US Treasury Investigates Hamas’s Funding Sources
The US Treasury Department has initiated a comprehensive investigation into $165 million worth of cryptocurrency transactions suspected to have financed Hamas before the militant group’s October 7 attack against Israel. This development comes amidst growing concerns over the increasing reliance of designated terror organizations on digital financing as traditional funding sources face intense scrutiny.
The Treasury’s probe underlines the urgent need for Congress to authorize appropriate regulatory measures to oversee cryptocurrency transactions, as highlighted in a report submitted to Congress earlier this month. The report represents the first formal assessment by US authorities regarding Hamas’s utilization of digital currencies.
Deputy Treasury Secretary Wally Adeyemo stressed that while certain terrorist groups still favor conventional financial tools, there’s a growing worry that they may resort to digital assets as traditional financial avenues become more restricted by regulatory authorities. The report also revealed that Hamas’s involvement in crypto-related transactions has raised significant alarms within Western security circles.
Lawmakers also cited intelligence assessments indicating that Hamas strategically embraced cryptocurrency as a means of financing its operations in the years leading up to the October 7 attack on Israel. According to the Financial Crimes Enforcement Network (FinCEN), nearly two dozen financial institutions have reported approximately $165 million in transactions linked to Hamas and digital assets over the past three years.
However, the exact extent of Hamas’s dependency on cryptocurrency funding remains uncertain, with FinCEN acknowledging the possibility of overreporting by financial institutions cautious of potential regulatory scrutiny.
Terrorists’ Exploitation of Cryptocurrency
Despite ongoing efforts to disrupt its traditional funding streams, Hamas reportedly receives approximately $100 million annually from Iran. Moreover, the group has diversified its revenue sources, including a global investment portfolio valued at about $500 million.
Israel’s military operations have disrupted Hamas’s tax collection efforts in Gaza, further incentivizing the group to explore alternative financing methods. Western intelligence agencies have provided evidence indicating Hamas’s utilization of cryptocurrency exchanges to transfer millions of dollars.
Accordingly, the Treasury has imposed sanctions on several individuals allegedly involved in Hamas’s cryptocurrency activities, including a Gaza-based money changer identified as a key architect of the group’s digital finance operations.
Federal law enforcement agencies have cited the use of cryptocurrency in promoting billion-dollar criminal operations, ranging from international child pornography rings to ransomware hacking networks. Most suspicious activity reports filed with FinCEN originate from digital asset exchanges, indicating a pattern of fund movement among Hamas operatives.
However, cryptocurrency regulation’s effectiveness hinges on enforcing identity verification standards, which vary significantly across jurisdictions. Hence, the Treasury seeks expanded regulatory authority, such as imposing uniform disclosure standards on foreign cryptocurrency exchanges.
Deputy Secretary Adeyemo added that the proposed regulatory enhancement is essential to adapt to the evolving virtual asset landscape.
Israel Calls for Confiscation of Funds from Gazan Crypto Exchanges
Further investigations indicate that cryptocurrency has become a prominent tool for large-scale transfers between Iran and the Hamas group through hawala networks. Since 2021, Israel’s National Bureau for Counter-Terror Financing has issued seven directives to confiscate cryptocurrency funds from three Gazan exchanges.
With the global financial ecosystem increasingly reliant on digital transactions, effective regulation and oversight are essential to mitigate the risks posed by illicit actors seeking to exploit emerging technologies for illicit purposes.
