Raising funds from supporters has always been one of the core financing methodologies of terrorists and violent extremists. Both large-scale donations, as well as smaller sums collected from many individuals, are core income streams.¹ This regularly involves the misuse of the charitable sector, including through the establishment of front structures that presented themselves as charitable organizations while raising terrorist funds. One of the most infamous front organizations was the Wafa Humanitarian Organization, which was involved in providing funds, equipment and weapons to al-Qaida in Afghanistan and distributed manuals on chemical and biological warfare.² However, terrorist organizations switched to more clandestine methods due to increased executive focus on terrorist financing, in particular following the September 11 attacks. This new pressure was exemplified by the broadening of the Financial Action Task Force (FATF) mandate to include combating the financing of terrorism in October 2001.³ These methods included setting up ostensibly charitable organizations, usually with innocent-sounding names. Some of the most recent examples are “German Lebanese Family,” “Humans for Humans” and “Give Peace,” which the German government dissolved in May 2021⁴ since they collected funds in Germany to finance Hezbollah.⁵

Technical Innovations Enable Crowdfunding by Terrorist Groups

The development of crowdfunding platforms in combination with social media and cryptocurrencies has added a new wrinkle: openly conducted crowdfunding activities. The combination of the large-scale reach of such platforms with the still underregulated cryptocurrency technology allows terrorists to address their supporters more or less openly and receive funds. Cryptocurrencies—in particular privacy coins as well as related technologies, such as tumblers, mixers and noncustodial wallets and exchanges—provide a range of advantages for donors and recipients of terrorist-related funds.⁶ They allow both for better protection of the identities of the sender and receiver as well as the protection of funds if these are located in a jurisdiction that has not yet fully regulated cryptocurrencies.

Several investigations highlight this; for example, in 2017, the Islamic State group (IS) set up a crowdfunding campaign asking for bitcoin donations.⁷ Hamas, which has organized crowdfunding campaigns for several years already, introduced technical innovations to ensure increased security for its donors. In 2019, after a donation drive for Hamas was reported in the media, the group moved its wallet away from a regulated U.S.-based exchange and began using software that creates a unique Bitcoin wallet address each time a potential donor initiates a transfer.⁸ Following seizures of funds by the U.S. government⁹ over the last few years, some terrorist groups have begun to move away from Bitcoin, which allows for easier tracing due to the transparency of the wallet as well as its blockchain. Some have begun to ask for donations in so-called “privacy coins.”¹⁰ Privacy coins offer greater data encryption; some encrypt both the wallets as well as the transaction paths, making tracing and identification significantly more difficult, if not impossible.¹¹

Crowdfunding by Violent Right-Wing Extremists

Combating the financing of individuals, groups and networks that are officially designated as terrorists presents operational challenges. Legally the situation is, in most cases, a simpler matter, as terrorist financing is generally illegal. On the other hand, the financing of violent extremism, while presenting significant and clear reputational risks, often presents complicated legal challenges. Many groups, particularly within the violent right-wing extremist spectrum, have not been officially classified as terrorism-related. Unfortunately, crowdfunding is also a widespread financing mechanism for such groups. For example, in the run-up to the violent storming of the U.S. Capitol on January 6, 2021, several violent right-wing extremist groups reportedly used crowdfunding to finance their preparations.¹² Here too, first attempts to obfuscate their financing activities are discernible. For example, the Proud Boys, which featured prominently during the riot at the U.S. Capitol, had funded part of their activities through a Christian crowdfunding website named GiveSendGo.¹³ Interestingly, in the violent right-wing spectrum, specific crowdfunding websites were created, such as Hatreon, WeSearchr, Counter Fund and Maker Support. Their creation was an attempt to counter bans of violent right-wing extremist stakeholders from other sites.¹⁴

The increased misuse of cryptocurrencies by violent right-wing extremist actors was also, in part, a reaction to growing concerns about reputational risks in the financial industry. For example, following the violent events during the “Unite the Right” rally in Charlottesville in August 2017, credit card companies and online payment service providers began refusing service to violent right-wing extremist actors.¹⁵ This triggered the migration from fiat-currency collection to the use of cryptocurrencies.¹⁶ The use of cryptocurrencies also allows for transnational crowdfunding, with some violent right-wing extremists in the U.S. receiving donations originating from a wide range of countries, including Europe.¹⁷ Here too, a move away from Bitcoin to privacy coins, such as Etherum or Monero, seems to be an ongoing trend.¹⁸

Weak Internet—Industry Defenses Require Regulatory Catch-Up

Since 2019, the weaknesses of the internal defense mechanisms of global social media and crowdfunding platforms against their misuse for terrorist financing have been regularly documented.¹⁹ Unfortunately, despite the risks that these weak internal systems present, little improvement was achieved. In 2021, most global platforms have continued to not adequately prioritize defenses against terrorist financing in their content moderation.²⁰ Given this situation, regulations will have to provide an impetus for these internet corporations to strengthen their mechanisms. In this regard, the newly passed European Union (EU) Terrorist Content Online (TCO) regulation²¹ has a role to play. The TCO focuses on terrorism-related content and requires companies to remove such content once notified by a competent authority (Art. 3 and 4). Obviously, policing the content of global platforms from the outside can only be partially effective, given the large number of daily uploads. Unfortunately, the TCO relegates the further development of internal defense mechanisms back to the platforms themselves (Art. 5). However, the currently negotiated EU Digital Services Act (DSA)²² can provide further progress. The current proposal of the European Commission includes a range of requirements and audit checks concerning internal compliance mechanisms of platforms, in particular very large platforms (Art. 25), such as risk assessments (Art. 26) or a requirement to take risk mitigations measures (Art. 27). Nevertheless, some key weaknesses remain.²³

