind the wallets.

Experts caution that while cryptocurrency offers a level of anonymity, no one can guarantee 100% anonymity at this point.

Some crypto wallet providers have started requesting Know Your Customer (KYC) information from customers and recording user addresses, which can be tracked by law enforcement.

Nonetheless, resourceful users can still use tools such as crypto “mixers” or tumblers, which combine user cryptocurrencies and then send them to the recipient from a common pool; some individuals transfer funds to exchanges or other entities, making it challenging to differentiate between various sources of funds.

Is cryptocurrency used for terror financing?

Yes, there have been instances of cryptocurrency allegedly being used to finance terrorist activities.

Terror groups employ various methods to move their funds, including crypto, banks, shell companies, charities, informal financial networks, and physical cash; however, experts suggest that cryptocurrency constitutes only a small portion of terror financing.

According to a Bloomberg report from 2022, a few years ago, approximately 5% of terrorist attacks were believed to be financed through cryptocurrency; however, as per a UN official, this figure may have since increased to 20%.

Illicit financing, including terror financing, constitutes only a small fraction of the cryptocurrency market, accounting for less than 1% of the entire market, according to Chainalysis, an American blockchain analysis firm.

Other forms of illicit financial activities involve scams, ransomware, and theft. In 2022, cryptocurrency-related crimes reached a record of $20.1 billion, which Chainalysis considers a conservative estimate, excluding other uses like drug payments.

Another emerging cybercrime trend is cryptocurrency theft through online attacks; the United Nations has reported that this is a significant source of funding for North Korea.

Cryptocurrency is also a convenient fundraising tool, especially when combined with social media, as noted by John Moss, the head of the Australian Transaction Reports and Analysis Centre (Austrac).

Austrac has reported cases of Australians sending digital funds to organized terror groups like al-Qaeda and ISIL (Islamic State of Iraq and The Levant).
In August, a UN report highlighted that the Islamic State (IS) has been using regional versions of cryptocurrency, such as stablecoins, and relying on virtual assets for international fund transfers.”

The Last Bit,
The intersection of cryptocurrency and terror financing presents a challenge for regulators, financial institutions, and security agencies.

While cryptocurrencies offer a degree of anonymity, they are not entirely untraceable, and efforts are being made to strike a balance between preserving the legitimate uses of digital currencies and curbing their exploitation for illicit purposes.

As governments worldwide grapple with the evolving dynamics of cryptocurrency, collaboration among international organizations, stricter regulations, and enhanced oversight become imperative in safeguarding global security.

In this ongoing battle, understanding the nuances of cryptocurrency’s role in terror financing is pivotal in crafting effective strategies to mitigate these risks and uphold the integrity of the global financial system.