Technical innovations in communications and in the financial sector have not been ignored by terrorist groups and organisations. Instead, these innovations have added to terrorist capabilities. Since the rise of the Islamic State of Iraq and the Levant (ISIL), a significant body of research has been conducted on their misuse of communications technology. For example, ISIL has used social media platforms to communicate, transfer knowledge and skills, propagate, radicalise and recruit. The Monitoring Team Reports by the UN Security Council have highlighted this issue in their reports for ISIL, al-Qaeda and the Taliban since 2014. The report from January 2020 highlighted that al-Qaeda’s affiliate in Syria Hurras al-Din (HAD) uses two encoded messaging apps, Telegram and WhatsApp, to raise funds locally.¹

However, there has been some incremental progress by the industry in combatting these types of misuse. In November 2019, various online service providers cooperated with Europol during the 16th Referral Action Day, a coordinated effort by the EU’s Internet Referral Unit² that resulted in the removal of a significant amount of ISIL-related accounts.³ ISIL responded defiantly to the campaign, demonstrating that this coordinated action impacted the group’s capabilities.⁴ These efforts are motivated by pressure from civil society organisations⁵ and regulatory action by governments. In Germany, the network enforcement act or Netzwerkdurchsetzungsgesetz (NetzDG) was a groundbreaking piece of legislation. This law requires social media platforms to remove illegal content, including terrorism-related content, once the platform is notified of its existence.⁶ In addition, a new regulation concerning the removal of terrorist content online is in the final stage of its adoption by the EU.⁷

Outside the community of experts, there has been less public attention on the misuse of these global communication services for terrorist financing, despite ISIL and other terrorist organisations regularly using these technical capabilities to disseminate financial information, raise funds and organise donation drives from the outset.⁸ Furthermore, a deeper understanding of the risk presented by terrorist organisations misusing cryptocurrencies and the related technical instruments to raise, transfer or store funds is currently only developing for these outside communities.⁹ These technological developments present new challenges in the fight against terrorist financing for these industries and regulators.

Misuse of Social Media and Crowdfunding for Terrorist Financing

In recent years, regulators have documented the ongoing misuse of the internet and social media platforms by terrorist organisations to finance their activities. In 2018, the US government updated its National Terrorist Financing Risk Assessment and explained the risk concerning several major international terrorist groups, in particular ISIL, al-Qaeda in the Arabian Peninsula (AQAP) and al-Shabaab.¹⁰ Most recently, the Asia/Pacific Group on Money Laundering (APG) in cooperation with the Middle East and North Africa Financial Action Task Force (MENAFATF) published a joint analysis and typology report on this issue. The report clarifies that terrorist financiers continue to use social media platforms mainly as a communication tool to solicit funds and disseminate financial information. However, the report also highlights that these activities are ‘highly visible and without a sophisticated understanding of computing and the use of encryption tools.’¹¹ This mirrors previous assessments by private sector stakeholders.¹²

Therefore, detecting these activities should not pose difficult challenges for prosecutors and online service providers. Nevertheless, a rudimentary search in January 2020 by the Counter Extremism Project focused only on individuals and entities involved in terrorist financing and those sanctioned by the UN Security Council on its ISIL and al-Qaeda sanctions list revealed that several of them had active social media accounts on several platforms.¹³ Therefore, the internal defences of these social media platforms against the misuse of their services for terrorist financing seem insufficient.

One of the central elements that guide social media platform use are the terms of service.¹⁴ In 2019, a report by the Royal United Services Institute (RUSI) highlighted that the terms of service for several major social media platforms did not specifically state the issue of terrorist financing.¹⁵ The terms of services corresponding to the platforms mentioned in the report (at the time of writing) demonstrate that this issue has not been addressed by these platforms and that the terms of services have not yet been amended to address this issue.

Although not entirely new, crowdfunding websites create an additional risk as these are specifically designed to solicit funding and donations. In 2015, the European Securities and Markets Authority (ESMA) highlighted the risk posed by investment-based crowdfunding platforms: They could be misused for terrorist financing, in particular ‘where platforms carry out limited or no due diligence on project owners and their projects.’¹⁶ One risk typology is the combination of the misuse of crowdfunding platforms and the misuse of the charitable donations for terrorist financing. The misuse of charitable donations for terrorist financing is one of the core funding streams for many terrorist organisations; the Financial Action Task Force (FATF) has published specific guidance on this issue in Recommendation 8.¹⁷ Regulators have documented several cases of misuse of crowdfunding websites for alleged charitable causes that ultimately benefitted terrorist groups.18 The challenge for regulators and investigators is the lack of information concerning the contributors to such campaigns on these platforms.¹⁹ In addition, the terms of services for crowdfunding platforms do not seem to focus on the terrorist financing risk consistently. Some platforms ask users not to act illegally and break the law but do not refer to this specific risk at all.²⁰

