Author: Jahnu Jagtap, Cryptotimes

Compiled by: Felix, PANews

As terrorist organizations adapt to an increasingly digital world, seeking new ways to raise and transfer funds, the global fight against terrorism is facing new challenges. According to a recent investigation by the United Nations Security Council monitoring team, the notorious terrorist organization ISIL has 'moved' from its long-trusted 'hawala'* (Note: referring to an informal method of money transfer, usually conducted through unauthorized dealers. Such transactions are not regulated by the Reserve Bank of India and therefore cannot trace the source of funds) to Cryptocurrency.

The report notes that terrorist groups like ISIL and al-Qaeda are abandoning traditional methods of fundraising, such as hawala, kidnapping, and extortion, and are now more inclined to use "Anonymity" cryptocurrency (represented by Monero) and embed QR codes in their promoted e-magazines to solicit donations.

These organizations have even established 'halal standards' (halal is translated as legal in Islamic society) to promote their ideology and operations. The report states that these organizations have set up two dedicated encryption channels on the Telegram messenger application, namely CryptoHalal and Umma Crypto, to guide supporters in obtaining and using specific Digital Money and accepting encryption donations approved based on a 'preliminary Islamic law assessment'.

For example, ISIL-K leverages Privacy Coin's Anonymity to launch a fundraiser using a QR code linked to the Monero Wallet. Although some encryptionexchanges delist Monero, the use of Monero by terrorist groups is increasing, making it difficult for authorities to track the flow of funds.

In August 2020, the US government seized over 300 encryption accounts, multiple websites, and Facebook pages, claiming that these accounts belonged to members of Al-Qaeda, ISIS, and the Hamas military organization.

Notably, ISIL's use of digital platforms continues to expand, causing growing concern among Member States. Various Cryptocurrency exchanges, gaming platforms, electronic wallets, and stablecoins are used to raise and transfer funds. One Member State noted that while the use of cash courier and hawala remittances is the preferred option for the transfer of funds to conflict zones, ISIL has deliberately shifted to cryptocurrency and online payment systems. With the increasing popularity of digital methods such as e-wallets, prepaid SIM card sales, and cryptocurrency, this phenomenon is expected to become more common and important.

Due to their ability to obfuscate transaction details, Privacy Coins such as Monero have become the preferred medium for terrorist financing. The UN report highlights the difficulty of monitoring these transactions, as they offer an Anonymity that the TradFi system can't match. ISIL and its branches use these characteristics for fundraising activities, ensuring that their financial activities are not discovered by the authorities.

The report also emphasizes the complexity of terrorist financing networks. ISIL's affiliates, especially those in Africa, have made significant contributions to the organization's fundraising. These affiliates typically rely on informal channels, making them difficult to disrupt. For example, ISIL-K raised $2.5 million in 2023, some of which may be related to specific attacks, highlighting the ongoing threat posed by these organizations.

This strongly worded report from the United Nations Security Council's monitoring team is bound to draw attention from several countries, including the United States, the United Kingdom, Europe, and India. Recently, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) issued a warning urging financial institutions to monitor cryptocurrency transactions that may be related to the terrorist organization Hamas.

In addition, the impact of this report will also affect the encryption industry. Because hawkish security agencies may strengthen monitoring of asset flows related to suspicious activities.

Related reading: Research institution reveals the truth about Hamas Cryptocurrency fundraising, the actual impact is minimal