Blood Money: Stopping the Cash That Underwrites Terror

Terrorism fundamentally depends on two things: violence and money. None of its violence, like Hamas’ massacre of Israelis, happens without the funding to make it possible. Some of that money comes from state-sponsors of terrorism, such as Iran’s direct sponsorship of Hamas and Hezbollah. But money also comes from “charity” fundraising or other payments, made through traditional banking channels or, increasingly, anonymous cryptocurrency wallets.

While efforts to counter terrorist financing (CFT) have periodically received significant global attention — particularly after major terror attacks like 9/11 — they are too frequently ignored in times of calm, allowing loopholes and changing technology to give rise to new innovations and evasions to get around existing CFT rules. The terrorists are learning while plodding governments too often take a wait-and-see approach to emerging risks.

U.S. and international passivity in the face of cryptocurrency advances is a typical example. Anonymous crypto wallets — frequently made more untraceable through digital blenders and mixers — allow criminals, drug lords, and terrorists to move massive amounts of dollars effortlessly across borders with very few means to track, trace, or intercept those funds. Occasionally, funds can be clawed back after the fact — when a ransomware payment is made to a hacker, for instance — but that achieves nothing when the funds have already been spent on the bullets and bombs of terror.

Over the last two years, Israeli authorities estimated that $93 million may have flowed to Hamas and affiliated groups via cryptocurrency. Terror groups, meanwhile, are actively requesting payment in crypto from their supporters.

Cryptocurrencies are not the only CFT weakness; traditional banks also are frequently used to fund terrorist acts. In the wake of the Hamas invasion, Israel has frozen funds deposited at the British bank Barclays.

Professional facilitators — like lawyers, lobbyists, and accountants — also represent a major CFT weak spot, as these enablers use shell companies, layering, and intentional opacity to hide the transfer of terror funds from public view. Last week, the U.S. Department of the Treasury announced targeted sanctions against 10 financial facilitators of Hamas throughout the Middle East and Africa, including enablers in the Sudan, Türkiye, Algeria, and Qatar. Facilitators of terrorism, unfortunately, can be found all over the world. Too frequently, these enablers reside in wealthy Western countries, like the U.S., and sanitize dirty money for drug dealers, corrupt officials, and terrorists. If America wants to fight terrorism, it is time we cleaned up our own house.

It should not have required a tragic terrorist act against Israeli civilians to act. The U.S., Israel, Europe, and other governments that operate within the global economy need to do more to mitigate future attacks and stop the shadowy operators who are leveraging loose domestic regulations to evade sanctions, attract illicit financial flows, and support terrorist operations like Hamas in the region.

More must also be done to break the economic links between Iran, Syria, Russia, Lebanon, and terror, disengaging the deep pockets and cynical politics that have bankrolled chaos in the Middle East for the last 70 years. Iran, Russia, and their proxies have financially fueled agents of chaos with little effective pushback from the U.S. and its allies. While sanctions have been used to punish Russia’s invasion or Iran’s nuclear ambition, it is time for America, Europe, Israel, and committed democracies around the world to demolish the financial architecture of terror once and for all. There must be a comprehensive war on the financial and political partners of terror and violence.

This begins with a massive push for financial transparency, with comprehensive and effective beneficial ownership registries that neuter dangerously anonymous shell corporations. Shady and opaque cryptocurrency loopholes must be shut down. There must be meaningful regulations of professional enablers to prevent crooked lawyers and accountants from using attorney-client privilege or opaque accounting practices to shield the funding of terrorism. And there must be a shock and awe campaign of sanctions, export controls, and other financial weaponry to destroy the bankers, money launderers, and smugglers that helped finance Hamas’s invasion and to dissuade future financiers of terror.

Money paid for the Hamas invasion and enabled its brutality. Following the money and cutting off the source of future terrorist financing is the only way to ensure that we don’t repeatedly relive this horror. America can — and must — lead in the efforts to deny Hamas and all terrorists the funding needed to wage war, disrupt democracy and diplomacy, and sow chaos and fear. Without real and permanent progress on countering the financing of terror, future attacks and bloodshed are inevitable. 

With committed political will, we can stop the funding of terrorism. Only time will tell if we are strong enough for this moment.

Elaine Dezenski is senior director and head of the Center on Economic and Financial Power at the Foundation for Defense of Democracies. FDD is a Washington, D.C.–based, nonpartisan research institute focusing on national security and foreign policy.