Al-Qaeda’s Case for Crypto
Marissa Bruder and Michelle Kaplun, ILLICIT FINANCE
September 12, 2020
The Counterterrorism Group assesses that the existence of cryptocurrency has presented an opportunity for terrorist groups, and Al-Qaeda in particular, to fund their operations in a new and relatively unregulated environment. The novelty of the cryptocurrency environment has made it difficult to evaluate the extent to which it has benefited Al-Qaeda. Recently, evidence has suggested that the group may be exploiting this emerging market for its own gain. After further analysis, it can be concluded that sufficient evidence exists that terrorist groups, like Al-Qaeda, have sought to take advantage of cryptocurrencies in order to fund their operations.
Since the use of cryptocurrency remains largely unregulated, it is susceptible to use by terrorist groups seeking to exploit it to suit their interests. This directly involved Al-Qaeda, who seeks to use cryptocurrency to fund operations and attacks against innocents around the globe they deem unworthy of living in their extreme version of an ideal Islamic society. Thus far, governments and law enforcement agencies have been unable to put in place measures to prevent Al-Qaeda, among other groups, from taking advantage of such a means of financing. As a result, they have struggled to protect the public from the consequences of sharing the cryptocurrency environment with these violent groups.
According to a Department of Justice (DOJ) announcement in August 2020, several government agencies coordinated an operation which successfully disrupted a series of cryptocurrency financing campaigns from several terrorist groups, including Al-Qaeda. The results marked the largest ever seizure of terrorist funds by the U.S. Government, and has sent a clear message that the disruption of terrorist financing campaigns is a high priority. Admittedly, the U.S. seizure of cryptocurrency from Al-Qaeda has severely rattled one of its primary sources of income, and may force it to reevaluate some of its key sources of funding. However, the recent success in halting several major terrorist financing networks have highlighted the increasing creativity and capability in which terrorist groups are able to sustain themselves.
After 9/11, a serious effort began which was aimed at targeting Al-Qaeda’s financial assets. It was discovered that it had previously relied on funds from hawala networks, which is a lawful system to transfer money without actually touching it. The hawala system is a secret means of sharing funds that allows someone in one country to exchange money directly to a person in another country, but the money is converted into the currency of the receiving person. This makes it a quick and easy exchange from one currency to another, as well as the location in which the money is delivered. The heavy fire that Al-Qaeda came under after 9/11 forced it to abandon its reliance on hawala networks and seek new, alternative methods. It is in the post 9/11 context in which Al-Qaeda’s use of cryptocurrency began to expand. Though its use of cryptocurrency was born partly out of necessity, Al-Qaeda’s participation in the cryptocurrency market marks an important milestone in terrorist financing. By analyzing and discussing Al-Qaeda’s presence in the cryptocurrency market, we can learn from its successes and downfalls in order to better deter the group in the future.
Sources claim that terrorist groups have been using cryptocurrency since 2014, and they have also outlined the concern from various countries about the use of such an unregulated form of payment. Although bitcoin has existed for more than a decade, its popularity has only recently gained traction. This is likely due to the rise of the cyber age in which more and more transactions are taking place anonymously online. Unsurprisingly, terrorist organizations have taken note of popular trends and have shown interest in starting donation campaigns via online forums, such as Telegram, a messaging app popular for the end-to-end encryption used to ensure its users’ privacy. It is possible that Al-Qaeda began using Telegram for fundraising earlier, though one of the initial complaints detailed the group’s solicitations for donations through a Telegram group called “Tawheed & Jihad Media” was launched in April 2019. Terrorist groups like Al-Qaeda have used platforms like Telegram as a way to connect to sympathetic individuals from across the globe and persuade people to support their objectives. The combination of a highly-secure mode of communication and the ability to discreetly transfer money via cryptocurrency has created a volatile situation in which Al-Qaeda has taken advantage of the opportunity to hide and plan much of their activities in the shadows.
Al-Qaeda requires funds to pay for weapons, training, and to support their members by providing a source of income. Taken together, its operations are costly and require a continuous influx of currency to sustain the organization and give it the ability to pursue its regional and global objectives. Al-Qaeda regularly uses Telegram to raise funds, as the platform’s encryption algorithm allows for both secure communications among members, as well as the space to connect with individuals interested in making inconspicuous contributions. While encrypted messaging allows Al-Qaeda members to communicate with less fear of discovery, the ability for apps to allow cryptocurrency transfers remains a controversial issue. Not only does it make it exponentially more difficult for authorities to track illicit financial transactions, but it furthers the claim that social platforms have done little to stop terrorist groups from using their applications as a shelter for their interactions.
There is overwhelming evidence that Al-Qaeda has already used cryptocurrency to finance its attacks. The attack on French newspaper Charlie Hebdo in 2015 was reportedly financed by bitcoin raised by Al-Qaeda in the Arabian Peninsula (AQAP). This shows an instance of how cryptocurrency has enabled Al-Qaeda to operate, and it is likely that cryptocurrency has played a significant role in helping finance other attacks. One difficulty with analyzing Al-Qaeda’s use of cryptocurrency involves quantifying the benefits it has gained from turning to this particular method, rather than more traditional funding methods. One clue may lie in a pro-Al-Qaeda magazine which published an article in 2018 outlining bitcoin’s potential as a fundraising asset. Al-Qaeda clearly recognizes the potential of cryptocurrency as a funding source, and it would follow logically that they have made a serious attempt to engage in the cryptocurrency market deeply enough to consider it a primary funding method. Considering the Charlie Hebdo attacks that took place in 2015 and the DOJ announcement in August, it is possible to conclude that Al-Qaeda has pursued cryptocurrency as a funding method for several years. It is still unclear whether the August interception of Al-Qaeda funds will impact its funding priorities, but the situation must be closely monitored to determine its response.
