Bitcoin and Terror-financing: a game of ‘catch me if you can’
A long-stated critique of cryptocurrencies is its use in financing terror operations. One could understand how that claim can be drawn. The link between a nefarious currency born from the internet, used in its darkest corners to finance human trafficking, and drug trades to jihadist groups running amock in the Middle East is quite obvious.
In reality, however, the two are far apart. Distanced by a layer of transparency.
Regulators, for years, have decried the use of terror groups’ use of cryptocurrencies, even more so than actual used-cases. Yaya Fanusie, a former CIA analyst and chief strategist at Cryptocurrency AML Strategies in a recent Epicenter podcast cleared the clutter regarding terror financing using cryptocurrencies.
At first, terror groups flocked to cryptocurrencies, seeing its anonymous nature, hence the association strengthens. However, due to the flailing financial and technological infrastructure that terror outfits operate from, even if cryptocurrencies were transferred, liquidating it is a hard task.
That’s not to say that cash-strapped terrorists aren’t trying. Fanusie stated that in “recent years” he has seen a lot of “experimenting” when it comes to siphoning cryptocurrencies from the west to the east. He said that while there might be a boatload of funds being plied on the blockchain through crypto-transactions, these groups are increasingly “learning” how to use digital assets for financing, and hence global authorities must be on their toes.
“What is clear to me is that they’re experimenting, they’re learning. I’ve noticed an increase in sophistication with some to these [terror financing] campaigns”
Fanusie, however, stated that while there is a gradual learning process among these terror groups, there is one big problem.
The transparency of cryptocurrencies, with the public availability of the digital wallets’ address complete with the amount and timestamp, belittles its case for fundraising. One of the main facets of traditional cryptocurrencies is a fork in the road for terror financing. He stated,
“For many reasons, cryptocurrency is not good for terrorist crowdfunding because it’s so transparent.”
Moreover, most cryptocurrency exchanges have either adhered to a country’s required AML/CTF norms or have internalized the matter, partnering up with private firms to ensure compliance. Either way, terror financing through centralized sources is a no-go.
While the case of cryptocurrencies being a tool for terror groups for fundraising is “overblown” according to a report by the RAND Corporation, the future of this financing source is uncertain. The aforementioned report suggested,
“The speed at which these technologies are adopted, and the details of which technologies are used and how they are deployed, are critical uncertainties that have important operational impacts.”