Treasury Department’s FinCEN ‘Alerts’ Crypto’s Use to Finance Terrorism

The recent breakout of the war between Israel and Hamas ignited the discussion around crypto-financed terrorism. Several reports and news articles have cited instances of terrorist groups like Hamas exploiting financial mediums such as digital assets to carry out funding for their operations. The Treasury Department then moved ahead with a warning meant for financial institutions following the recent events.

The United States Treasury Department advised the financial institutions that they should remain vigilant. They were told to look if there are suspicious activities linked to Hamas-like terrorist organizations’ funding.

The Financial Crimes Enforcement Network (FinCEN) of the Treasury Department issued a warning on Friday, October 20. It highlights that Hamas relies on fundraising efforts that involve virtual currency and fictitious charities to gather both traditional and digital currencies.

FinCEN has urged virtual asset service providers to promptly report any suspicious transactions associated with Hamas.

The U.S. Department of the Treasury is taking comprehensive actions, including issuing this alert and collaborating with foreign counterparts. This came in the wake of efforts to prevent Hamas from raising and utilizing funds on a global scale as part of a broader government response.

Raising Concerns Calls for Higher Scrutiny

FinCEN has introduced a notice of proposed rulemaking. It designates crypto mixers as a concern for money laundering. According to the announcement, this move aims to address potential misuse by various entities, including Hamas, Palestinian Islamic Jihad, and the Democratic People’s Republic of Korea.

FinCEN Director Andrea Gacki, in a statement on Thursday, highlighted that this marks the first instance of FinCEN employing Section 311 authority to address a category of transactions considered a primary money laundering concern. She further emphasized that, in line with their work in the traditional financial system, the Treasury will actively strive to detect and eliminate any illicit usage and exploitation of the cryptocurrency ecosystem (CVC).

Chainalysis, in a statement on Wednesday, suggested that certain recent reports regarding the alleged utilization of cryptocurrencies by terrorist groups could be exaggerating metrics and relying on “inaccurate analyses.”

Terrorist organizations have favored and are likely to persist in using conventional, fiat-based methods. It included financial institutions, hawala, and shell companies as their primary means of financing, etc. according to the company.

Recently, about a hundred U.S. lawmakers forwarded a letter to the Under Secretary of the Treasury for Terrorism and Financial Intelligence, Brian Nelson, and National Security Advisor Jake Sullivan.

Elizabeth Warren, a Democrat Senator from Massachusetts, along with over a hundred other lawmakers from both the Democratic and Republican parties. They expressed their concerns about how Hamas had raised millions of dollars through cryptocurrency.