While cash remains the primary enabler of these activities, terrorists are found to be using crypto when there are no other means.
Mounting evidence suggests that terrorism is increasingly financed with crypto, according to a United Nations official.
The prevalence of crypto financing of terrorist activities may have quadrupled in recent years, Svetlana Martynova told a recent conference.
The senior legal officer of the UN Counter-Terrorism Committee Executive Directorate estimates that 20% of terrorist attacks have been crypto-financed. He reported that these numbers seemed to have increased as scrutiny of the illicit use of cryptocurrencies intensified.
Criminal activities associated with cryptocurrencies hit a record high last year, according to the most recent Chainalysis report. The figure has nearly doubled, from $7.8 billion in 2021, with illicitly associated addresses receiving $14 billion in 2021.
Chainalysis highlighted a number of militant organizations that had made efforts to fund their operations with cryptocurrencies.
Terrorists Abuse Cryptocurrencies
Martynova pointed out that cash payments continue to facilitate the vast majority of terrorism around the world. She also highlighted the use of an informal value transfer system known as “hawala”. The practice, which involves the use of middlemen, adheres to Islamic principles and is commonly used in the Middle East.
The United Nations official explained that terrorists often adapt their fundraising methods to suit the restrictions imposed by their environment. For example, “if they want to collect money from a territory that uses mobile payments as a common way to pay, they will abuse that mechanism,” she said.
However, if terrorists are effectively shut out of the formal financial system, they are more likely to abuse cryptocurrencies.
Member States to Step Up the Game
Increased scrutiny of crypto transactions has followed in the wake of international efforts to combat its use for illicit purposes. Martynova referred to a UN Security Council resolution, which calls on member states to step up their regulation of cryptocurrencies.
Martinova also touched on the global standards recommended by the Financial Action Task Force, which focus on tracking Blockchain transactions across jurisdictions.
Martynova regretted that the implementation of these regulations remains woefully disappointing. Only 27 of 98 jurisdictions in a recent survey reported that they had started to create a regulatory framework for cryptocurrencies. Consequently, even fewer have been in a position to enforce them.
One criminal activity associated with cryptocurrencies that has been gaining prominence is ransomware attacks. This week, the Biden administration is hosting a global summit, with officials from around the world participating, to address this problem.
A White House official said the goal of the meeting would be to establish a globally coordinated approach to the issue.
By Audy Castaneda