Therefore, compliance professionals must be aware that they cannot consistently rely on social media and crowdfunding platforms to act as a first line of defence against terrorist financing activities. Further action by such platforms to strengthen their awareness of the risks and the internal safeguards against the misuse of their services and more specific regulation seems to be required. One interesting recommendation is to include information such as email addresses, IP addresses and social media handles in terrorism sanctions designations.²¹ Although such identification information can be easily and quickly changed by the respective users, including it in the designation information would at least provide a starting point for internal investigations by companies. In its latest resolution focused on terrorist financing, the UN Security Council called for ‘effective partnerships with the private sector, including…the financial technology industry and internet and social media companies’ to counter this threat.²²

Misuse of Cryptocurrencies and Related Technology for Terrorist Financing

The last few years have documented several cases of terrorist organisations—from extremist Islamist to extremist right-wing—attempting to solicit funds in cryptocurrencies.²³ In 2015 and 2017, ISIL members were arrested and convicted in the US for attempting to support the group in adopting this technology and attempting to solicit funds in cryptocurrency.²⁴ Therefore, while this type of asset may not be the major terrorist financing tool yet, the advantages cryptocurrencies offer for illicit behaviour, along with the regulatory gaps and the lack of technical expertise within the regulatory bodies, pose challenges for the control of this risk.²⁵

The enhanced ability to keep the identity of cryptocurrency users confidential is a problem for counter-terrorist financing (CTF). Since transactions are publicly recorded in blockchain, protecting the identity of those transacting is necessary in order to guarantee user privacy. Many, in particular bitcoin users, have argued that keeping blockchain public is sufficient for preventing cryptocurrency misuse because all transactions can be traced.²⁶ However, the availability of so-called mixing services or tumblers to mix and match several transactions and obscure the original transaction path contradicts this argument.²⁷ Terrorist financing frequently involves small sums to finance terror cells or individual attacks. Consequently, verifying the identity of the sender as well as that of the receiver and their potential connection to terrorist groups is essential to CTF.

Regulators have documented several cases of misuse of crowdfunding websites for alleged charitable causes that ultimately benefited terrorist groups

However, regulators have reacted to this situation. FATF published guidance in 2019²⁸ and the EU focused on those elements of the new technology that offer services to users, in particular providers of custodial wallets and custodial exchanges. With the Fifth AML Directive (5AMLD), the EU decided²⁹ that such providers would now be included with the entities obliged to adhere to the reporting requirements of financial institutions.³⁰ This is an important first step as now these service providers will have to implement compliance, due diligence and know your customer procedures. Although this is a fairly new provision, online service providers as well as regulators will have ensured that the appropriate mechanisms for customer identification and verification are set. In addition, regulators and prosecutors will need to have sufficient expertise to handle the reporting from this industry.

Despite this progress, the uneven regulatory framework around the globe³¹ creates additional problems. Cryptocurrencies are traded virtually and users can move wallets and use exchanges in several jurisdictions. Therefore, while regulators and investigators may become aware of attempts to finance terrorism, they are unable to stop the transaction or freeze the assets due to the lack of jurisdictional authority. For example, Hamas already exploited this weakness for one of its crowdfunding campaigns; the group switched its campaign away from a regulated US-based exchange.³²

Finally, new technical developments will present additional threats to the fight against terrorist financing. For example, privacy coins such as Monero offer even more enhanced protection of user privacy.³³ Non-custodial/decentralized wallets³⁴ and exchanges³⁵ allow a pure peer-to-peer (P2P) transaction without the provision of an intermediary. In pure P2P transactions, direct regulatory control could only be exercised by the regulatory and investigative authorities. This approach would require developing significant new technical capabilities and expanding specialised monitoring capacities within regulatory authorities, which would present enormous challenges for the existing limited resources.

Conclusion

With the Fifth AML Directive (5AMLD), the EU decided that custodial wallets and custodial exchanges will now be included with the entities obliged to adhere to the reporting requirements of financial institutions

The adoption of social media, crowdfunding and cryptocurrency technologies by terrorist groups and organisations to finance their activities is not surprising. Terrorist groups have always adapted new technologies to circumvent controls and restrictions on their activities. Prior to 2001, al-Qaeda began using email accounts.³⁶ However, current industry awareness and capabilities as well as regulatory frameworks have not sufficiently adjusted to counter the new threats that these technologies pose to CTF. Therefore, progress on both sides of the equation, including public-private partnerships, is necessary to ensure that the currently weak defences are strengthened.

