By Ari Karp
Hezbollah, a Lebanese Shi’a terrorist organization, powers its operations through hundreds of millions of criminal enterprises (money laundering, human, drugs and arms trafficking, etc.) and approximately $700 million in state backing from Iran. Via this funding, the terror network finances its terrorist activities, a global criminal-financial network with hubs in Europe, Africa and Latin America, and affording it a larger artillery arsenal than most nation-states.
Hezbollah isn’t alone in attaining this kind of mixed funding. In fact, a mix of varying sources and types of funding is a common denominator for many terror networks. For example, ISIS’ comprehensive financial income sources included crime, oil, fake charity donations, extortion and kidnapping, and of course foreign funding. Al-Shabaab, a Somalia-based Salafi-jihadist organization, finances itself from business extortion, taxation, racketeering, and religious-based funding.
Though it may seem, mixed funding is not unique to religious-based terrorism or even the recent decade—Colombia’s FARC and the U.S. Ku Klux Klan (KKK) have also raised funding through mixed methods.
Terrorist organizations exploit loopholes in financial systems and use sophisticated methods to move money across borders without detection. Part of this strategy involves the use of anonymous cryptocurrencies, making it challenging for law enforcement agencies to track their activities. But the inherent functions of blockchain technology can also play a crucial role in disrupting terrorism financing.
Fighting terror through blockchain
Blockchain’s decentralized and immutable nature means no single entity can manipulate or control the network. This makes it highly attractive to terror and counter-terror actors alike, with terrorists able to function and entertain transactions with less restriction, conversely equipping CT actors more capability to track and monitor digital activity and transactions of terrorist accounts. Its advanced cryptographic nature and tokenomic models provide intense security as well as a certain level of privacy, which, while attractive to the law-abiding users, also provides a cloak for illicit activities as previously discussed.
But therein lies the secret. Just as this technology holds the potential for terrorists to fundraise and finance itself, the technology also holds the potential to prevent terrorism financing.
By enabling real-time data and transaction tracking, blockchain technology can make it difficult for terrorists to move money undetected. It can also help to identify and block suspicious account access and transactions (subject to set regulation), alerting and enabling financial institutions and law-enforcement agencies to act quickly and prevent terrorist financing. If used properly, this technology has the capability to facilitate inter-agency cooperation and intelligence sharing on an international scale, driving more holistic, effective, and successful joint-combat against terrorism.
Though governments and regulatory bodies can use blockchain to enhance their security apparatus and the ability to counter terror financing, I wouldn’t suggest celebrating and announcing the end or terrorist financing just yet.
As the quote from Spiderman’s Ben Parker goes, “with great power comes great responsibility”. Recognizing the power blockchain presents, and remembering a core reason for the push to decentralization – the “de” centralization part, i.e. countering “centralized regulation” – are we not sacrificing exactly that in the name of security?
While I’d love to be the one to sit here and tell you blockchain will solve all our terror-financing issues, I simply cannot. As with anything, particularly in the security arena, it comes down to a matter of balance.
It is essential to balance security needs with the risk of increased centralized regulatory power often perceived as stifling innovation and curtailing the growth of decentralized technology and community. I believe that it is vital we give security and counterterror bodies the regulatory power necessary to combat terror financing. It then ultimately comes down to the wider blockchain community to remain vigilant and ensure that the regulatory power given to the centralized entities is not taken advantage of, which could undermine its core principles of decentralization.
Optimistic about blockchain’s counter-terror future?
With companies across industries adopting blockchain, we must understand that despite its potential, the technology has limitations and requires full industry cooperation to be effective, efficient and transparent in the fight against terrorism financing. As a technology and data-centric system, it is only as good as the data fed into it, and that requires collaboration and communication from all involved parties.
Thus, the question remains: Who controls that whip to ensure the same regulatory forces don’t use that power at the detriment of the decentralized ecosystem? A query for another post in the future 😉
Blockchain technology has the power to become an invaluable tool in the world’s arsenal to combat all forms of terrorism. It can facilitate the tracking of transactions, identify suspicious activities, and expand financial protection and limitations.
But implementation of technology’s power by centralized regulatory bodies requires full-scale industry cooperation and must be utilized responsibly to ensure it doesn’t hinder the future of decentralized technology and control. With the right approach, governments can and should strike a balance between security and innovation to ensure that blockchain technology is used for the greater good and create a safer world for all.