Terrorism Financing in Early Stages with Cryptocurrency But Advancing Quickly

Given the censorship resistant nature of blockchains, the intelligence community faces difficulties addressing terrorist financing issues using cryptocurrency. In an excerpt from their 2020 Crypto Crime Report, Chainalysis finds that the technical sophistication of terrorist financing campaigns employing cryptocurrency has advanced significantly. To highlight this advancement, Chainalysis provides two case studies — one that took place between 2016 and 2018, and one from 2019.

In 2016, Ibn Taymiyya Media Center (ITMC), the media wing of Mujahideen Shura Council (MSC) in the Environs of Jerusalem, a jihadist group based in Gaza, became the first terrorist organaization to launch a public crowdfunding campaign using cryptocurrency. In a campaign titled “Jahezona” (“Equip Us” in Arabic), the group called upon potential donors to help them raise money to buy weapons. The campaign ran from June 2016 to June 2018 with ITMC using various social media platforms to promote the campaign and share a Bitcoin address, which donors could send funds to. Using its analytical tools, Chainalysis was able to build a comprehensive picture of where donations originated from and where some received donations were ultimately sent. Over the two years the fundraising campaign ran, ITMC received tens of thousands’ worth of cryptocurrency across more than 50 individual donations.

In January 2019, the Izz ad-Din al-Qassam Brigades (AQB), the military wing of Hamas, began raising Bitcoin in one of the largest and most sophisticated cryptocurrency-based terrorism financing campaigns ever seen, according to Chainalysis. AQB launched three separate sub-campaigns, iterating their methods each time they ran into obstacles. In the first sub-campaign launched in January, the group began simply by displaying a QR code underneath a “donate to the jihad” message on their website. The Bitcoin address was associated with an account of a U.S. based regulated exchange. The account was quickly shut down with the individual who established it investigated.

The second sub-campaign began with AQB replacing the Bitcoin address on their website with a new one linked to a private, non-custodial wallet. Despite the additional precautions used to increase anonymity this Chainalysis was able to trace donations to and from the address. Soon after this however, ACB launched a much more advanced third sub-campaign. With this campaign AQB integrated a Bitcoin wallet into their website that generated a unique Bitcoin address for each donor. Furthermore, AQB published instructional videos detailing how to donate as anonymously as possible. This latest and still ongoing campaign has proven difficult to track given the unique addresses used for every donor. Nevertheless, Chainalysis was able to discover some addresses using a combination of court documents from associated cases, addresses from the first two sub-campaigns, and its analytical tools. In just nine months AQB has raised roughly the same amount of money that ITMC did over the course of two years.

Chainalysis believes that in 2020 and beyond more terrorist organizations could embrace cryptocurrency as a fundraising tool, using increasingly more sophisticated methods to enhance their privacy. They suggest law enforcement, intelligence agents, and the cryptocurrency community remain vigilant to ensure this doesn’t happen.

Why it matters:

• Public blockchains, despite their pseudonymous features are fully transparent by design given that every transaction is recorded on an open public ledger, shared amongst all network participants. To the delight of law enforcement, cryptocurrencies provide unparalleled insights into the crypto-based terrorism.
• Chainalysis’ report highlights the importance of analytical tools used to understand what’s going on on public blockchains. As methods for evading surveillance and tools for