Reality Check: Bitcoin Plays A Bit Role In Terror Financing
Is bitcoin really the preferred currency of terrorists? You might think so from reading some of the mainstream media headlines. But a recent intergovernmental study on terrorist financing paints a very different picture.
The Financial Action Task Force (FATF), a Paris-based, intergovernmental body that develops policies to protect the global financial system against money laundering, terrorist financing and financing of weapons of mass destruction, recently released a report called Emerging Terrorist Financing Risks . There is a small section in the report about virtual currency as a tool for this financing, but the 48-page report says foreign terrorist groups are primarily using traditional methods such as private donations, self-funding and criminal activities to raise funds. It says new payment technologies pose an emerging vulnerability that may increase over time, but the prevalence of these technologies by terrorist groups is not clear at present.
The report’s purpose is to analyze recently-identified terrorist financing methods. It claims that understanding how terrorists manage assets is key to restricting their access to funds and to disrupting their activities. Experts from the FATF’s global network of law enforcement, intelligence agencies and financial intelligence units contributed to the report.
Terrorists And Traditional Financing
Terrorist groups raise money for operations, propaganda, training, and recruitment.
Anti-money laundering and efforts to counter terrorist financing have succeeded in undermining these organizations’ ability to use some traditional fundraising methods, the report notes. But it also notes that these organizations are adaptable, requiring authorities to continue to monitor terrorists’ use of traditional financing methods.
Virtual currencies are not mentioned until the latter part of the report.
Virtual currencies have attracted terrorists and criminals because they offer anonymity for transactions and users, fast transactions, low volatility (which brings a lower exchange risk) and reliability, the report notes.
Law enforcement agencies have noticed terrorist websites promoting the use of bitcoin for donations. Authorities have also discovered online discussions among terrorists about using virtual currency to purchase weapons. One ISIL-linked blog proposed using bitcoin to support global terrorism.
The report cites the recent case of Virginia teen Ali Shukri Amin who was arrested for using Twitter to promote terrorism and instructing people how to use bitcoin. Amin’s Twitter conversations had more than 4,000 followers.
Other payment technologies rated higher than virtual currency on FATF’s list of concerns. One being social media.
Donors to social media and crowdfunding solicitations are often unaware of the end-use of funds raised. Such campaigns can attract thousands of donors. Terror groups also use other peer-to-peer horizontal communication avenues like mobile apps, chats, and forums.
Online Payment Systems Raise Concern
Terrorists’ growing use of online payment systems also gets significant scrutiny. To avoid detection when using these systems, terrorists rotate the required registration information.
The exploitation of natural resources for terrorist financing gets examined at length. Natural resources in or near areas of conflict present terrorists with opportunities to reap rewards from these resources. Other criminal activities terrorists use to raise funds include smuggling, illegal mining, extortion, and kidnapping for ransom.
Terrorist groups also infiltrate non-profit organizations to gain access to their funds. A 2014 FATF report on non-profit organizations explored terrorist abuse of the global non-profit sector. Charities and non-profits that operate in war zones are particularly at risk of being infiltrated by terrorist groups.
They are also able to route revenue from legitimate commercial enterprises to terrorist organizations.
Still, other illegal fundraising activities mentioned include credit card fraud, loan fraud, insurance fraud, smuggling, bank robberies, drug trafficking, tax fraud, extortion, and kidnapping for ransom.
How Terrorists Move Assets
One section of the report examines how terrorist groups move assets. It notes the banking sector remains the most reliable global transaction venue, and it remains vulnerable to terrorist financing. Anti-money laundering measures are making it more difficult for terrorists to use the banking sector, but traditional financial products can be used for terror financing. A group can still open a bank account and provide a credit card to enable members to access cash via bank ATMs.
The report’s conclusion notes that traditional financing methods continue to represent terror financing risks. It also notes that self-funding through legitimate means such as personal and business income are increasing.
Images from Shutterstock and FATF.
