Bitcoin does facilitate the financing of terrorist organizations

     Is Bitcoin really the currency of choice for terrorists? Readers may read some negative news in mainstream media about terrorists using Bitcoin to carry out criminal activities and then assume that this statement is correct. However, a recent investigation by scholars into the financial activities of terrorist organizations has overturned this conclusion.

     The Paris-based Financial Action Task Force (FATF), a coalition of governments that legislate against money laundering, terrorist financing and the financing of weapons of mass destruction, recently released a report titled “Emerging Terrorist Financing Methods Raise Concerns.”

     In this report, there is a part that mentions virtual currency, saying that virtual currency is a tool for terrorist organizations to raise funds, but the 48-page report also said that terrorist organizations mainly raise funds through traditional currencies, such as private donations, self-financing and criminal activities. The report also said that emerging electronic currency payments have loopholes that will be exposed over time, but the current popularity of this new technology among terrorist organizations is still unknown.

     The purpose of this report is to analyze the recently identified methods of terrorist financing. It claims that understanding the methods of terrorist financing can prevent them from raising funds and using the funds to carry out terrorist activities. The report was jointly prepared by the Cyber ​​Enforcement Division, Intelligence Agency and Financial Intelligence Unit from FATF.

Terrorist groups use traditional currencies to raise funds

     Terrorist organizations raise funds for organizational operations, propaganda, training and recruitment.

     The report points out that anti-money laundering and anti-terrorist financing activities have successfully blocked terrorist organizations from using traditional currencies to raise funds. However, it also points out that these organizations are highly adaptable and the relevant departments still cannot be careless and need to continue to monitor whether they are using traditional currencies to raise funds.

Virtual currencies are only mentioned in the latter part of the report

     The report points out that virtual currencies have successfully attracted the attention of terrorists and criminals with their anonymity, fast transfer speed, low volatility (low risk when exchanging currencies) and reliability.

     Law enforcement agencies have noticed that many terrorist websites have begun accepting Bitcoin donations. Authorities have also found conversations among terrorists about using Bitcoin to buy weapons. One blog even publicly proposed using Bitcoin to donate to global terrorism.

     The report cited the recent arrest of Virginia teenager Ali Shukri for publicly advocating terrorism on his Twitter account and encouraging people to donate to terrorist organizations using Bitcoin. Amin’s tweet had more than 4,000 responses.

     There are other payment methods that the FATF is more concerned about than Bitcoin. One of them is social media.

     The most worrying method of terrorist organizations to raise funds is through social media solicitation and group fundraising, which we are unaware of. Such fundraising activities can attract thousands of donors. Terrorist organizations also use other communication methods such as mobile applications, online chats and forums to raise funds.

Online payment systems cause concern among authorities

     Terrorists have recently been using online payment systems to raise funds more and more frequently, and relevant departments have stepped up their scrutiny. When terrorists use these online payment systems, in order to evade scrutiny, they use false information when registering accounts.

     The extent to which terrorists use the exploitation of natural resources for financing remains to be determined. Natural resources in or around terrorist activities also provide a source of income for terrorist organizations. Criminal activities used by terrorists for financing include smuggling, illegal mining, extortion, and kidnapping for ransom.

     Terrorist organizations also infiltrate non-profit organizations to obtain funds for their activities. A report published by FATF in 2014 stated that some non-profit organizations were used by terrorist organizations to conduct profit-making activities for them. Charities and non-profit organizations within the scope of terrorist organizations' activities should be particularly careful and must not be infiltrated by terrorist organizations.

     Terrorist organizations also have the ability to co-opt legitimate businesses into becoming terrorist organizations.

     Other illegal fund-raising activities include credit card fraud, loan fraud, insurance fraud, smuggling, bank robbery, drug smuggling, tax fraud, extortion and kidnapping for ransom.

How Terrorists Transfer Funds

     The report also mentions how terrorist organizations transfer funds. The report points out that banks are the most reliable trading places, but they can also be used by terrorists to transfer funds. Anti-money laundering measures prevent terrorists from using banks to raise funds, but they can use financial products to raise funds. Terrorist organizations open bank accounts and provide members with a credit card to allow them to obtain cash through ATM machines.

The report concludes that terrorist groups’ methods of raising funds using traditional currencies remain a current concern. It also states that terrorist groups’ self-financing through legal means, such as personal and business income, is increasing.