Recent Six-Figure Funds Transfers to U.S. Right-Wing Groups Raise Compliance Concerns

In the wake of the January 6 insurrectionist attack on the United States Capitol, and the threat of right-wing extremist groups conducting armed protests in state capitals across the United States, one of the many questions that law enforcement agencies across the United States are now actively exploring is whether such groups are largely self-funding or are receiving more substantial funds from other sources.

Two recent sets of news reports indicate that the latter is a genuine cause for concern.  First, on January 15, multiple news media reported that a French computer programmer “transferred more than $500,000 in Bitcoin to far-right activists” shortly before his suicide.  The programmer reportedly sent approximately $250,000 in Bitcoin to Nick Fuentes, a far-right activist who participated in the Capitol insurrection.  In total, the Bitcoin transfers went “to 22 addresses, including many belonging to American far-right activists and organizations.”  NBC News subsequently reported that the FBI is investigating the Bitcoin transfers.

Second, on January 18, the Times of Israel reported that a $100,000 grant was made through a San Francisco-based Jewish federation to the Tea Party Patriots, a conservative activist organization that reportedly helped to organize and promote the rallies that preceded the January 6 riot.  Organizers of the insurrection stated that the Tea Party Patriots helped to fund the rallies, although the Tea Party Patriots denied doing so.

The donation was apparently an example of donor-advised funds, which the Times of Israel described as “a system of funding that allows philanthropists to give donations to the causes of their choice via their local Jewish federation.”  Subsequently, the San Francisco federation stated that it would monitor its donor-advised funds.

These developments indicate that the legacy of the Trump Administration, which includes responsibility for fomenting the Capitol riot, poses policy challenges for companies, as Matt Kelly recent wrote, but legal and compliance challenges as well.  U.S. financial institutions should immediately take three steps to address those challenges.

First, financial institutions need to review whether any of their accountholders have affiliations with extremist or insurrectionist organizations, and if so, to conduct enhanced due diligence and take other actions as appropriate.  Second, they need to increase their monitoring of funds transfers from foreign-based accounts to the accounts of such organizations.  Third, they should actively explore using their authority, under section 314(b) of the PATRIOT Act, to share information with each other concerning substantial funds transfers that could constitute financial support for domestic terrorist activities.

In addition, companies in other industries need to identify any donations they may have made to organizations whose agendas appear to extend beyond wholly peaceful protests and advocacy to support for insurrection and violent attacks on public officials and institutions, and to end those donations.  Failure to do so could subject a company not only to reputation risk, but to more severe consequences if law enforcement authorities should trace those donations to groups who engage in violent insurrectionist or extremist activities.

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