Key Insights
- Palestinian Islamic Jihad raised $12M in cryptocurrencies, revealing the use of crypto to bypass traditional financial monitoring.
- U.S. Treasury confirms that Hamas and similar groups use minimal crypto compared to traditional financial systems for funding.
- ICPAC alerts financial professionals to enhance KYC measures and transaction monitoring to prevent terror financing through crypto.
Blockchain analytics firm Elliptic confirmed that the Palestinian Islamic Jihad (PIJ) raised $12 million through crypto fundraising. This revelation was part of a broader investigation that showed PIJ using various cryptocurrencies to gather and transfer funds. These funds were subsequently sent to allied groups, including Hezbollah.
The use of cryptocurrencies by terrorist organizations such as PIJ is a method to circumvent traditional financial monitoring and sanctions. By leveraging the anonymity and decentralized nature of cryptocurrencies, these groups are able to move funds across borders with reduced risk of detection.
Despite the efforts to track and mitigate such activities, the total funds raised through these methods remain a smaller fraction of the overall financial operations of such groups.
For instance, traditional methods like cash and bank transfers still constitute a portion of the financial transactions for these organizations. PIJ’s $12 million raised through crypto, as confirmed by Elliptic, contrasts with earlier reports from the Wall Street Journal, which suggested higher figures. The Journal later corrected its findings based on Elliptic’s data.
U.S. Treasury and Crypto Use by Terrorist Groups
In response to Representative Tom Emmer’s inquiry, Brian Nelson, the U.S. Treasury’s Undersecretary for Terrorism and Financial Intelligence, provided additional insights. Nelson confirmed that Hamas’s use of crypto is relatively small compared to traditional financial systems. This statement aligns with the findings regarding PIJ, suggesting that while crypto fundraising is noteworthy, it is not the predominant method for terror financing.
Nelson emphasized that “Hamas’s use of cryptocurrency remains limited when compared to their overall financial operations,” providing context to the scale of crypto usage among such groups.
ICPAC’s Alert on Terror Financing
The Institute of Certified Public Accountants of Cyprus (ICPAC) has issued a critical alert to combat the increasing use of cryptocurrencies for terrorist financing. ICPAC urged accounting professionals to strengthen their monitoring and Know Your Customer (KYC) measures. The alert specifies five fund transfer methods, including cryptocurrencies, and calls for enhanced vigilance and robust compliance practices.
Financial professionals are advised to scrutinize transactions, especially those linked to conflict zones or jurisdictions under sanctions. The alert also highlights the importance of using advanced blockchain investigation tools to trace suspicious activities.
“Professionals must be proactive in detecting and reporting suspicious transactions,” the alert states.
Methods and Prevention Measures
ICPAC’s alert identifies several methods terrorists use to transfer funds, including financial institutions, electronic money institutions (EMIs), payment institutions, crowdfunding platforms, and cryptocurrencies. The alert notes that terrorists often exploit the anonymity of cryptocurrencies for cross-border peer-to-peer transfers and receive funds through crowdfunding or charitable donations. This makes it challenging to track and monitor illicit financial flows.
To combat these risks, ICPAC recommends the use of specialized blockchain investigation tools to monitor suspicious wallets and transactions. Strict KYC procedures are also emphasized as crucial in preventing terrorist financing activities.
The alert specifically mentions the need to scrutinize accounts registered under charitable organizations and non-profit organizations (NPOs), particularly those receiving donations from conflict zones.
Global Concerns and Regulatory Actions
The alert from ICPAC aligns with global concerns about the use of cryptocurrencies in terrorism. International regulatory bodies have highlighted the need for stringent monitoring and reporting practices. Members, associated firms, and compliance officers are reminded of their duty to report suspicious transactions, with a failure to do so considered an offense.
The U.S. Treasury has also acknowledged the relatively small but growing use of cryptocurrencies by militant groups. These findings underscore the need for continuous improvement in monitoring and compliance measures to address the evolving methods of terror financing.
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