Terror on the Blockchain: The Emergent Crypto-Crime-Terror Nexus

Abstract

AbstractInadequate oversight and an inchoate appreciation are giving terrorist groups ready access to transboundary financial transfers by means of virtual currency. This chapter counters the prevailing approach that treats cryptocurrency-enabled crimes, such as terrorism, as monolithic. This chapter demonstrates that terrorist groups are using cryptocurrency and decentralized finance to fundraise and transfer funds in conjunction with the traditional financial system. Since actual case studies are few and data limited, this chapter is a proof of concept: it compares terrorist financing schemes by the Al-Qassam Brigades and Al Qaeda that used virtual assets. The comparison of virtual assets being used finds that standards developed and recommended by the Financial Action Task Force (FATF) are wholly inadequate to contain the proliferation of decentralized finance technology and centralized virtual assets as drivers of the global Illicit International Political Economy (IIPE). FATF recommendations are not sufficiently nuanced, nor are they effective at detecting, disrupting and deterring he nexus of crypto, crime and terror. To make matters worse, FATF members are falling short on implementing even FATF’s inadequate standards. The chapter concludes that FATF needs to: clarify inclusion criteria under the current definition of virtual assets; broaden regulations, improve interagency collaboration, and formulate more nuanced recommendations that are sensitive to crypto-enabled crimes across different criminal activities and criminogenic factors.