On April 29, The Times reported that the militant movement Hamas “is experimenting with bitcoin donations to avoid international measures against terrorist funding.” The Times stated that Hamas’s military wing, the Izz ad-Deen al-Qassam Brigades, “posted an online tutorial that sets out how donors could send money using the cryptocurrency, including using public computers to evade detection.”
The United States, the United Kingdom, and the European Union have placed substantial sanctions on Hamas as a terrorist organization, including sanctions against Hamas leaders and financial facilitators. In addition, the United States reportedly “has started placing ‘primary sanctions’ on bitcoin wallets found to have been used for terrorist financing and their owners.”
To circumvent these restrictions, according to cryptocurrency analysis firm Elliptic,
Hamas has started using a new wallet for each transaction, meaning that the US Treasury would be forced to place a new sanction order for each transaction.
Although the amount that Hamas has so far received in cryptocurrency is only in the tens of thousands of dollars, researchers at Elliptic told the Reuters news agency that the group was testing the platform with a view to using it on a larger scale.
Note: In a March 2019 RAND Corporation report on terrorist use of cryptocurrencies, the authors opined that “[c]urrent cryptocurrencies are not well matched with the totality of features that would be needed and desirable to terrorist groups but might be employed for selected financial activities.” They also stated, however, that
should a single cryptocurrency emerge that provides widespread adoption, better anonymity, improved security, and that is subject to lax or inconsistent regulation, then the potential utility of this cryptocurrency, as well as the potential for its use by terrorist organizations, would increase.
In this case, Hamas’s reported use of separate wallets for separate transactions may be a technique that facilitates broader use of bitcoin or other cryptocurrencies by Hamas and other terrorist organizations. Previously, publicly reported instances of terrorist organizations using bitcoin to transfer funds surreptitiously involved fairly small amounts of money (i.e., thousands of dollars). The fact that Hamas has already succeeded in moving tens of thousands of dollars during a testing phase indicates that the Treasury Department and its counterparts in Europe will need to increase their monitoring of terrorist financing activities, and presumably the frequency of additional counter-terrorist financing sanctions.
If that happens, financial institutions that do business with cryptocurrency exchanges and businesses must consider conducting enhanced due diligence on those firms, and be prepared to move quickly if the Treasury Department increases the number and frequency of new Hamas-related sanctions. While bitcoin would be of little value in remote locations where terrorist groups are conducting active operations, the ability to use cryptocurrency channels to move funds routinely to cities close to those operational areas, where bitcoin could be exchanged for cash, would be of great concern to many countries.
Dipping Through Geometries 