November 21, 2023
Terrorist Financing: Hamas and Cryptocurrency Fundraising
Policymakers, including some Members of Congress, are
cryptocurrency addresses linked to Hamas, PIJ, and other
scrutinizing U.S. efforts to counter the role that
terrorist groups between 2021 and 2023. In April 2023, the
cryptocurrency fundraising plays in the financing of
Qassam Brigades announced it would stop accepting
terrorism. A key question for Congress is whether further
Bitcoin donations, cautioning that donors could be targeted
regulation of the virtual asset sector and/or the introduction
by authorities.
of additional countermeasures are necessary to prevent
terrorist financing. The issue has attracted congressional
Recent Developments
attention in the wake of the October 7, 2023, attacks on
Since October 7, authorities appear to be on alert for signs
Israel perpetrated by Hamas—an Iran-supported Palestinian
that Hamas-linked entities may have resumed soliciting
group identified by the United States and some others as a
cryptocurrency donations, in order to fund the current
terrorist organization subject to sanctions. U.S. government
Israel-Hamas conflict. On October 10, Israeli authorities
reports indicate that Hamas has sought cryptocurrency
reportedly moved to freeze additional Hamas-linked
through donation drives since at least 2019.
cryptocurrency accounts. For its part, the U.S. Department
of the Treasury has engaged public and private stakeholders
Role of Cryptocurrency Donations in
in the United States and across Europe and the Middle East
Hamas Fundraising Campaigns
in efforts to deter terrorist fundraising through
Although Hamas has reportedly solicited cryptocurrency
cryptocurrencies. Treasury has also taken the following
donations, the scale and effectiveness of these efforts
actions:
remain unclear. Citing two cryptocurrency analytics firms
• Sanctioned additional Hamas operatives and financial
and Israeli government seizure orders, the Wall Street
facilitators—including a Gaza-based virtual currency
Journal reported on October 10, 2023, that cryptocurrency
exchange (Buy Cash Money and Money Transfer
wallets connected to Hamas received about $41 million
Company) and its operator.
between 2020 and 2023 and that wallets connected to
another U.S.-designated terrorist organization, the Palestine
• Issued an “alert” to financial institutions to counter
Islamic Jihad (PIJ), received as much as $93 million over a
Hamas-related terrorist financing. In the alert,
similar period. Some observers have questioned whether
Treasury’s Financial Crimes Enforcement Network
such figures overestimate the amount Hamas received and
(FinCEN) noted the variety of ways in which Hamas
note the role of other, larger funding sources that sustain
raises funds, including “fundraising campaigns
Hamas (e.g., the Iranian government, extortion and de facto
involving virtual currency and fictitious charities raising
taxation in Gaza, foreign investments, and charities).
both fiat and virtual currency.”
•
Origins
Published a notice of proposed rulemaking (NPRM) that
determined that transactions involving convertible
In 2019, Hamas engaged in a cryptocurrency donation
virtual currency (CVC) mixing are “of primary money
campaign that led to the U.S. seizure of several websites
laundering concern” and proposed the application of
and 150 cryptocurrency accounts linked to the armed wing
enhanced recordkeeping and reporting obligations on
of Hamas, the Izz al Din al Qassam Brigades, in 2020. In
covered financial institutions, pursuant to the first
connection with these enforcement actions, the U.S.
special measure outlined in Section 311 of the USA
Department of Justice (DOJ) charged two foreign nationals
PATRIOT Act (P.L. 107-56; codified at 31 U.S.C.
for money laundering crimes related to their involvement in
5318A). (Mixers are applications that obscure the
converting cryptocurrency into other forms of value. DOJ
senders and recipients of cryptocurrency transactions,
also prosecuted an individual for concealing material
complicating efforts to trace funds.)
support to Hamas, including through Bitcoin. In 2023, the
U.S. Commodity Futures Trade Commission filed a civil
• Hosted a FinCEN Exchange to discuss threats posed by
enforcement action against the cryptocurrency exchange
illicit cryptocurrency use in light of Hamas’s attack on
Binance in which it alleged that Binance received and
Israel and the role of the financial industry in countering
dismissed information about Hamas transactions in 2019.
the financing of terrorism (CFT). FinCEN encouraged
financial institutions to register under the voluntary
Following its initial cryptocurrency campaign, Hamas’s
information sharing program under Section 314(b) of
efforts to generate cryptocurrency donations continued to
the USA PATRIOT Act.
garner attention from prospective donors as well as law
enforcement authorities. In 2021, the U.S. cryptocurrency
U.S. Policy Framework for CFT and
exchange platform Coinbase identified Hamas as one of
Cryptocurrency Regulation
several terrorist groups involved in cryptocurrency
Contemporary U.S. CFT policy is grounded in anti-money
fundraising. Israeli authorities reportedly seized dozens of
laundering (AML) and counterterrorism policies that
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Terrorist Financing: Hamas and Cryptocurrency Fundraising
predate the advent of virtual assets and virtual asset service
categorically act to meaningfully curtail illicit crypto
providers (VASPs). At issue is whether and how to modify
activity and protect our national security and that of our
existing AML/CFT policies and regulations to reflect the
allies.” In several congressional committee hearings since
risks and opportunities posed by virtual assets.
October 7, some Members have raised questions regarding
the role of terrorist fundraising through cryptocurrencies.
U.S. Regulatory and Sanctions Framework for CFT
The cornerstone of U.S. AML policy originated in 1970
