FinCEN issues warning about virtual currency being used to finance terrorist organizations

Financial institutions need to be on the lookout for suspicious activity connected to financing terrorist organizations, such as Hamas, the Treasury Department said in an alert.

The Treasury Department’s Financial Crimes Enforcement Network issued that warning on Friday, citing Hamas’ reliance on “fundraising campaigns involving virtual currency and fictitious charities raising both fiat and virtual currency.”

FinCEN also said that virtual asset service providers should report suspicious transactions linked to Hamas as soon as possible.

“As part of a whole-of-government response, the U.S. Department of the Treasury (Treasury) is taking all steps necessary, including by issuing this Alert and engaging with foreign counterparts, to deny Hamas the ability to raise and use funds worldwide,” FinCEN said.

The warning comes shortly after a report from the WSJ said that Hamas, along with other militant groups, used crypto as a financing tool ahead of attacks in Israel earlier this month. Sen. Elizabeth Warren, D-Mass., along with more than a hundred other lawmakers including both Democrats and Republicans, said they were concerned about how Hamas raised millions of dollars through crypto in a letter sent to the Biden administration on Tuesday.

Chainalysis said Wednesday that some recent reports about the supposed use of crypto by terrorist groups might be overstating metrics and using “flawed analyses.”

“Terrorist organizations have historically used and will likely continue to use traditional, fiat-based methods such as financial institutions, hawalas, and shell companies as their primary financing vehicles,” it wrote.

FinCEN’s proposed rules

FinCEN announced a notice of proposed rulemaking on Thursday that would label crypto mixers as a money laundering concern, in an effort to combat bad actors including Hamas, Palestinian Islamic Jihad and the Democratic People’s Republic of Korea, according to a statement.

“This is FinCEN’s first ever use of the Section 311 authority to target a class of transactions of primary money laundering concern, and, just as with our efforts in the traditional financial system, Treasury will work to identify and root out the illicit use and abuse of the CVC ecosystem,” said FinCEN Director Andrea Gacki on Thursday.

Written comments on the proposal are due within 90 days.