CRYPTO

An overview of the use of cryptocurrencies in terrorist financing


By Coinbase Special Investigation Team

Following the fall of the elected Afghan government and the rise of the Taliban in its place, many speculated that the group may or may not have turned to cryptocurrencies as a means of financing their activities. As part of our compliance program, Coinbase tracks such transactions and often works with global law enforcement agencies in prohibition and enforcement efforts.

After conducting a thorough analysis of global crypto transactions, our Coinbase Special Investigation Team is sharing its findings below. To conduct this research, Coinbase relied on cryptocurrency data analyzed by Coinbase Analytics across different blockchains. This data study provides an overall overview of terrorist funds using cryptocurrencies across the industry and is not limited to coinbase.

A quick step back

Institutional and consumer interest in crypto is at an all-time high, with the growing growth of DFIs, the mainstream adoption of cryptocurrency in 2020 and 2021 has achieved the position that has been expected for many years.

The industry has come a long way since Satoshidis, Mount Gox, and the Silk Road, but illegal activity has declined but has not stopped completely. However, with less than 1% of all activity in the crypto space represented by 2020, illicit activity is no more a concern for the crypto economy than a theoretical financial system. (1)

Further breaking down the illegal activity we see that in 2020 the transactions associated with terrorist financing (TF) are less than 0.05% All Invalid Volume. For example, in cryptocurrency, terrorism funds are very low overall.

Nevertheless, as long as an organization thinks it can use crypto for TF, we are committed to proving them wrong. To that end, we provide this update on our ongoing work.

TF-related organizations have raised funds overall

Our Coinbase Special Investigation Team focuses its research on the fundraising efforts of the largest TF-related firms over the past few years. (2), (3), (4)

Evaluating the fundraising of these organizations over time, we see that Hamas has raised the most funds so far. This is probably because Hamas actively requests donations in the form of BTC on their websites and related telegram channels.

Hamas’s fundraising by al-Qaeda-linked exchange services and the Saudi-led jihadist activist movement has lagged behind.

Changes in fundraising efforts per organization over time

Breaking down the fundraising efforts of this TF-related organization, we see that the fundraising efforts of Hamas are more striking than those of other organizations. Hamas first started soliciting Bitcoin grants in January 2018, with a single donation address. Within a few months, their fundraising strategies tried to obscure the funds raised by providing new grant addresses as they entered the grant page.

The periods of intense fundraising by Hamas seem to be related to the periods of the most intense geopolitical conflict.

The periods of intense fundraising by Hamas seem to be related to the periods of the most intense geopolitical conflict.

Removing Hamas fundraising efforts from the chart above, we see that fundraising efforts of other TF-related organizations are prone for a certain period of time. For example, ISIS fundraising was initially conducted between February and October 2020. It is likely that various authorities have taken over his fundraising website to reappear a few months later.

Altcoins are increasingly donated

Over time, this TF-related organization has further undermined its fundraising efforts by currency, but we see that while TF-related interest organizations have continued their fundraising efforts in BTC, there have been fluctuations in fundraising in ETH, ERC20s and XRP.

From August 2020 to August 2021, terrorist organizations began receiving ETH, ERC20 tokens, and XRP grants. Only the Saudi-led jihadist cadre movement, which began soliciting grants in the form of BTC, ETH, XRP and various ERC20 tokens, can be blamed for raising funds. Incitement of violence against governments and countries, including Pakistan, Israel and the United States, on Twitter. A website prior to the movement’s website was cited in a West Point study of Islamic terrorism.

Breaking up the fundraising of this movement by currency we see that they initially raised funds from Altcoin.

This is what Coinbase is doing

The use of crypto as a fundraising strategy for Coinbase terrorist actors – and committed to the end. Not only does Coinbase actively research and identify trends in TF, we also take action. Preventing TF is a team effort that includes the Coinbase Special Investigation and the Global Intelligence Team. After identifying terrorist financing operations, Coinbase took at least three key steps:

  1. Block a crypto address associated with these companies to prevent users from sending them funds.
  2. Use Coinbase Analytics to identify the campaign efforts of the larger terrorist organization and to identify potential participants and affiliates.
  3. Coordination with law enforcement and regulatory agencies, such as FinCEN, FBI and others.

When it comes to terrorism funding, it’s important to be accurate, but fast. Thanks to blockchain analysis, we can identify and accurately identify TF campaigns and do our part to stop them. TF can only be less than 0.05% All illegal activity, But it is and always will be one of our top priorities at Coinbase.

Footnote

1) This percentage was taken from transactions in BTC, ETH, LTC, BCH and XRP blockchain / lasers.

2) Please note that the fundraising efforts of the selected organization have been consolidated into a common bucket. Coinbase has included data in this analysis that can be independently verified through blockchain analysis.

3) Cryptocurrency USD values ​​were estimated at the time the grant was made.

4) Data was last retrieved on August 24, 2021.


A brief account of the use of cryptocurrencies in terrorist financing was originally published in The Coinbase Blog Medium, where people continue the conversation by highlighting and responding to the story.



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