Raising funds from supporters has always been a core financing methodology of terrorist groups

Similarly, progress in the regulation of cryptocurrencies has been achieved. The draft of a new FATF guidance document highlights that privacy coins and anonymizing services, such as tumblers and mixers, present red flag risk indicators.²⁴ Similarly, in July 2021, the EU Commission proposed a legislative package of new anti-money laundering/counter-terrorist financing provisions. As part of this, the commission proposes to broaden the reach of EU provisions to include exchanges that offer crypto-to-crypto services, prohibit the use of anonymous wallets²⁵ and require that all transfers in cryptocurrencies be transparent.²⁶

In combination, these new regulatory steps present important progress in the attempt to hinder terrorist and violent extremism financing via online services.

Conclusion

Raising funds from supporters has always been a core financing methodology of terrorist groups. Since terrorist financing is generally illegal, such activities are normally conducted clandestinely, including through front structures that present themselves as charitable organizations. Social media platforms and crowdfunding websites in combination with the use of cryptocurrencies have created a new technically advanced version of these activities. The enhanced protection that cryptocurrencies, particularly privacy coins, offer for terrorist donors, recipients and funds, in combination with weak internal defensive mechanisms of global social media and crowdfunding platforms, resulted in openly conducted terrorist crowdfunding campaigns. Violent right-wing extremist groups also use crowdfunding methodologies. Such activities, while presenting clear reputational risks, present complicated legal challenges since the majority of groups and networks in this spectrum have not yet been officially classified as terrorist-related. Regulatory developments—such as the EU TCO and DSA, in combination with the developing regulatory framework within FATF and the EU concerning transparency of cryptocurrency transactions—provide opportunities for stronger internal defensive mechanisms of the social media and crowdfunding industry as well as increased abilities to trace funds related to terrorism and violent extremism.

Dr. Hans-Jakob Schindler, senior director, Counter Extremism Project (CEP), hjschindler@counterextremism.com