Congressional attention to the terrorist financing risks
with the Bank Secrecy Act (BSA; P.L. 91-508) and its
posed by cryptocurrencies is ongoing amid broader debates
major component, the Currency and Foreign Transactions
surrounding virtual asset governance and whether the sector
Reporting Act. Designations and prohibitions against state
requires additional legislation, regulation, and supervision.
sponsors of terrorism and foreign terrorist organizations
Stakeholders have sought to balance the opportunities that
emerged in the late 1970s and evolved through the 1990s.
the virtual asset sector may portend for financial sector
In response to the Al Qaeda attacks on the United States on
innovation and financial inclusion with the susceptibility of
September 11, 2001 (9/11), Congress took additional CFT
virtual assets to misuse. Some observers further note that
actions through the enactment of several public laws,
certain aspects of the virtual asset ecosystem (e.g.,
including the USA PATRIOT Act and its major component,
decentralized participants that comprise a network, such as
the International Money Laundering Abatement and Anti-
nodes and miners) are not consistently regulated, especially
Terrorist Financing Act of 2001.
internationally. Others caution against proposals for
regulation that may be overly broad and ill-equipped to deal
In response to 9/11, President George W. Bush also issued
with the characteristics of the virtual asset industry and
Executive Order (E.O.) 13224, which established a new
stifle innovation.
counterterrorism sanctions program targeting specially
designated global terrorists (SDGTs). In 2019, President
Proponents of enhanced cryptocurrency regulation may
Donald Trump issued E.O. 13886, amending E.O. 13224 to
point to perceived gaps in AML/CFT compliance among
expand the scope of sanctionable activity and authorize
VASPs, including well-known cryptocurrency exchanges
secondary sanctions against foreign financial institutions
(e.g., Binance and Bizlato) and mixers (e.g., Blender.io and
that have knowingly conducted or facilitated a significant
Tornado Cash). In practice, U.S. authorities are challenged
financial transaction on behalf of an SDGT. Digital
to enforce BSA requirements on foreign-headquartered
currency addresses, including one related to a Hamas-linked
transmitters, even if the exchanges conduct business with
exchange, have been sanctioned under the SDGT program.
U.S. persons. FinCEN’s October 2023 NPRM on CVC
mixers noted that no such mixers have registered in the
AML/CFT Regulations for Virtual Assets
United States as MSBs—underscoring concerns regarding
AML/CFT requirements for money services businesses
the apparent lack of AML/CFT compliance among such
(MSBs) under the BSA (finalized in a 2011 FinCEN
VASPs. Other observers may question whether regulatory
rulemaking) generally apply to VASPs that act as money
changes to the cryptocurrency industry will significantly
transmitters (a type of MSB). FinCEN issued guidance in
affect terrorist financing. At recent congressional hearings
2013 and 2019 to clarify that such VASPs are required to
held since October 7, witnesses testified that the appeal of
(1) register with FinCEN as MSBs; (2) maintain an AML
cryptocurrency for financing terrorist groups in particular,
program; and (3) follow recordkeeping, monitoring, and
including Hamas, may be limited due to their susceptibility
transaction reporting requirements, in line with
to detection by authorities (blockchain ledgers that record
requirements for MSBs. Such reporting requirements
crypto transactions are publicly visible) and the availability
include filing suspicious activity reports and currency
of other funding sources and laundering methods.
transaction reports. Applicable AML/CFT requirements
also include verifying customer identities and conducting
Legislation in the 118th Congress contains provisions to
related customer due diligence.
address certain aspects of the virtual asset sector. For
example, the National Defense Authorization Act for Fiscal
FinCEN has clarified that these requirements apply to
Year 2024 (NDAA; H.R. 2670 and S. 2226) would require
domestic and foreign-located CVC money transmitters that
bank supervisors and federal regulators to establish
do business “in substantial part within the United States,”
AML/CFT examination standards for financial institutions
even if they are headquartered outside the United States and
relating to crypto assets. The NDAA would also require
have no physical U.S. presence. FinCEN considers
Treasury to report to Congress on anonymity-enhancing
centralized and decentralized exchanges to be money
services, such as mixers, and recommend policy options for
transmitters subject to AML/CFT requirements. In contrast,
preventing their use by illicit actors. Other bills have sought
CVC users, including those who use cryptocurrency to buy
to address Hamas-specific illicit financing more broadly,
goods and services, are not considered to be money
including the Hamas International Financing Prevention
transmitters and are exempt from BSA requirements.
Act (H.R. 340), End Financing for Hamas and State
Sponsors of Terrorism Act (H.R. 6322), and Hamas and
Congressional Outlook
Palestinian Islamic Jihad International Terrorism Support
Concern regarding the possibility that Hamas has benefitted
Prevention Act of 2023 (S. 1647).
from cryptocurrency donations prompted some Members of
Congress to write several letters to the Biden
Liana W. Rosen, Specialist in International Crime and
Administration. One such letter, with more than 100
Narcotics
signatures, urged the Administration to “swiftly and
Paul Tierno, Analyst in Financial Economics
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Terrorist Financing: Hamas and Cryptocurrency Fundraising

IF12537
Rena S. Miller, Specialist in Financial Economics


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https://crsreports.congress.gov | IF12537 · VERSION 1 · NEW

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