The perfect culprit: crypto or the terror of funding the banking system?

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Profile picture Mehdi Reza HackerNoon

Mehdi Reza

AML activist, interested in financial conflicts in the Middle East and the financing of terrorism

Ever since the crypto trend started gaining traction, institutions have been pointing to these alternative currencies as a major threat to global security. According to these crypto opponents, the anonymity and alternative channels outside of traditional finance provided by digital currency, allow the world’s worst criminals to fund their work.

From a purely factual standpoint, it is hard to deny that cryptocurrencies are widely used by illicit organizations. Terrorist organizations, for example, use cryptocurrency to sell drugs, weapons, and other items on the black market.

Nearly a decade ago, sites such as “Funding the Islamic Struggle Without a Trace” began popping up on the dark web, facilitating bitcoin transfers to jihadists. Even today, the lack of regulation in the cyber domain has opened the door for many criminal and terrorist organizations to use crypto as a vital source of funding.

This trend is especially true in Asia and the Indo-Pacific where crypto adoption is outpacing government oversight.

But the idea that crypto is the ultimate terrorist financing tool is not as simple as it sounds.

First of all, crypto is not immune to surveillance and even state-instituted rules. As many scholars have pointed out for at least the last three years, law enforcement cooperation in cybersecurity and cryptocurrency markets has made de-anonymization and fund tracking real possibilities.

Moreover, current trends indicate that cryptocurrency systems that are most regulated and integrated into the global system are the most widely used and adopted. Incompatible platforms are abandoned or remain marginal for lack of support, which means that terrorist groups and other illicit actors may find that the digital world becomes less and less responsive to their needs.

More fundamentally, however, focusing on crypto as the primary illicit finance problem at the expense of close scrutiny of traditional networks can be dangerous to the integrity of global finance.

Recent revelations about the Iranian regime have proven just how true this is.

In a recent article, the Wall Street Journal presented a surprising expose on Iran’s secret financial network used to circumvent US sanctions.

According to official documents and intelligence reports obtained by the WSJ, in recent years Tehran has managed to establish an underground banking and financial system to handle tens of billions of dollars in annual trade banned under US sanctions.

The implications of these findings are vast, especially in the context of ongoing talks between the United States and Iran in Vienna aimed at reviving the 2015 Joint Comprehensive Plan of Action (JCPOA) signed by the administration. Obama, commonly referred to as the Iranian nuclear. deal.

The clandestine network of trade and finance has allowed Iran to gain substantial influence in talks with the United States, as the main tool used by the West to influence Iranian behavior has been largely undermined for a long time. .

Mainstream reports of the dismal state of the Iranian currency and its global economy reflect a false reality.

Iran’s true economic position appears to be quite different.

According to evidence authenticated by Western diplomats and intelligence officials, Iran has built a wide range of proxy companies outside Iranian borders in order to hide their connection to the regime, a technique long known to be used by the ayatollahs to orchestrate illicit financing.

Thanks to these front companies, Iran was able to slowly rebuild its foreign trade and export goods, including Iranian oil. According to the WSJ article, tens of billions of dollars of trade have been conducted through these bogus entities in the past year alone.

What all of this means, in practice, is that Iran has managed to increase its trade to roughly pre-sanctions levels, which has eased domestic pressure on the regime and also given Tehran more maneuverability on the world stage.

What is important to highlight in this story is that Iran’s highly successful international plot was carried out through legacy financial institutions and by exploiting loopholes in the traditional trading system. Crypto simply did not play a major role, if at all, in this pattern.

The lesson of these observations on Iran: there is no miracle solution to circumvent the international system in its entirety. Any major effort to launder large amounts of money and otherwise conduct illicit finance will, at some point, have to take advantage of legacy institutions. Focusing on identifying and reducing these gaps remains the highest priority to protect global finance


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Ever since the crypto trend started gaining traction, institutions have been pointing to these alternative currencies as a major threat to global security. According to these crypto opponents, the anonymity and alternative channels outside of traditional finance provided by digital currency, allow the world’s worst criminals to fund their work.

From a purely factual standpoint, it is hard to deny that cryptocurrencies are widely used by illicit organizations. Terrorist organizations, for example, use cryptocurrency to sell drugs, weapons, and other items on the black market.

Nearly a decade ago, sites such as “Funding the Islamic Struggle Without a Trace” began popping up on the dark web, facilitating bitcoin transfers to jihadists. Even today, the lack of regulation in the cyber domain has opened the door for many criminal and terrorist organizations to use crypto as a vital source of funding.

This trend is especially true in Asia and the Indo-Pacific where crypto adoption is outpacing government oversight.

But the idea that crypto is the ultimate terrorist financing tool is not as simple as it sounds.

First of all, crypto is not immune to surveillance and even state-instituted rules. As many scholars have pointed out for at least the last three years, law enforcement cooperation in cybersecurity and cryptocurrency markets has made de-anonymization and fund tracking real possibilities.

Moreover, current trends indicate that cryptocurrency systems that are most regulated and integrated into the global system are the most widely used and adopted. Incompatible platforms are abandoned or remain marginal for lack of support, which means that terrorist groups and other illicit actors may find that the digital world becomes less and less responsive to their needs.

More fundamentally, however, focusing on crypto as the primary illicit finance problem at the expense of close scrutiny of traditional networks can be dangerous to the integrity of global finance.

Recent revelations about the Iranian regime have proven just how true this is.

In a recent article, the Wall Street Journal presented a surprising expose on Iran’s secret financial network used to circumvent US sanctions.

According to official documents and intelligence reports obtained by the WSJ, in recent years Tehran has managed to establish an underground banking and financial system to handle tens of billions of dollars in annual trade banned under US sanctions.

The implications of these findings are vast, especially in the context of ongoing talks between the United States and Iran in Vienna aimed at reviving the 2015 Joint Comprehensive Plan of Action (JCPOA) signed by the administration. Obama, commonly referred to as the Iranian nuclear. deal.

The clandestine network of trade and finance has allowed Iran to gain substantial influence in talks with the United States, as the main tool used by the West to influence Iranian behavior has been largely undermined for a long time. .

Mainstream reports of the dismal state of the Iranian currency and its global economy reflect a false reality.

Iran’s true economic position appears to be quite different.

According to evidence authenticated by Western diplomats and intelligence officials, Iran has built a wide range of proxy companies outside Iranian borders in order to hide their connection to the regime, a technique long known to be used by the ayatollahs to orchestrate illicit financing.

Thanks to these front companies, Iran was able to slowly rebuild its foreign trade and export goods, including Iranian oil. According to the WSJ article, tens of billions of dollars of trade have been conducted through these bogus entities in the past year alone.

What all of this means, in practice, is that Iran has managed to increase its trade to roughly pre-sanctions levels, which has eased domestic pressure on the regime and also given Tehran more maneuverability on the world stage.

What is important to highlight in this story is that Iran’s highly successful international plot was carried out through legacy financial institutions and by exploiting loopholes in the traditional trading system. Crypto simply did not play a major role, if at all, in this pattern.

The lesson of these observations on Iran: there is no miracle solution to circumvent the international system in its entirety. Any major effort to launder large amounts of money and otherwise conduct illicit finance will, at some point, have to take advantage of legacy institutions. Focusing on identifying and reducing these gaps remains the highest priority to protect global finance

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