The global fight against terrorism is entering a new phase as terrorist organizations adapt to an increasingly digital world and find new ways to raise and move funds. Recent findings from a UN Security Council monitoring team suggest that the notorious terrorist group ISIL has “shifted” from its long-trusted “hawala” (secret money transfer without funds moving) route to cryptocurrencies.
The UN Security Council report further stated that ISIL and other associated terrorist groups now favor the cryptocurrency Monero and are soliciting donations using QR codes embedded in their propaganda e-magazines.
A disturbing report claims that terrorist organisations such as ISIL and Al-Qaeda are abandoning traditional fundraising methods such as hawala, kidnapping and extortion in favour of cryptocurrencies that “enhance anonymity”.
The report further stated that these organizations have set “halal parameters” (halal translates to lawful in the context of Islamic society) for accepting cryptocurrencies to further their causes and activities. The UN report noted that two dedicated cryptocurrency channels, CryptoHalal and Umma Crypto, have been set up on the Telegram messenger app to accept donations in approved cryptocurrencies according to a “preliminary Sharia assessment.”
The damning report by the UN Security Council monitoring team is likely to attract attention in several countries, including the US, UK, Europe and India, and its findings will likely lead to discussions on stricter regulations in the cryptocurrency sector to detect the movement of funds for terrorism-related activities.
Recently, the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN) issued a warning urging financial institutions to monitor cryptocurrency transactions that may have ties to the terrorist organization Hamas.
What does the UN Security Council report say?
The move to cryptocurrency
The report details how ISIL has established specialized channels on platforms such as Telegram to instruct supporters on acquiring and using specific digital currencies. For example, ISIL-K has taken advantage of the anonymity that privacy coins offer by launching donation drives using QR codes linked to Monero wallets. Despite some cryptocurrency exchanges delisting Monero, the terrorist group's use of Monero has increased, making it difficult for authorities to trace the flow of funds.
In August 2020, the US government seized more than 300 cryptocurrency accounts, as well as multiple websites and Facebook pages, allegedly belonging to members of al-Qaeda, ISIS, and the military wing of Hamas.
“Sharia”-Based Cryptocurrency Assessment
Dedicated channels such as CryptoHalal and Umma Crypto on Telegram have been established to provide religious guidance and facilitate the acquisition of cryptocurrency. These channels not only promote religious correctness, but also provide anonymity, making it harder for authorities to trace transactions.
Cryptocurrency Preferences
ISIL's expanding use of digital platforms is of growing concern to member states. A variety of cryptocurrency exchanges, gaming platforms, e-wallets, and stablecoins are used to raise and transfer funds. One member state noted that while cash courier and hawala are the preferred methods for transferring funds to conflict zones, ISIL has purposefully shifted to cryptocurrencies and online payment systems. The group's expanding use of digital methods such as e-wallets, prepaid cell card sales, and cryptocurrencies is expected to become more widespread and significant in the future.
The financial nexus and the role of privacy coins like Monero
Privacy coins like Monero have become a favored vehicle for terrorist financing because they allow transaction details to be hidden. The UN report highlighted the difficulty of monitoring these transactions, as they offer a level of anonymity that is unmatched by traditional financial systems. ISIL and its affiliates take advantage of these features to conduct fundraising campaigns and conceal their financial activities from authorities.
The report also highlights the complex nature of terrorist financing networks. ISIL affiliates, particularly those in Africa, contribute significantly to the organization's financial strength. These affiliates often rely on informal channels and are therefore less susceptible to disruptions. For example, ISIL-K received $2.5 million in 2023, some of which may be linked to specific attacks, highlighting the continuing threat posed by these organizations.
Conclusion
The UN Security Council report will sound alarm bells in several countries under attack by these terrorist organizations, with implications for the cryptocurrency world as hardline security agencies are likely to step up scrutiny of large-scale movements of assets linked to suspicious activities.
Related article: US lawmakers warn Iran's cryptocurrency mining could be a source of terror funding
