FATF Reports Digital Currencies Pose Risk for Terrorist Financing


The Financial Action Task Force (FATF), an inter-governmental organization based in Paris, recently issued a warning over the use of digital currencies by terrorist groups.

In a recent report titled “Emerging Terrorist Financing Risks”, the FATF indicated that digital currencies such as bitcoin are being used by criminal groups and could be exploited by terrorists for financing. According to the body, the cryptocurrency technology poses such risks as it presents anonymous transfer of funds internationally and is difficult to detect.

The report stated:

Virtual currencies such as bitcoin, while representing a great opportunity for financial innovation, have attracted the attention of various criminal groups, and may pose a risk for TF. This technology allows for anonymous transfer of funds internationally. While the original purchase of the currency may be visible (e.g., through the banking system), all following transfers of the virtual currency are difficult to detect. The US Secret Service has observed that criminals are looking for and finding virtual currencies that offer: anonymity for both users and transactions; the ability to move illicit proceeds from one country to another quickly; low volatility, which results in lower exchange risk; widespread adoption in the criminal underground; and reliability.

The organization noted that some law enforcement agencies have observed websites linked to terrorist organisations being used to promote the collection bitcoin donations.

In the report, FATF highlighted the case study of Ali Shukri Amin, who was sentenced to 11 years in prison for providing advice and support to ISIL. Amin, who used the Twitter handle @Amreekiwitness, gave instructions on how to use bitcoin to mask the provision of funds to ISIL, as well as facilitation to ISIL supporters seeking to travel to Syria to fight with ISIL.

The report noted:

For example, Amin tweeted a link to an article he had written entitled “Bitcoin wa’ Sadaqat al-Jihad” (Bitcoin and the Charity of Jihad). The article discussed how to use bitcoins and how jihadists could utilise this currency to fund their efforts. The article explained what bitcoins were, how the bitcoin system worked and suggested using Dark Wallet, a new bitcoin wallet, which keeps the user of bitcoins anonymous. The article included statements on how to set up an anonymous donations system to send money, using bitcoin, to the mujahedeen.

US agencies were the sources for the case study.

The FATF is an inter-governmental organization established by government officials from member jurisdictions. The FATF currently comprises 34 member jurisdictions and 2 regional organisations, representing most major financial centres in all parts of the globe. The policy-making body aims to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.