Cryptocurrencies, Terrorism Financing and Money-Laundering
Due to the popularity, privacy and decentralization of cryptocurrency, terrorism groups are turning to this new innovation to gather funding for their act of wickedness.
In 2017, a woman was indicted for
attempting to send ISIS financial support through Bitcoin and other currencies. She fraudulently obtained credit cards, using them to purchase cryptocurrency online, totalling more than $50,000. Some of the funds were also generated through a fraudulently obtained loan.
However, she didn’t then send the
money directly. Converting the cash
into cryptocurrency was a money
laundering operation, as she then
withdrew the money and attempted
to send it via four banks—American
Express Bank, Chase Bank, Discover
Bank and TD Bank. The money was
wired successfully to shell companies
in Pakistan, China and Turkey.
It was only when the woman attempted to travel to Syria and join ISIS in
person that she was stopped, and her
scam identified.
Crime and Privacy
Bitcoin and other coins provide high
levels of security when used correctly.
Moreover, Bitcoin is pseudonymous.
While not completely private, your
unique address is publicly available—
and any transactions from it can
be tracked. However, the identities
behind these accounts aren’t revealed
unless the person identifi es themselves, for example by asking publicly for donations.
Meanwhile, terror groups rely on
privacy. As a terrorist purchasing
bomb-making equipment and supplies for an attack, it’s vital that your
movements and actions aren’t traced.
While there is no evidence as of yet
that cryptocurrencies have been used
in this way, it’s clear that they could
be.
Cryptocurrencies Laundering
Just like money laundering, it disguises ill-gotten funds, making them appear legitimate, money laundering is of central importance to any criminal operation. To simply put one’s fraudulent proceeds into a bank account would be to raise suspicion; and to carry around ever-increasing amounts of cash would be unwise.
Bitcoin and other currencies have
been used for this purpose in the
past. The idea is simply to use dirty
money to buy Bitcoin, through one
exchange or another, and transfer it
to a clean wallet.
Depending on the complexity of the
scheme—and the amount of money
involved—there are then two ways to
get the money back.
The first is to simply withdraw it from
the new account, relying on the ‘privacy’ of cryptocurrency. This brute force
method is ineff ective, as the transaction between the two wallets can be easily discovered, hence why this method isn’t used by most criminals.
The more effective method is to keep
the money in the clean wallet, gradually ‘sipping’ it from that account to
yet another. This method is better
since relatively minor transactions
over a longer period of time are less
noticeable. This was the method used
by the cyberterrorists behind the May
2017 worldwide cyberattack by the
WannaCry ransomware cryptoworm, and similar criminal acts.