Dr Hans-Jakob Schindler, senior director, Counter Extremism Project, New York, NY, USA and Berlin, Germany and former coordinator ISIL, Al-Qaida and Taliban monitoring team, UN Security Council, hjschindler@counterextremism.com

1. “Letter dated 20 January 2020 from the Chair of the Security Council Committee pursuant to resolutions 1267 (1999), 1989 (2011) and 2253 (2015) concerning Islamic State in Iraq and the Levant (Da’esh), Al-Qaida and associated individuals, groups, undertakings and entities addressed to the President of the Security Council,” United Nations Security Council, 20 January 2020, https://www.un.org/securitycouncil/sanctions/1267/monitoring-team/reports
2. “Referral Action Day Against Islamic State Online Terrorist Propaganda,” Europol, 22 November 2019, https://www.europol.europa.eu/newsroom/news/referral-action-day-against-islamic-state-online-terrorist-propaganda
3. “Europol disrupts Islamic State propaganda machine,” BBC News, https://www.bbc.com/news/world-middle-east-50545816
4. “Defiant Message From ISIS In Response To Campaign Against Its Presence On Telegram, Other Platforms,” Middle East Media Research Institute, 2 December 2019, https://www.memri.org/reports/defiant-message-isis-response-campaign-against-its-presence-telegram-other-platforms
5. “Digital Disruption Fighting Online Extremism,” Counter Extremism Project, https://www.counterextremism.com/digital-disruption
6. Williams Echikson and Oliva Knodt, “Germany’s NetzDG: A key test for combatting online hate,” Centre for European Policy Studies and the Counter Extremism Project, 9 November 2018, https://www.counterextremism.com/sites/default/files/CEP-CEPS_Germany%27s%20NetzDG_020119.pdf.
7. “Preventing the Dissemination of Terrorist Content Online,” European Parliament, http://www.europarl.europa.eu/legislative-train/theme-civil-liberties-justice-and-home-affairs-libe/file-preventing-the-dissemination-of-terrorist-content-online
8. “Emerging Terrorist Financing Risks,” Financial Action Task Force, October 2015, https://www.fatf-gafi.org/media/fatf/documents/reports/Emerging-Terrorist-Financing-Risks.pdf
9. The Counter Extremism Project is currently finalising a study in cooperation with Berlin Risk on this subject.
10. “National Terrorist Financing Risk Assessment, U.S. Department of the Treasury, 2018, https://home.treasury.gov/system/files/136/2018ntfra_12182018.pdf
11. “APG/MENAFATF Social Media and Terrorism Financing Report,” Asia/Pacific Group on Money Laundering, 23 January 2019, http://www.apgml.org/methods-and-trends/news/details.aspx?pcPage=1&n=1142
12. “Use of Social Media by Terrorist Fundraisers and Financiers,” The Camstoll Group, April 2016, https://www.camstoll.com/wp-content/uploads/2016/04/Social-Media-Report-4.22.16.pdf
13. “U.N.-Designated Individuals Maintain Social Media Presence,” Counter Extremism Project, 22 January 2020, https://www.counterextremism.com/blog/un-designated-individuals-maintain-social-media-presence. Since the publication and at the time of writing of this article, Facebook removed most of the accounts notified in the press release.
14. Depending on the platform, the terminology varies. For example, “Community Standards” or “Rules.”
15. Tom Keatinge and Florence Keen, “Social Media and Terrorist Financing: What are the Vulnerabilities and How Could Public and Private Sector Collaborate Better?” Royal United Services Institute, 2019, https://rusi.org/sites/default/files/20190802_grntt_paper_10.pdf
16. “Questions and Answers: Investment-based crowdfunding: money laundering/terrorist financing,” European Securities and Markets Authority, 1 July 2015, https://www.esma.europa.eu/sites/default/files/library/2015/11/esma_2015_1005_qa_crowdfunding_money_laundering_and_terrorist_financing.pdf
17. “Risk of Terrorist Abuse in Non-Profit Organisations,” Financial Action Task Force, June 2014, https://www.fatf-gafi.org/media/fatf/documents/reports/Risk-of-terrorist-abuse-in-non-profit-organisations.pdf
18. “APG/MENA FATF Social Media and Terrorism Financing Report,” 23 January 2019, Asia/Pacific Group On Money Laundering, http://www.apgml.org/methods-and-trends/news/details.aspx?pcPage=1&n=1142
