Even with the widespread use of cryptocurrencies, traditional financing methods still prevail among terrorist organizations.
Recent internal security investigations in Singapore have provided new insights into the financing methods used by these groups.
Terrorist Threat Assessment in Singapore
Singapore’s Ministry of Home Affairs has released its 2024 Terrorism Threat Assessment. a reportunderscoring the continued high risks posed by global instability.
Analysis by the Department of Homeland Security indicates that while cryptocurrency financing among terrorist groups has increased slightly since May 2020, it remains small compared to the traditional cash transfers that are most commonly used.
The report also noted that traditional money transfers and bank transfers are the primary means used by Islamic organizations such as the Islamic State of Iraq and the Levant (ISIS) to raise funds.
Despite the technological advances in cryptocurrencies, these groups still rely on more secretive and less traceable methods, such as the hawala system – an informal way of transferring money without any physical movement.
The report also cites wire transfers and money services companies as the two main ways these groups operate, along with direct money delivery companies.
Despite the potential of cryptocurrencies to provide untraceable transactions, their actual use in terrorist activities remains far less than traditional methods. According to the report, in February, a pro-ISIS group in the Philippines attempted to use cryptocurrencies to fund its activities.
They launched a social media campaign to raise funds for what they called “mujahideen,” demonstrating the potential of using digital platforms to raise money. However, the report found that this has not become a mainstream trend as some security analysts had expected.
Continuous improvement of encryption guidelines
Although cryptocurrencies are less commonly used in terrorist financing than cash, Singapore has been steadily improving its guidance on the financial sector. In April, the Monetary Authority of Singapore introduced amendments to the region’s Payment Services Act.
According to Bitcoinist, the changes, which went into effect on April 4, include a range of measures covering custody services for digital payment tokens (DPTs), facilitation of the transfer of digital payment tokens (DPTs), and cross-border money transfers.
The Authority revealed the reason for this change, noting:
These amendments will allow the Monetary Authority of Singapore to impose requirements on direct payment service providers relating to anti-money laundering, combating the financing of terrorism, user protection and financial stability.
Prior to that, last November, the Monetary Authority of Singapore also made a notable change to its cryptocurrency regulation. Specifically, the country’s regulator imposed restrictions on trading, including a ban on lending and staking. According to the MAS, this is part of Singapore’s ongoing efforts to ensure a “safer cryptocurrency market.”
Featured image created using DALL-E, chart from TradingView