Since 2018, bitcoin has only risen in popularity, making it all the more attractive to groups looking to raise money discreetly, but in sizable quantities. Aside from the anonymity that exchanging bitcoin allows, Al-Qaeda is likely also drawn to using cryptocurrency due to its high valuation. For example, on September 9, 2020, one bitcoin was worth 10,035.68 US-Dollars. For Al-Qaeda, this means that the value of bitcoin makes it a worthy endeavor, since it is capable of bringing in large returns in a relatively short period of time, making it an ideal source of revenue to support itself and further its missions. Bitcoin allows for funds to stockpile rapidly, meaning that cryptocurrency may be a method Al-Qaeda seeks out not only to sustain itself, but to thrive. Money brought in so quickly has clear concerns, such as the speed in which an Al-Qaeda operation may be carried out or the potency of the equipment used.
In the August operation, the DOJ announced that bitcoins from 155 accounts linked to Al-Qaeda were collected. Given the quantity of this size being intercepted by the agencies, it is more than likely that cryptocurrency has become a normalized method of fundraising for Al-Qaeda. This, among other reasons mentioned above, make it absolutely necessary, now more than ever, to track how, when, and where Al-Qaeda plan to use it. Particularly because, as the graph below shows, the use of bitcoin has significantly risen from 2009 to 2019 and is projected to continue to increase until 2033 and beyond.
Global Rise in the Amount of Bitcoins Over Time
The possibility of Al-Qaeda using cryptocurrency to purchase the materials needed to build a nuclear weapon remains very low primarily due to the fact that such materials are difficult to come by and even more difficult to acquire. Most states are wary of accepting the responsibility associated with providing terrorist groups with nuclear materials, and Al-Qaeda acquiring nuclear capability would cause unimaginable international concerns. However, taking part in the cryptocurrency market can lead to buying more supplies to support bombings and other weapons of mass destruction. Although bitcoin continues to be a secretive form of currency collection and transfer, the data available has shown that other cryptocurrencies can provide more anonymity than bitcoin offers. This is especially true for large trade offs of money within different funding accounts, which can raise suspicions from local authorities and become easier to track. Therefore, in some cases, it is better for a terrorist group to exchange smaller quantities of money using a more anonymous form of cryptocurrency, which will then in turn make it more difficult for law enforcement.
Unfortunately, terrorist groups are continuing to evolve in the use of cryptocurrency. Al-Qaeda has learned from the times that it has been caught by authorities so that it can avoid detection in the future. It is also gaining more knowledge about the new world of secret money transfer since it is still fairly new to the market. However, terrorists are also collecting cryptocurrency by a process of stealing bitcoins through phishing and ransomware attacks.
Al-Qaeda has also employed methods that include theft of bitcoins in attempts to blackmail people and force them to pay in cryptocurrency. Phishing can occur through emails that have links attached to an invalid source that can unleash a virus onto the computer. Once this happens, it then has access to the computer and can blackmail a victim for payment in the form of bitcoins to release the encrypted files. If the person affected chooses to pay the price, it is not guaranteed that the hacking terrorist will decrypt and give back the files in their original form. This can be a trap for many people because Al-Qaeda is being paid an extraordinary amount of money in the form of cryptocurrency. After the payment is made, it can be difficult to track where or who the money has been sent too, if there were any important files stolen, or if there were any traces of a virus left in the computer.
It is important to note the uniqueness of Al-Qaeda’s sources of funding like many other terrorist groups, which are primarily illegal and “home-grown”, unlike others, who commonly rely on funds from state-sponsorship. This means that there are greater consequences at stake through Al-Qaeda’s methods, as are the risks for those who contribute to the group. The potential for scams, blackmail, and other traps is high, as the unregulated nature of the cryptocurrency environment often allows Al-Qaeda the freedom to exploit vulnerable individuals. Such activities force one to question whether the riskiness of Al-Qaeda’s behaviors justifies involvement due to the consequences that can be faced from legal undertakings. There is also a chance that these repercussions may even deter many people from the unfortunate mistake of funding a terrorist organization via this method.
In turn, amplifying the risks associated with cryptocurrency could work in the interests of those seeking to combat Al-Qaeda, as it would severely weaken Al-Qaeda’s ability to attract donations due to fears of exposure and criminal action. To reiterate, analyzing and making it known to the public about Al-Qaeda’s risky financing methods is imperative to discouraging people from taking part. Raising awareness for the potential risks associated with the emerging cryptocurrency market will not only likely reduce the amount of profit Al-Qaeda can gain through using it as a funding source, but it will also aid law enforcement in their ongoing efforts to defeat the group by focusing on other modes of funding which are easier to monitor.
The Counterterrorism Group (CTG) continues to closely monitor the situation involving Al-Qaeda’s use of cryptocurrency. It recommends that individuals, businesses, and other firms avoid, as much as possible, engaging in the cryptocurrency market, since it is a largely unregulated environment for financial transactions, and the risk for falling for scams or illegitimate funding campaigns is considerably higher than other methods of currency exchange. CTG recognizes that the situation involving cryptocurrency is fluid, continuously evolving, and that current recommendations may change with time. Since this market remains relatively new and unfamiliar to many users, CTG encourages the use of more reliable forms of exchange. CTG reiterates its dedication to monitoring the situation and updating all parties committed to fighting Al-Qaeda and illicit finance in the cryptocurrency environment.
________________________________________________________The Counterterrorism Group (CTG)
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