19. Alexandra Posadzki, “Hard to identify crowdfunding platforms financing terrorism,” The Star, 18 May 2017, https://www.thestar.com/business/2017/05/18/hard-to-identify-crowdfunding-platforms-financing-terrorism.html
20. “Terms of Use,” Kickstarter, https://www.kickstarter.com/terms-of-use?ref=global footer; “Terms of Use,” Indiegogo, https://www.indiegogo.com/about/terms?utm_source=learn&utm_medium=referral&utm_campaign=ent trustandsafety& utm_content=bodylink; “Community Guidelines,” Countable, https://www.countable.us/about/community-guidelines?utm_source=causes&utm_content=tos; “Community Guidelines,” Patreon, https://www.patreon.com/policy/guidelines; “GoFundMe Terms of Service,” GoFundMe, https://www.gofundme.com/terms
21. Tom Keatinge and Florence Keen, “Social Media and Terrorist Financing: What are the Vulnerabilities and How Could Public and Private Sector Collaborate Better?” Royal United Services Institute, 2019, https://rusi.org/sites/default/files/20190802_grntt_paper_10.pdf
22. “Resolution 2462 (2019),” United Nations Security Council, 28 March 2019, https://undocs.org/en/S/RES/2462(2019)
23. Yaya Fanusie, “Hamas Military Wing Crowdfunding Bitcoin,” Forbes, 4 February 2019, https://www.forbes.com/sites/ yayafanusie/2019/02/04/hamas-military wing-crowdfunding-bitcoin/#5327df034d7f; Yashu Gola, “Breaking: ISIS Used Bitcoin to Fund Horrific Sri Lanka Easter Bombings, Research Claims,” CCN Markets, 2 May 2019, https://www.ccn.com/isis-bitcoin fund-sri-lanka-easter-bombings/; “Far-Right European Terrorist Group Crowdfunding Cryptocurrency,” Counter Extremism Project, 28 August 2018, https://www.counterextremism.com/blog/far-right-european-terrorist-group crowdfunding-cryptocurrency
24. Nikita Malik, “How Criminals And Terrorists Use Cryptocurrency: And How To Stop It,” Forbes, 31 August 2018, https://www.forbes.com/sites/nikitamalik/2018/08/31/how-criminals-and-terrorists-use-cryptocurrency-and-how-to-stop-it/#21a6f8493990
25. Aaron Brantly, “Financing Terror Bit by Bit,” CTC Sentinel, October 2014, https://ctc.usma.edu/app/uploads/2014/10/CTCSentinel-Vol7Iss105.pdf, Nathaniel Popper, “Terrorists Turn to Bitcoin for Funding, and They’re Learning Fast,” The New York Times, 18 August 2019, https://www.nytimes.com/2019/08/18/technology/terrorists-bitcoin.html
26. “Protect your privacy,” Bitcoin.org, https://bitcoin.org/en/protect-your-privacy
27. Osato Avan-Nomayo, “Cryptocurrency Mixers and Why Governments May Want to Shut Them Down,” Cointelegraph, 28 May 2019, https://cointelegraph.com/news/cryptocurrency-mixers-and-why-governments-may-want-to-shut-them-down
28. “Guidance for a Risk-Based Approach: Virtual Assets and Virtual Asset Service Providers,” Financial Action Task Force, June 2019, http://www.fatf-gafi.org/media/fatf/documents/recommendations/RBA-VA-VASPs.pdf
29. The 5AMLD had to be transposed into national law by all members of the EU by 10 January 2020.
30. “Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU,” Official Journal of the European Union, 30 May 2018, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32018L0843&from=EN
31. “Cryptocurrency Regulations Around The World,” ComplyAdvantage, https://complyadvantage.com/blog/cryptocurrency-regulations-around-world/
32. Brenna Smith, “The Evolution Of Bitcoin In Terrorist Financing,” Bellingcat, 9 August 2019, https://www.bellingcat.com/news/2019/08/09/the-evolution-of-bitcoin-in-terrorist-financing/
33. “Monero: A Reasonably Private Digital Currency,” Monero, https://www.getmonero.org
34. Jamie Redman, “The Difference Between Custodial and Noncustodial Cryptocurrency Services,” Bitcoin.com, 29 November 2018, https://news.bitcoin.com/the-difference-between-custodial-and-noncustodial-cryptocurrency-services/
35. Andrew Gillick, “The importance of non-custodial decentralized exchange,” Brave New Coin, 17 January 2019, https://bravenewcoin.com/insights/the-importance-of-building-a-non-custodial-decentralized-exchange
36. “Al Qaeda Used Hotmail To Plan Attacks,” CBS News, 1 May 2009, https://www.cbsnews.com/news/al-qaeda-used-hotmail-to-plan-attacks/