20% of terrorist attacks are probably financed by crypto, UN official warns

(Kitco News) The number of terrorist attacks financed by crypto is likely to rise, with the current estimate at around 20%, according to a UN official.

Cash is still the most common way to finance terrorist attacks, but the use of crypto is increasing — from 5% a couple of years ago to 20%, Svetlana Martynova, senior legal officer at the UN Counter-Terrorism Committee Executive Directorate, told Bloomberg in an interview in Mumbai.

“Now we think it could reach around 20%. The statistics here are not our best friends. We’re just seeing more as we look more into it,” Martynova said. “Cash is always king. It’s as anonymous as possible; it’s the hardest thing to detect in real life.”

Martynova also spoke at a meeting of the UN Security Council which took place at the Hotel Taj Mahal Palace in Mumbai. This was one of the locations where a series of coordinated terrorist attacks occurred in November 2008.

“When it comes to moving funds, experts agree that cash and other time transfers remain the most prevalent methods used by terrorists,” she said last week. “There was also an increase in their use in combination with new payment methods.”

Martynova pointed to crypto as opening the door to anonymous cross-border money transfers. “Blockchains, cryptocurrencies and crowdfunding sometimes present a complex money trail for financial investigators to follow,” she said.

However, the solution would not be to ban crypto, Martynova pointed out, stating that authorities must work on underestimating the threat and come up with appropriate ways to respond.

The response must be “risk-based, outcome-based, proportionate and consistent with human rights law,” she said in the speech.

The UN recommends following the Financial Action Task Force (FATF) recommendations when dealing with the financing of terrorism, which includes the “travel rule”. The rule asks virtual asset providers (VASPs) to report crypto transactions that exceed a certain threshold. But not many people use them, according to FATF.

A report by blockchain research firm Chainalysis showed that crypto-crime climbed to a record high in 2021, with illicit digital assets receiving $14 billion last year, more than double the total of $7.8 billion in 2020.

The report said that groups such as al-Qaeda and the al-Qassam Brigades, which is Hamas’ military wing, tried to use crypto when financing their options, but it is difficult to detect “a group that has gotten away with it.”