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When a group that says it provides financial assistance “relating to the jihad” sought to improve conditions for fighters in a squalid, sandbag-fortified trench in Syria late last year, it turned to a new funding conduit: bitcoin.
“There is currently no shelter to protect the food and ammunition from the rain,” the group, called al Sadaqah (“charity” in Arabic), lamented in a post on the messaging app Telegram.
The group’s Twitter feed contains a video showing a dirt floor strewn with blankets, bags of pita bread and hand grenades along with a message—“Donate anonymously with Cryptocurrency”—followed by a bitcoin address. So far, according to an online ledger, the group has received about $1,000.
The soliciting of digital currency by jihadist groups like al Sadaqah has only recently come under scrutiny from US officials. In January, Rep. Ted Budd introduced a bill to establish a financial-technology task force to combat terrorists’ use of cryptocurrency. Treasury Secretary Steven Mnuchin told the Senate Banking Committee that the agency is also planning to investigate.
Meanwhile, cryptocurrency has become an increasingly discussed topic among jihadist groups in the Middle East. This month, an issue of al-Haqiqa, a pro-al Qaeda online magazine, included a “Tech Talk” section that outlines bitcoin basics.
Al Sadaqah has realized what other violent groups have found: Raising funds in cryptocurrencies can evade the rules the global banking system has put in place to block terror financing and money laundering.
“It is fast, efficient, and does not pass through the same interest-loaded and traceable routes that any usual payment methods would go through,” Hassan Abdo, an al Sadaqah spokesman, wrote to The Wall Street Journal in a text message. “This way we and our donors can keep our full anonymity.”
Yaya Fanusie, an ex-CIA analyst who is a director of the Washington-based counterterrorism think tank Foundation for Defense of Democracies, has been tracking al Sadaqah’s bitcoin accounts for months. He said it is difficult to confirm the identities of such groups online because they hide behind fake personas and use technology to protect their identities.
“What they’re more than likely attempting to do isn’t just to pick up a few peanuts in donations here,” said Michael Smith, a fellow at the New America think tank who studies terrorists’ use of technology. “It’s to build a network of sympathizers.”
Messrs. Fanusie and Smith said al Sadaqah and its solicitation of cryptocurrency appear to be genuine. The group’s spokesman says its members are located in northern Syria, and its website includes a “disclaimer” that the group doesn’t support Islamic State or its affiliates.
There have been cases in the past of cryptocurrency links to funding Islamic State. In 2015, a Virginia teen, Ali Shukri Amin, was charged with conspiring to provide material support to a foreign terrorist organization for explaining on Twitter how to send bitcoin to the group. A federal judge sentenced Mr. Amin to 11 years in prison.
The U.S. government alleges that Zoobia Shahnaz, a lab technician in New York, defrauded financial institutions last year of more than $85,000, which she converted into cryptocurrencies and transferred to Islamic State-linked individuals and shell companies in China, Pakistan and Turkey. Ms. Shahnaz, 27, faces fraud and terrorism-related conspiracy and money-laundering charges.
Mr. Abdo said his group has yet to encounter supporters in Syria who deal in cryptocurrency. “But we’ve received donations from the different corners of the world,” he wrote.
Cryptocurrencies like bitcoin use a digital ledger called a blockchain that is maintained by a broad network of computers. They can be traded without relying on banks and exchanges that are required by law to make sure they aren’t working with criminals.
“I would call it a money-laundering revolution,” said Arkady Bukh, a New York defense lawyer who has represented hackers and terrorism suspects.
While bitcoin’s blockchain is visible, the ownership of the currency is often unclear. Other, more innovative cryptocurrencies can avoid tracking altogether. Governments are behind the curve when it comes to regulating digital currencies, Mr. Fanusie said.
Marwan Khayat of the Middle East Media Research Institute, a Washington group that tracks jihadists’ online activity, discovered the fundraising efforts of al Sadaqah in November. The group solicited bitcoin for improvements including new toilets to “prevent brothers from having to leave the guard point and travel into the bushes to relieve themselves, which can be very difficult sometimes.”
Through a cryptocurrency exchange, users can convert digital currency to conventional currency transmitted to a linked debit card, credit card, or bank account, available for cash withdrawal at an ATM.
In December, al Sadaqah posted a video on Telegram showing a new roof and shorn-up walls and ramparts. “The place where the brothers eat and sleep is in much better condition than before,” a balaclava-clad man says on a video tour of the facility.
Al Sadaqah has since broadened its appeal, publishing a message that included a link to a map of bitcoin ATMs, and soliciting funds through additional cryptocurrencies that offer more privacy than Bitcoin.
“We hope that this is only the beginning,” Mr Abdo wrote.
The Wall Street Journal