1. See, for example: “Treasury Designates Key Nodes of ISIS’s Financial Network Stretching Across the Middle East, Europe, and East Africa,” U.S. Department of the Treasury, April 15, 2019, https://home.treasury.gov/news/featured-stories/treasury-designates-key-nodes-of-isiss-financial-network-stretching-across-the-middle-east-europe-and-east-africa
2. “Wafa Humanitarian Organization,” United Nations Security Council, April 7, 2021, https://www.un.org/securitycouncil/sanctions/1267/aq_sanctions_list/summaries/entity/wafa-humanitarian-organization
3. “FATF Cracks down on Terrorist Financing,” Financial Action Task Force (FATF) and Organisation for Economic Co-operation and Development (OECD), October 31, 2001, https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=PAC/COM/NEWS(2001)91&docLanguage=En
4. “Drei Spendensammelvereine wegen Terrorfinanzierung verboten,” Bundesministerium des Innern, für Bau und Heimat, May 19, 2021, https://www.bmi.bund.de/SharedDocs/pressemitteilungen/DE/2021/05/verbotsverfahren-hisballah-spenden.html
5. In March 2020, all Hezbollah activities were declared illegal in Germany, see:“Bekanntmachung eines Vereinsverbots gegen die Vereinigung Hizb Allah (deutsch: ‘Partei Gottes‘),” Bunesministerium des Innern, für Bau und Heimat, March 26, 2020, https://www.bmi.bund.de/SharedDocs/downloads/DE/veroeffentlichungen/nachrichten/2020/verbotsverfuegung-hizb-allah.pdf?__blob=publicationFile&v=2
6. Hans Jakob Schindler, “New Technologies: The Emerging Terrorist Financing Risk,” ACAMS Today Europe, June 3, 2020, https://www.acamstoday.org/new-technologies-the-emerging-terrorist-financing-risk/
7. “Drive for Bitcoin donations on an ISIS-affiliated website,” The Meir Amit Intelligence and Terrorism Information Center, December 6, 2017, https://www.terrorism-info.org.il/app/uploads/2017/12/E_235_17.pdf
8. Brenna Smith, “The Evolution Of Bitcoin In Terrorist Financing,” Bellingcat, August 9, 2019, https://www.bellingcat.com/news/2019/08/09/the-evolution-of-bitcoin-in-terrorist-financing/
9. Currently, the largest seizure occurred in August 2020. See: “Global Disruption of Three Terror Finance Cyber-Enabled Campaigns. Largest Ever Seizure of Terrorist Organizations’ Cryptocurrency Accounts,” Department of Justice, August 13, 2020, https://www.justice.gov/opa/pr/global-disruption-three-terror-finance-cyber-enabled-campaigns
10. See, for example: Rachel-Rose O’Leary, “The bitcoin terrorists of Idlib are learning new tricks,” Wired, March 31, 2021, https://www.wired.co.uk/article/bitcoin-crypto-terrorism-syria
11. See, for example: Shobhit Seth, “The 6 Most Private Cryptocurrencies,” Investopia, July 4, 2021, https://www.investopedia.com/tech/five-most-private-cryptocurrencies/
12. See, for example: David D. Kirkpatrick, Mike McIntire and Christiaan Triebert, “Before the Capitol Riot, Calls for Cash and Talk of Revolution,” New York Times, January 16, 2021, https://www.nytimes.com/2021/01/16/us/capitol-riot-funding.html
13. Jason Wilson, “Proud Boys and other far-right groups raise millions via Christian funding site,” The Guardian, April 10, 2021, https://www.theguardian.com/world/2021/apr/10/proud-boys-far-right-givesendgo-christian-fundraising-site
14. Shahed Warreth, “Crowdfunding and cryptocurrency use by far-right and Jihadi groups,” VoxPol, November 21, 2019, https://www.voxpol.eu/crowdfunding-and-cryptocurrency-use-by-far-right-and-jihadi-groups/
15. See, for example: Barb Darrow, “Visa, PayPal and More Are Banning Hate Groups. Will It Work?” Yahoo! Finance, August 18, 2017, https://finance.yahoo.com/news/visa-paypal-more-banning-hate-210530270.html
16. Marc Steinau, “How neo-Nazis and right-wing extremists profit from bitcoin,” Insider, January 11, 2018, https://www.businessinsider.com/neo-nazis-and-right-wing-extremists-profit-from-the-bitcoin-hype-2018-1
17. Erika Kinetz and Lori Hinnant, “ Far-right cryptocurrency follows ideology across borders,” AP News, September 28, 2021, https://apnews.com/article/cryptocurrency-coronavirus-pandemic-technology-business-europe-f7f754fc2c68b0eb0d712239323f26c3
18. Kacper Rekawek, Alexander Ritzmann and Hans Jakob Schindler, “Violent Right-Wing Extremism and Terrorism – Transnational Connectivity, Definitions, Incidents, Structures and Countermeasures,” Counter Extremism Project, November 2020, page 23, https://www.counterextremism.com/sites/default/files/CEP%20Study_Violent%20Right-Wing%20Extremism%20and%20Terrorism_Nov%202020.pdf
19. Since 2019 several reports regularly highlighted these risks. See: Tom Keatinge and Florence Keen, “Social Media and Terrorist Financing What are the Vulnerabilities and How Could Public and Private Sectors Collaborate Better?” Global Research Network on Terrorism and Technology: Paper No. 10, https://rusi.org/explore-our-research/publications/special-resources/social-media-and-terrorist-financing-what-are-vulnerabilities-and-how-could-public-and-private; Hans Jakob Schindler, “Financing of Terrorism and Social Media Platforms,” Counter Extremism Project, April 2020, https://www.counterextremism.com/sites/default/files/CEP%20Policy%20Paper_Terrorist%20Financing%20und%20Social%20Media_April%202020.pdf
20. Hans-Jakob Schindler, “Misuse of Online Services for the Financing of Terrorism,” Counter IED Report, Spring-Summer 2021, https://counteriedreport.com/previous-editions/
21. “Regulation (EU) 2021/784 of the European Parliament and the Council of 29 April 2021 on addressing the dissemination of terrorist content online,” Official Journal of the European Union, May 17, 2021, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32021R0784&from=EN
22. “Proposal for a Regulation of the European Parliament and of the Council on a Single Market For Digital Services (Digital Services Act) and amending Directive 2000/31/EC, 15 December 2020,” European Commission, https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020PC0825&from=en
23. Alexander Ritzmann, Hans Jakob Schindler and Lucinda Creighton, “EU Commission consultation. Digital Services Act package – ex ante regulatory instrument of very large online platforms acting as gatekeepers,” CEP Policy Paper, May 2021, https://www.counterextremism.com/sites/default/files/2021-05/CEP%20Policy%20Paper%20II%20EU%20DSA_May%202021_0.pdf
24. “Draft updated Guidance for a risk-based approach to virtual assets and VASPs,” Financial Action Task Force, March 2021, https://www.fatf-gafi.org/media/fatf/documents/recommendations/March%202021%20-%20VA%20Guidance%20update%20-%20Sixth%20draft%20-%20Public%20consultation.pdf
25. “Proposal for a Regulation of the European Parliament and the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, Art 3 and 58.1,” European Commission, https://ec.europa.eu/finance/docs/law/210720-proposal-aml-cft_en.pdf
26. “Proposal for a Regulation of the European Parliament and of the Council on information accompanying transfers of funds and certain crypto-assets (recast),” European Commission, https://ec.europa.eu/finance/docs/law/210720-proposal-funds-transfers_en.pdf