Written by: Jahnu Jagtap, Cryptotimes

Compiled by: Felix, PANews

The global fight against terrorism is facing new challenges as terrorist organizations adapt to an increasingly digital world and find new ways to raise and transfer funds. According to recent findings of the United Nations Security Council Monitoring Group, the notorious terrorist organization ISIL "migrated" from its long-trusted "Hawala" (Note: refers to an informal way of moving funds, generally through unauthorized dealers. Such transactions are not regulated by the Central Bank of India, so the source of funds cannot be traced) to cryptocurrencies.

The report states that terrorist groups like ISIL and al-Qaeda are abandoning traditional fundraising methods such as hawala, kidnapping and extortion, and are now more inclined to use "more anonymous" cryptocurrencies (represented by Monero) and embed QR codes in their promotional e-magazines to solicit donations.

The groups even set up "halal guidelines" (halal is translated as legal in Islamic societies) to promote their ideology and operations. The report said that the groups set up two dedicated encrypted channels on the Telegram messenger application, CryptoHalal and Umma Crypto, to guide supporters in obtaining and using specific digital currencies and accept crypto donations approved based on "preliminary Sharia assessments."

For example, ISIL-K took advantage of the anonymity of privacy coins to launch a fundraising campaign using a QR code linked to a Monero wallet. Although some crypto exchanges have delisted Monero, the terrorist group’s use of Monero has continued to increase, making it difficult for authorities to track the flow of funds.

In August 2020, the U.S. government seized more than 300 encrypted accounts, multiple websites, and Facebook pages that it said belonged to members of al-Qaeda, ISIS, and the Hamas military wing.

Notably, ISIL’s expanded use of digital platforms has caused growing concern among Member States. Various cryptocurrency exchanges, gaming platforms, e-wallets, and stablecoins are used to raise and transfer funds. One Member State noted that while the use of cash couriers and hawala remittances is the preferred method of transferring funds to conflict zones, ISIL has deliberately turned to cryptocurrencies and online payment systems. This phenomenon is expected to become more prevalent and significant as digital methods such as e-wallets, prepaid mobile phone card sales, and cryptocurrencies become more popular.

Privacy coins such as Monero have become a preferred medium for terrorist financing due to their ability to obfuscate transaction details. The UN report highlights the difficulty of monitoring these transactions as they offer anonymity that cannot be matched by traditional financial systems. ISIL and its affiliates have exploited these features for fundraising activities, ensuring that their financial activities remain undetected by the authorities.

The report also highlights the complexity of terrorist financing networks. ISIL affiliates, particularly in Africa, contribute significantly to the group’s funding. These affiliates often rely on informal channels, making them less susceptible to disruption. For example, ISIL-K raised $2.5 million in 2023, some of which may be linked to specific attacks, highlighting the ongoing threat posed by these groups.

The scathing report from the UN Security Council Monitoring Group is bound to attract the attention of several countries, including the United States, the United Kingdom, Europe and India. Recently, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a warning urging financial institutions to monitor cryptocurrency transactions that may be linked to the terrorist organization Hamas.

In addition, the impact of this report will also spread to the crypto industry, as hawkish security agencies are likely to increase monitoring of asset flows related to suspicious activities.