Bitcoin’s role in terrorism worries US authorities


Ben Coth / BuzzFeed News; Getty Images (3)

Publicity that Calling himself Azym Abdullah, he didn’t need much money to create an ISIS website that would broadcast horrific beheading videos. What he needed was secrecy, so in 2014 he was said to have turned to cryptocurrency.

He paid just over 1 Bitcoin, roughly $ 400 at the time, to register the domain name in Iceland and host it on servers all over the world. His site asked visitors for donations to help pay for maintenance costs. These, too, were in Bitcoin.

Sending donations in this way has allowed donors to hide their identities behind a series of letters and numbers – a preferred technique that makes it difficult for banks, law enforcement and the US Treasury to track and slow the flow of funds supporting terrorism.

Abdullah’s reliance on bitcoin was documented in a 2017 Treasury intelligence assessment, which BuzzFeed News received as part of a document cache that includes internal emails and reports about the cryptocurrency. The intelligence assessment also uncovers evidence of nine other incidents in which supporters of terrorism used cryptocurrencies to finance their activities, from purchasing airline tickets to defacing a political website to arranging travel to Syria.

The vast majority of cryptocurrency transactions are used in legitimate purchases. But the documents provide insight into the US government’s ongoing, and sometimes delayed, battle to counter the use of encrypted technology to promote terrorism and crime, as well as the variety of methods that cryptography uses – with its presumed anonymity and ease of transmission around the world – that can be used for nefarious purposes.

In 2016, for example, analysts at the U.S. Treasury’s Financial Crime Enforcement Network, or FinCEN, raised alarms about so-called mixers – companies that break down crypto transactions into smaller pieces to further protect the identity of the owner. When these companies operate in the United States, they are supposed to register with FinCEN and provide information about customers and suspicious transactions. But the report, which is among the documents BuzzFeed News has received, found that “of the 30 largest mixing services, none recorded … or showed any evidence of a compliance program.”

The government did not take action until nearly four years later. Last year, FinCEN Fined One of the mixers, valued at $ 60 million, for failing to “collect and verify customer names, addresses, and other identifiers in more than 1.2 million transactions”. The government found that these dealings helped criminals involved in illegal drugs, fraud, forgery, and child exploitation as well as neo-Nazis and other white supremacist groups. FinCEN She said I tracked transactions worth over $ 2000 from Blender to a website called Welcome to the video Which hosted child sexual abuse material.

The documents examined by BuzzFeed News track Treasury’s concerns about crypto technology from at least 10 years ago. FinCEN trying now Change its rules So that any company that deals with the cryptocurrency to obtain clearer information about its customers and their transactions.

FinCEN and the Department of Justice did not respond to letters requesting comment.

Alex Fradkin for BuzzFeed News

The Office of the Financial Crime Execution Network of the United States Department of the Treasury in Vienna, Virginia

Yaya Fanusi, a former CIA analyst and expert on the national security implications of cryptocurrencies, said he believed US officials were way ahead of their European counterparts in addressing the issue. But, like other experts contacted by BuzzFeed News, he said he sees a need for a new class of financial investigators to prevent the misuse of cryptocurrencies by terrorists, drug traffickers and other criminals.

“For people on the ground, cryptocurrencies are hard to understand when compared to traditional means of money laundering,” said Fanosi, now a senior fellow at the Center for a New American Security. “Skills and resources were not deployed at the field level until recently.”

With regulators and the industry slowly adjusting, the appeal of cryptocurrency remains strong, as terrorists discover they can use it to solicit donations to fund operations. Last August the Ministry of Justice Advertise An investigation conducted in cooperation with the US Treasury Department seized millions of dollars as part of “the largest-ever seizure of terrorist organizations’ digital currency accounts.”

One of the Indictments She described how Al Qaeda and affiliated groups carried out a money laundering operation that requested donations in crypto via social media accounts. Then they used that network for donations to “further their terrorist aims.” A government-affiliated al-Qaeda network received more than 15 Bitcoins, worth thousands of dollars, in 187 transactions between February 5, 2019 and February. .25, 2020.

Crypto technology is squeezing the same vulnerabilities in the financial system that were first explored by FinCEN Files, A global project by BuzzFeed News and the International Consortium of Investigative Journalists in late 2020. News organizations found that major Western financial institutions allowed dirty money to circulate around the world in full view of US authorities. As with traditional currencies, Bitcoin and other cryptocurrencies can test the ability of financial institutions to track their transactions, and the ability of US authorities to thwart crime.

At the hearing of her nomination before the Senate Finance Committee incoming Treasury Secretary Janet Yellen She said This cryptocurrency has the potential to “improve the efficiency of the financial system”.

“At the same time, it can be used to finance terrorism, facilitate money laundering, and support malicious activities that threaten the national security interests of the United States and the integrity of the US and international financial systems,” she said.

Pool / Getty Images

Janet Yellen during a Senate Finance Committee hearing, Jan.19

Transferring cryptocurrencies is much easier than other financial tools, allowing criminals to quickly transfer assets to different parts of the world – an advantage when trying to avoid scrutiny by US law enforcement or when a discovery appears imminent.

“You can escape into jurisdiction or entities that don’t care,” said Paul Kuskowski, CEO of Coinfirm, a cryptocurrency analytics and compliance company. It is a mechanism designed to protect themselves in the knowledge that they will receive illegal funds. ”

There are currently thousands of different virtual currencies circulating in a still developing and secretive market. Cryptocurrency owners usually get this money on an exchange and store it in virtual wallets with specific addresses only through unique arrangements of letters and numbers – another layer of anonymity that obscures who really has the money.

Just as banks are responsible for monitoring their customers’ transactions, cryptocurrency exchanges have legal obligations that must be fulfilled. They even send the government suspicious activity reports, or SARs, which are the same forms that banks use when faced with treatment indicating criminal activity.

But some exchanges are resisting FinCEN’s proposal to tighten regulations, describing the requirements as more onerous than the banking industry faces. Square, the payments company founded by Jack Dorsey, CEO of Twitter, and investment firms such as Andreasen Horowitz also said the new rules would be onerous and might violate clients’ privacy rights.

The Electronic Frontier Foundation wrote in a public comment letter earlier this year that it believed the regulations proposed by FinCEN would “undermine the civil liberties of users of cryptocurrencies” and “give the government access to collections of sensitive financial data.” ●

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