Ben Kothe / BuzzFeed News; Getty Images (3)
The propagandist, who called himself Azym Abdullah, didn’t need a lot of money to set up a website for ISIS that broadcast gruesome beheading videos. What he needed was secrecy, and so he allegedly turned to cryptocurrency in 2014.
He paid just over 1 bitcoin, around $ 400 at the time, to register the domain name in Iceland and host it on servers around the world. His website asked visitors for donations to help finance its upkeep. These were also in Bitcoin.
Sending donations this way allowed its donors to protect their identities behind a series of letters and numbers – a preferred technique that makes it difficult for banks, law enforcement, and the U.S. Treasury Department to track and track the flow of funds in support of terrorism slow it down.
Abdullah’s trust in Bitcoin is documented in a 2017 Treasury Department intelligence rating that BuzzFeed News received as part of a cache of documents containing internal emails and reports on cryptocurrency. The intelligence service rating also reveals evidence of nine other incidents where supporters of terrorists used cryptocurrency to fund their activities, from buying airline tickets to defacing a political website to organizing trips to Syria.
The vast majority of crypto transactions are used for legitimate purchases. However, the documents offer a glimpse into the U.S. government’s ongoing, sometimes delayed battle against the use of crypto technology to advance terrorism and crime, as well as the multiple ways crypto – with its presumed anonymity and ease of transmission around the globe – is working. can be used for nefarious purposes.
In 2016, for example, analysts from the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) raised alarms about so-called mixers – companies that break down crypto transactions into smaller pieces in order to further protect the identity of the owner. If these companies operate in the US, they will need to register with FinCEN and provide information about suspicious customers and transactions. However, the report, which is among the documents BuzzFeed News received, stated that “none of the top 30 mixed services were registered … or provided evidence of a compliance program”.
It was not until almost four years later that the government took action. Last year FinCEN fined one of the blenders $ 60 million for “failing to record and verify customer names, addresses and other identifiers in over 1.2 million transactions.” These transactions, the government found, supported criminals involved in illicit narcotics, fraud, counterfeiting and child exploitation, as well as neo-Nazi and other white supremacist groups. FinCEN said more than $ 2,000 in transactions were tracked by the mixer on a website called Welcome to Video, which hosted child sexual abuse materials.
The documents reviewed by BuzzFeed News reflect the finance department’s concerns about crypto technology for at least 10 years. FinCEN is now trying to change its rules so that any company that deals with cryptocurrency needs to have clearer information about their customers and their transactions.
FinCEN and the Justice Department did not respond to comments.
Alex Fradkin for BuzzFeed News
The office of the Financial Crimes Enforcement Network, part of the US Treasury Department, in Vienna, Virginia
Yaya Fanusie, a former CIA analyst and expert on the impact of cryptocurrencies on national security, believes U.S. officials are ahead of their European counterparts in solving the problem. But like other experts contacted by BuzzFeed News, he sees the need for a new class of financial investigators to prevent cryptocurrency from being misused by terrorists, drug traffickers, and other criminals.
“For local people, crypto is harder to understand compared to traditional money laundering methods,” said Fanusie, now a senior fellow at the Center for a New American Security. “Only recently have the skills and resources been deployed at the field level.”
As regulators and industry slowly adjust, the appeal of crypto remains strong, and terrorists are finding that it can be used to raise funds to fund operations. Last August, the Justice Department announced that an investigation conducted with the Treasury Department had seized millions of dollars in “the largest terrorist organization cryptocurrency accounts ever seized.”
One of the charges described how Al-Qaeda and affiliated groups were conducting a money laundering operation that requested crypto donations through social media accounts. They then used this network for donations “to further their terrorist goals”. One of the al Qaeda networks tracked by the government received more than 15 bitcoins worth thousands of dollars in 187 transactions between February 5, 2019 and February 5, 2019.
Crypto technology expresses the same vulnerabilities in the financial system first explored by the FinCEN files, a global project by BuzzFeed News and the International Consortium of Investigative Journalists in late 2020. The news organizations noted that major Western financial institutions were allowing dirty bid prices around the world within sight of the US authorities. As with traditional currencies, Bitcoin and other cryptography can test the ability of financial institutions to track their transactions and the ability of US authorities to thwart crime.
At her nomination hearing before the Senate Finance Committee, new Treasury Secretary Janet Yellen said cryptocurrency had the potential to “improve the efficiency of the financial system.”
“At the same time,” she said, “it can be used to finance terrorism, facilitate money laundering, and assist with malicious activities that threaten the US national security interests and the integrity of the US and international financial systems.”
Pool / Getty Images
Janet Yellen during a Senate Finance Committee hearing on Jan. 19
Cryptocurrency is much easier to move than other financial instruments, allowing criminals to quickly relocate assets to different parts of the world – a benefit when trying to avoid US law enforcement review or when detection is imminent.
“You can flee to jurisdictions or companies that don’t care,” said Pawel Kuskowski, CEO of Coinfirm, a cryptocurrency analytics and compliance company. “
Currently, thousands of different virtual currencies are traded in a still developing market that is characterized by secrecy. Typically, cryptocurrency holders purchase these funds on an exchange and store them in virtual wallets with addresses identified only by unique arrangements of letters and numbers – another level of anonymity that obscures who really owns the funds.
Just as banks are responsible for monitoring their customers’ transactions, crypto exchanges are legally obliged to comply. They even send the government suspicious activity reports, or SARs, the same forms banks use when they come across a transaction that suggests criminal activity.
However, some exchanges are pushing against FinCEN’s proposal for stricter regulations and describe the requirements as more burdensome than those of the banking industry. Square, the payments company founded by Twitter CEO Jack Dorsey, and investment firms like Andreessen Horowitz have also said the new rules would be burdensome and could violate customers’ privacy rights.
The Electronic Frontier Foundation wrote in a public comment earlier this year that FinCEN’s proposed regulations would “undermine the civil liberties of cryptocurrency users” and “give the government access to treasures of sensitive financial information.” ●
