TRM Labs: ISIS allies used crypto to raise millions for terrorism -TGN

According to a new report from TRM Labs, Middle Eastern terrorist groups associated with ISIS are increasingly turning to cryptocurrency to conduct their operations.

On Friday, the blockchain analytics and compliance firm wrote that it has found “increasing on-chain evidence” of the organization’s digital assets in Tajikistan, Indonesia, Pakistan and Afghanistan – specifically Tether stablecoins (USDT) on the Tron (TRX) network.

According to the company, one such group in Tajikistan controlled an address that received $2 million in USDT through Tron in 2022 as part of a fundraiser to recruit fighters for an ISIS-affiliated company, ISKP.

“ISKP has long sought to recruit Tajiks to join ISKP in Afghanistan and carry out attacks against the Tajik government,” explains TRM Labs. “In 2022, ISKP launched its first attacks in Tajikistan.”

The parties behind the address used a KYC-verified exchange to cash out some of the money, allowing TRM Labs and the exchange to track down and to arrest Shamil Hukumatov, a senior ISIS fundraiser, last month.

That is the crux of the problem when it comes to regulating cryptocurrencies – especially in the West. While the technology’s proponents often advocate digital assets as instruments of financial sovereignty and privacy, it is loudest critics in Washington consider it possible avenues for money laundering and sanctions violations not available through traditional bank rails.

Regulators in the United States have not taken steps to ban crypto completely, but the US Treasury Department has noted its active use for terrorist financing and other forms of illegal financing – including by ISIS.

Basically a bipartisan Senate bill suggested last week, the Treasury Department is seeking new authority for cracking down on DeFi exchange operators that fail to meet the know-your-customer (KYC) and anti-money laundering (AML) obligations that are typical of centralized exchanges.

Global terrorism financing

In addition to Tajikistan, terrorist organizations had accounts in Indonesia that received $517,000 as part of fake fundraising campaigns to liberate ISIS families in Syrian camps – again using USDT on Tron.

This year, a media unit connected to the Pakistani Isis-affiliated ISPP posted messages to an ISIS message server, including several crypto addresses. The account owner claimed to be raising funds to help survivors of the February 2023 earthquakes in Turkey and Syria, but the addresses had already been flagged by TRM Labs as being connected to ISPP.

“Finding these campaigns, tracing the donations on the blockchain and identifying the donors is critical to mapping and potentially disrupting pro-ISIS networks around the world,” the company concluded.