The propagandist who Calling himself Azym Abdullah didn’t need a lot of money to set up a website for Daesh that would broadcast horrific beheading videos. What he needed was secrecy, so in 2014 he reportedly turned to cryptocurrency.
He paid a little over a bitcoin, around $ 400 at the time, to register the domain name in Iceland and host it on servers around the world. His site asked visitors for donations to help pay for the upkeep. These too were in bitcoin.
Sending donations in this manner has allowed its donors to protect their identities behind a series of letters and numbers – a favored technique that makes it harder for banks, law enforcement and the U.S. Treasury Department to track and to slow the flow of money supporting terrorism.
Abdullah’s reliance on bitcoin is documented in a 2017 Treasury Department intelligence assessment, which was received by BuzzFeed News as part of a document cache that included internal emails and reports. on cryptocurrency. The intelligence assessment also reveals evidence of nine other incidents in which terrorist supporters used cryptocurrency to finance their activities, from buying airline tickets to breaking down a political website and going. by organizing trips to Syria.
The vast majority of crypto transactions are used for legitimate purchases. But the documents provide a glimpse into the ongoing, sometimes late, battle of the US government to counter the use of crypto technology to promote terrorism and crime, as well as the variety of ways cryptography – with its alleged anonymity. and its ease of transfer around the world – can be used for nefarious purposes.
In 2016, for example, analysts at the U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, sounded the alarm bells about so-called mixers – companies that break up crypto transactions into smaller chunks to further protect the identity of the owner. When these companies operate in the United States, they are expected to register with FinCEN and provide information on suspicious customers and transactions. But the report, which is part of documents received by BuzzFeed News, found that “out of the 30 largest mixing services, none have registered … or showed no evidence of a compliance program.”
It was not until almost four years later that the government intervened. Last year, FinCEN fined one of the $ 60 million mixers for failing to “collect and verify the names, addresses and other identifiers of customers on over 1.2 million transactions.” These deals, according to the government, have helped criminals involved in illegal narcotics, fraud, counterfeiting and child exploitation as well as neo-Nazi and white supremacist groups. FinCEN mentionned it tracked transactions worth over $ 2000 from the mixer to a website called Welcome to the video which housed material of child sexual abuse.
The documents reviewed by BuzzFeed News trace the Treasury Department’s concerns about crypto technology at least 10 years ago. FinCEN now tries to change your rules so that any business dealing with cryptocurrency will need to get clearer information about their customers and their transactions.
FinCEN and the Department of Justice did not respond to messages seeking comment.
Yaya Fanusie, a former CIA analyst and expert on the national security implications associated with cryptocurrencies, said he believes U.S. officials are ahead of their European counterparts in resolving the issue. But, like other experts contacted by BuzzFeed News, he said he saw the need for a new class of financial investigators to prevent the misuse of cryptocurrency by terrorists, drug traffickers and other criminals.
“For people on the ground, cryptography is harder to understand than the more traditional means of money laundering,” said Fanusie, now a senior fellow at the Center for New American Security. “It is only recently that skills and resources have been deployed on the ground.”
As regulators and the industry slowly adapt, the appeal of crypto remains strong, with terrorists finding they can use it to solicit donations to fund operations. Last August, the Ministry of Justice ad that an investigation conducted in cooperation with the Treasury Department seized millions of dollars in the “largest ever seizure of cryptocurrency accounts of terrorist organizations.”
One of the indictments describes how al Qaeda and affiliated groups carried out a money laundering operation that solicited donations of crypto through social media accounts. They then used this network for donations “to further their terrorist objectives.” One of the al Qaeda associated networks tracked by the government received more than 15 bitcoins, worth several thousand dollars, in 187 transactions between February 5, 2019 and February. 25, 2020.
Crypto technology is putting pressure on the same weak spots 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. News agencies have found that major Western financial institutions are allowing dirty money to flow around the world in plain sight 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.
In her nomination hearing before the Senate Finance Committee, new Treasury Secretary Janet Yellen mentionned this cryptocurrency has 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 support malicious activities that threaten the national security interests of the United States and the integrity of the United States. American and international financial systems. ”
Cryptocurrency is much easier to move than other financial instruments, allowing criminals to quickly transfer assets to different parts of the globe – a benefit when they try to avoid scrutiny by law enforcement agencies. order or when detection appears imminent.
“You can run away to a jurisdiction or entities that don’t care,” said Pawel Kuskowski, CEO of Coinfirm, a cryptocurrency analysis and compliance firm. “It’s a mechanism designed to protect themselves knowing that they are going to receive illicit funds. . “
There are currently thousands of different virtual currencies traded in an ever-changing market marked by secrecy. Typically, cryptocurrency owners acquire these funds on an exchange and store them in virtual wallets with addresses that are only referred to by unique arrangements of letters and numbers – another layer of anonymity that hides to who really owns the funds.
Just as banks are responsible for monitoring their customers’ transactions, crypto exchanges have legal obligations to meet. They even send the government Suspicious Activity Reports, or SARs, the same forms banks use when they come across a transaction suggesting criminal activity.
But some exchanges oppose FinCEN’s proposal for stricter regulation, describing the requirements as more onerous than what the banking industry faces. Square, the payments company founded by Twitter CEO Jack Dorsey, and investment firms such as Andreessen Horowitz also said the new rules would be binding and could 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 cryptocurrency users” and “give the government access to tons of sensitive financial data ”. ●