Virtual Currencies Pose Risk For Terrorism Financing, Says FATF

Financial Action Task Force (FATF), an Inter-governmental body headquartered in Paris, has raised concerns over the use of virtual currencies by terrorist groups in a recent report.

In a report entitled “Emerging Terrorist Financing Risks”, FATF said that which digital currencies such as bitcoin, represents a great opportunity for financial innovation, they may pose a risk for terrorist financing. This is mainly because this technology allows “anonymous” transfer of funds internationally and is difficult to detect.

“The US Secret Service has observed that criminals are looking for and finding virtual currencies that offer: anonymity for both users and transactions; the ability to move illicit proceeds from one country to another quickly; low volatility, which results in lower exchange risk; widespread adoption in the criminal underground; and reliability”, it added.

Coming to the use of virtual currencies by terrorist organisations, the report said that law enforcement agencies have seen the use of websites affiliated with terrorist organisations to promote the collection bitcoin donations.

In this connection, FATF cited the example of Ali Shukri Amin, who was sentenced to 11 years in prison to be followed by a lifetime of supervised release and monitoring of his internet activities for conspiring to provide material support and resources to the ISIL. Amin explained to the terrorist group what bitcoins were, how the bitcoin system worked and suggested using Dark Wallet, a new bitcoin wallet, which keeps the user of bitcoins anonymous.

Established in 1989, the Financial Action Task Force (FATF) is an inter-governmental body by the Ministers of its Member jurisdictions.  The FATF is a “policy-making body” which aims to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.