Our mission is to build trust in blockchains, and as a trusted investigative partner to governments around the world, preventing terrorists from using cryptocurrency is one of our primary responsibilities. It’s a serious task, and it’s important to be responsible and judicious when releasing information on a subject as consequential as terrorism financing. False reports can not only misinform analysis, but also damage the reputation of individual cryptocurrency firms and the industry as a whole. Over the past several months, three instances of erroneous analysis led to misleading headlines that continue to spread fear. We’d like to make some clarifications.
There is no evidence that ISIS is storing $300 million in Bitcoin
This week, stories circulated that Hans-Jakob Schindler, director of the think tank the Counter Extremism Project, said that authorities have searched for ISIS’s missing war chest since 2017 and that he is wondering if the $300 million has not been found because cryptocurrency “might have been one of the ways it might have been used… This would be an ideal storage mechanism until it is needed. If done right, it would be unfindable and unseizable for most governments.”
While Schindler’s statement suggests that he does not have hard evidence and is speculating on a theory, media sensationalized it into headlines including “Fears missing ISIS millions are hidden in cryptocurrency ready for use as war chest,” “ISIS has £246million Bitcoin war chest to spend on bloody terror comeback campaign, expert warns,” and “ISIS’s $300 million war chest is hidden in Bitcoin, says think tank”.
Schindler’s theory is also highly unlikely. We know that most terrorism financing campaigns have raised less than $10,000, indicating limited adoption. Further, if ISIS had funneled oil proceeds into Bitcoin, trading volume of regional exchanges and money service businesses would have reflected this flow of funds.
Of course, cryptocurrency is also not necessarily the ideal storage mechanism for illicit funds. Unlike cash and other traditional forms of value transfer, cryptocurrency is inherently transparent. Every transaction is recorded in a publicly visible ledger. With the right tools, we can stop bad actors from abusing the system for terrorism financing and other crimes.
The Popular Resistance Committees (PRC) did not raise $24 million in a Gaza-based terrorism fundraising campaign
We saw another unfortunate example of misinformation spreading earlier this year when reports mischaracterized the size and scope of a terrorism fundraising campaign run by Popular Resistance Committees (PRC) through Cash4PS, a money service business based in Gaza. News stories stated the group had raised almost $24 million. We broke down how we used Chainalysis Reactor to show that if PRC raised any money at all, it was substantially less than $24M.
There were two errors that led to this mistaken conclusion. First, analysts started off assuming that all transfers to Cash4PS addresses were related to terror financing. While some Cash4PS addresses may belong to terrorist groups or their associates, there’s no evidence to suggest all of them are. Second, analysts relied on a generic blockchain explorer, which does indicate that upwards of $24 million worth of Bitcoin has been received by Cash4PS addresses. However, the majority of those transfers are from other Cash4PS addresses. Overall, just under $1M has been transferred to Cash4PS addresses from the outside.
ISIS did not use Bitcoin to carry out the 2019 Easter Sunday Sri Lanka bombings
Finally, as we discussed in our 2020 Crypto Crime Report [p 79], a blockchain intelligence firm reported that Bitcoin payments facilitated the Easter Sunday Sri Lanka bombings carried out by ISIS. Media reports amplified the firm’s findings, which claimed that ISIS collected funds using CoinPayments, a cryptocurrency payment processor.
The firm’s conclusion was based on a movement of roughly $10,000 worth of cryptocurrency from one CoinPayments address controlled by ISIS to another shortly before the attacks. The firm also claimed that the balances in CoinPayments’ wallets surged from $500,000 to $4.5 million just one day before the Easter attacks but dropped back to $500,000 right after the attacks took place.
However, our analysis suggests those findings are likely incorrect and that both the $10,000 transaction and $4 million balance increase were simply internal transactions that are standard practice for a payment processor like CoinPayments.
While these claims of terrorism financing using cryptocurrency are speculative at best and inaccurate at worst, there are some legitimate instances of terrorist groups using cryptocurrency to raise money. We have found that terrorism financing is generally nascient but capabilities are advancing quickly.
Chainalysis experts analyze terrorist financing campaigns on an ongoing basis. We work with users in law enforcement and intelligence to gain insight into how terrorists use cryptocurrency while helping exchanges minimize exposure to this activity.
If you are working on a terrorism financing case or investigating illict activity that touches cryptocurrency and would like a consultation, please contact email@example.com.
If you are a member of the press and would like to confirm information for a story on this topic, please contact firstname.lastname@example.org.