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5 Ways Terrorists, Cartels, and Hostile Nations Abuse Cryptocurrencies

Photo: Reuters

As times change and technology advances, so too do the strategies of terrorist groups and hostile foreign nations. Here are five ways terrorist organizations, cartels, and other nations are taking advantage of cryptocurrencies.

1. Online Financing

Because terrorist groups rely heavily on anonymity, cryptocurrencies are very appealing to them. A Department Of Justice report detailed how the military wing of Hamas, al-Qassam Brigade, was able to use cryptocurrencies for donations. The al-Qassam Brigade posted links on their social media and official website pages for Bitcoin donations, along with a video describing how to make anonymous donations. The same report details that although they bragged about how the donations were untraceable, the IRS, HSI, and FBI were able to sabotage the al-Qassam Brigade’s efforts and track down several individuals responsible for donating laundered money to the terrorist organization.

2. Laundering and Fraud

Along the same lines, cryptocurrencies appeal to terrorist organizations for fraud and money laundering schemes. The same DOJ report describes al-Qaeda Telegram pages masked as charity organizations. Al-Qaeda used these pages to solicit cryptocurrency donations to fund their terrorist goals, sometimes even explicitly. ISIS has also used similar schemes with cryptocurrencies. In 2015, Ali Shukri Amin pleaded guilty to providing support to the Islamic State by demonstrating to followers how to send Bitcoin to the terrorist group. In 2017, Zoobia Shahnaz maxed out credit cards to buy Bitcoin, later converting it to cash to conceal her activities to provide ISIS with support.

3. International Funding

Another key aspect of cryptocurrencies making them especially appealing to terror groups and sanctioned governments is that they can receive international funding when they’re cut off from global banking. Unlike Hezbollah, which relies on funding from Iran’s regime for its activities, ISIS has primarily been funded from within its territories since its founding. However, due to military losses, ISIS can no longer rely on these territories as a means to fund their militant actions. Cryptocurrencies provide a means of funding from people who are outside their territories or even global supporters.

4. Travel Across Borders

Cryptocurrencies are also attractive to drug cartels throughout Latin America, for very similar reasons. Over the years, these drug cartels have been able to gain access to technologies that rival the world’s best intelligence agencies, and it comes as no surprise to these agencies that they too are shifting to cryptocurrencies. A 2020 Drug Enforcement Administration Threat Assessment report stated that Mexican and Colombian cartels use these currencies to further their criminal enterprises and transfer international funds. The report also suggests that because of a drop of seizures in hard currency, from $702 million in 2012 to $368 million in 2019, cryptocurrency laundering schemes are gaining popularity. The head of Mexico’s Financial Intelligence Unit, Santiago Nieto, has also described that cartels buy small amounts of Bitcoin to launder their money and transfer it across borders undetected. In 2020, Nieto stated, “there’s a transition to committing crimes in cyberspace, like acquiring cryptocurrencies to launder money…and the pandemic is accelerating it. Late last year, a Mexican human trafficker, Ignacio Santoyo, was arrested after being linked by bitcoin to a prostitution ring that exploited over 2000 women across Latin America.”

5. Develop Their Own Currencies

Earlier this week, Iran had made its first purchase of imports with cryptocurrency in order to circumvent sanctions. The order was valued at $10 million, although Iran’s regime did not disclose which cryptocurrency was used. (Read more here.) In addition, Iran has announced plans to roll out their own cryptocurrency, “Rial,” later this month. This is not the first time a nation has thought to use cryptocurrencies to avoid U.S. sanctions. Following Russia’s invasion of Ukraine in February, the U.S. and E.U. imposed numerous sanctions on Russia to hamper their war waging capabilities. In a news conference in late March, the Head of the Russian Duma’s Committee on Energy, Pavel Zavalny, floated the idea of allowing “friendly” nations to pay for oil and gas exports with cryptocurrencies. Earlier that month, Senators Warren and Brown sent a letter to Secretary of the Treasury Janet Yellen, expressing concern that Russia may use cryptocurrencies to evade the recently imposed sanctions. North Korea has also been an extreme abuser of cryptocurrency. In 2019, the United Nations had estimated that North Korea has amassed $2 billion for their weapons of mass destruction program by using sophisticated cyber-attacks. In April of this year, the FBI uncovered hackers associated with North Korea for a cryptocurrency heist of more than $600 million, according to an FBI statement. On the other hand, China banned all cryptocurrency transactions and mining in September 2021. That following January, China also released an app that allows users to make transactions with a digital version of their currency, the Renminbi. According to Scott Kennedy, a senior advisor at the Center for Strategic and International Studies, China could avoid potential U.S. financial sanctions with a turn to their digital currency. Kennedy also said, “(China) wouldn’t need that SWIFT interbank communication system. It is the only way for the U.S. to actually stop any of these transactions.”

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