The conflict between Israel and Hamas in the Gaza Strip has thrust into the spotlight an issue that has been on the back burner for nearly a decade: terrorist financing networks.
Now, the US and other Western governments are refocusing the issue. This is especially true of terrorists’ use of digital money, or cryptocurrencies, which can be disseminated around the world without banking or regulatory oversight.
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Counterterrorism is a game of cat and mouse. The October 7 Hamas attack focused on the terrorist group’s use of cryptocurrencies. Currently, the United States is showing signs of repression. Will the vigilance continue?
And there are larger strategic issues. Just as Israeli and other intelligence agencies ignored signs of a military buildup in Gaza, financial watchdogs were preoccupied with other issues. They missed an opportunity to squeeze the funds out of Hamas and other groups before they took action. (Hamas has been designated a terrorist organization by the US State Department since 1997.)
“We’ve taken our eye off the ball,” says Louise Sherry, director of the Center on Terrorism, Transnational Crime, and Corruption at George Mason University. “We know from the most reliable sources that the government is not collecting the necessary data on the use of cryptocurrencies and credit cards, which are currently an essential means of financing Hamas.”
Behavior in recent weeks suggests this may change. For example, the US Treasury reached a $3.4 billion settlement with cryptocurrency exchange Binance over a lack of safeguards.
The conflict between Israel and Hamas in the Gaza Strip has thrust into the spotlight an issue that has been on the back burner for nearly a decade: terrorist financing networks.
Now, U.S. and other Western government watchdogs, lawmakers and others are refocusing the issue. In particular, the use of digital money, or cryptocurrencies, by terrorists can be distributed around the world without any oversight from banks or regulators.
It is easy to overstate the importance of cryptocurrencies. Violent non-state groups receive far more funding through other formal and informal financial systems than they do using Bitcoin and other digital money, terrorist financing experts say. But it’s still a concern, and the bigger issue is a strategic one.
Why I wrote this
a story focused on
Counterterrorism is a game of cat and mouse. The October 7 Hamas attack focused on the terrorist group’s use of cryptocurrencies. Currently, the United States is showing signs of repression. Will the vigilance continue?
Just as Israeli and other intelligence agencies ignored it. Signs of military buildup In Gaza, financial watchdogs were preoccupied with other issues. They missed an opportunity to squeeze the funds out of Hamas and other groups before they took action. (Hamas has been designated a terrorist organization by the US State Department since 1997.)
“We’ve turned a blind eye to the issue of terrorism,” says Louise Shelley, director of the Center on Terrorism, Transnational Crime, and Corruption at George Mason University. “We know from the most reliable sources that the government is not collecting the necessary data on the use of cryptocurrencies and credit cards, which are currently an essential means of financing Hamas.”
There are signs that this may change.
Hamas’s brutal attack on Israel on October 7 has received renewed attention. On November 27, the U.S. Treasury Department announced the existence of the Task Force on Combating the Financing of Terrorism, which worked with 12 other countries and anti-fraud groups in the immediate aftermath of the attack. These countries include Israel, Australia, Germany, and the tax havens Liechtenstein, Luxembourg, and Switzerland.
And cryptocurrencies are gaining attention. for example:
• One of the first entities to be sanctioned by the Treasury Department less than two weeks after the October attack was a Gaza-based cryptocurrency exchange called Buy Cash Money and Money Transfer Company. Israel has ties the company to Hamas fundraising efforts and the United States. The U.S. Treasury alleges that the company was used by members of Turkey’s Al Qaeda affiliate and the Islamic State of Iraq and Syria (ISIS).
• Also in October, a bipartisan group of 105 U.S. senators and representatives called on the Biden administration. crack down on Regarding the use of cryptocurrencies by terrorists. The action came a week after the Wall Street Journal reported that Hamas and his ally, the Palestinian Islamic Jihad, Also received $134 million. In digital funds from August 2021 to June 2023.
• On November 21, the Treasury Department’s Financial Crimes Enforcement Network announced that it had imposed a record $3.4 billion fine in a settlement with Binance, the world’s largest cryptocurrency exchange. The government accused the company of turning a blind eye to deals by Hamas, Palestinian Islamic Jihad, al-Qaeda and ISIS. Binance also agreed to five years of federal oversight to ensure it does not facilitate such transactions in the future.
• In a Nov. 28 letter to Congress, the Biden administration asked for increased authority to monitor virtual currency exchanges that allow transactions by illegal groups. Deputy Treasury Secretary Wally Adeyemo warned in a speech the next day that the federal government would curb the use of cryptocurrencies if the industry did not police these flows.
The Binance settlement is “pretty huge,” said Matthew Levitt, director of the Reinhardt Program on Counterterrorism and Intelligence at the Washington Institute for Near East Policy. “This sends a very strong message to the industry. … We are thinking seriously about this.”
But many people familiar with the fight against terrorist financing have seen this pattern before. High-profile terrorist attacks generate intense, if temporary, attention. After 9/11, attention focused on the flow of funds to al-Qaeda. This amount rose again in 2014 when the US-led coalition began fighting ISIS in Iraq and Syria. But interest waned each time as other crises distracted the United States.
“Resources are limited and priorities change all the time,” said Alex, a former U.S. Treasury Department expert on terrorist financing who now heads his own risk advisory firm, Capitol Peak Strategies in Washington.・Mr. Soelden says. “In the past few years, in the era of Russia’s invasion of Ukraine and potential conflict with China, terrorist financing has not been a major priority. [and] “Use both sanctions and export controls” against states rather than non-state groups.
The problem with this stop-and-go approach is that heightened vigilance is most needed before a terrorist attack, not after.
“The preparation phase…costs far more than the actual attack itself,” said Celina Realjo, professor of practice at the Perry Center for Hemispheric Defense Studies at the National Defense University. Combatants must be transported, housed, and fed in preparation for action. “The attack costs thousands of dollars,” she added. “But the support network is in the millions.”
Will the current scrutiny of Hamas funding also fade over time?
“There are concerns about this.” [war in Gaza] “This could be a watershed moment for Hamas that allows for greater philanthropy and greater investment opportunities,” said Mr. Zelden of Capitol Peak Strategies. “Offsetting this is the renewed attention from like-minded governments after years of de-prioritization of Hamas’ terrorist financing activities. There will be competing forces. Who will win? Unfortunately, only time will tell.”
