One of the criticisms surrounding cryptocurrencies is the ability of people to use it to finance illegal and disastrous activities such as terrorism, kidnapping, and more. This has led to several researches by individuals, agencies, as well as organizations regarding the issue.
The Philippine Institute for Peace, Violence and Terrorism Research (PIPVTR) published a report on May 20 which reveals recent transactions by terrorist groups related to Islamic State (IS) in Southeast Asia. The institute noted an increase in terrorism financing among pro-Islamic State (IS) terror groups in Southeast Asia as the COVID-19 issue keeps unfolding.
According to the report, this is their first transaction using cryptocurrencies, and it presents a serious security menace:
“This development poses a stronger security threat with the presence of Foreign-Trained-Fighters (FTF) from regional terrorist organizations like the Jemaah Ansharut Daulah (JAD) and the Mujahideen Eastern Timur (MIT) in Mindanao.”
It is money laundering operation which utilizes cryptocurrencies and is made up of two phases. First, they channeled cryptocurrency assets from suspicious sources via unidentified exchanges. The perpetrators made the transactions and the sources of coins obscure, making it quite difficult to track.
Second, they exchanged the cryptocurrency assets into fiat money thereby returning the funds to the legal money cycle. According to PIPVTR, terrorists in Southeast Asia can evade regulations to trade cryptocurrency, which shows the looseness of legal framework.
Hence, PIPVTR called for the implementation of Anti-Money Laundering and Countering Financing Terrorism procedures for cryptocurrencies, accusing authorities of losing control of financial flows. Citing the 2017 Marawi Siege case, which involved unconfirmed reports of private remittances and cash couriers using cryptocurrency to aid some terrorist groups, the institute noted that the authorities ignored these reports.
PIPVTR mentioned the rise in the use of anonymous cryptocurrency assets such as Monero (XMR), which make it easier to hide illicit activity. As time goes on, people hope to have stricter regulations in the cryptocurrency space for improved trust and wider adoption.