Islamic State Group Uses Cryptocurrency to Fund Attacks in Africa

ADF STAFF

The Islamic State group (IS) has turned to cryptocurrencies to move money from places such as Somalia and South Africa to fighters elsewhere on the continent.

Private donations, known as “sadaqah” in Arabic, make up one of IS’s largest sources of revenue. Although much of this money moves through the informal system known as hawala, some IS supporters use digital currencies such as Bitcoin or Tether to transfer money quickly while avoiding detection by international agencies seeking to disrupt terror financing, according to Beatrice Berton, an analyst with the European Union Institute for Security Studies.

The Counter ISIS Finance Group (CIFG) reports that West Africa, home to Islamic State West Africa Province (ISWAP), has become a focal point for cryptocurrency transfers. The CIFG represents about 80 countries and international organizations targeting IS.

Nigeria, where ISWAP operates, is second to India among the world’s largest adopters of cryptocurrency as legal tender. Nigerians use cryptocurrencies as a hedge against economic instability. The sheer volume of transactions — nearly $60 million in 2023 alone — means IS and other terrorist groups can get lost in the shuffle, experts say.

Cryptocurrencies such as Bitcoin use a blockchain technology to verify their value and track their movement. Users are anonymous, but once a cryptocurrency wallet address can be tied to an individual, it is easy to search the ledger for every transaction linked to that address.

Observers say that IS has seen its finances plummet from more than $300 million when it controlled parts of Iraq and Syria to about $20 million today. The organization has encouraged its African affiliates, such as IS-Somalia and Islamic State Central African Province (ISCAP) in the eastern Democratic Republic of the Congo (DRC), to finance their own operations.

They have done so through a variety of means, including ransoms from kidnappings, extortion and “taxes” on local residents. IS-Somalia raises about $6 million a year through those methods, according to observers. IS supporters in South Africa engage in a growing number of kidnappings then funnel ransom payments to IS affiliates through al-Shabaab.

GhostSec is another group that tracks IS finances. The group, which includes private hackers formerly affiliated with the group Anonymous, also has targeted IS finances and discovered thousands of dollars in Bitcoin going to an account believed to be affiliated with IS since 2012.

Hackers found that that account transferred money to another Bitcoin account containing more than $3 million but were unable to identify the owner, according to Deutsche Welle.

Since Bitcoin was developed more than 15 years ago, cryptocurrencies have become notorious as a way to conduct illicit transactions, from drug deals to weapons trafficking. Cryptocurrency defenders say international pressure to prevent money laundering has lifted much of the secrecy that previously surrounded them.

According to Tether CEO Paolo Ardoino, Tether has frozen more than $300 million in digital assets as part of its campaign to keep criminals from using its cryptocurrency. It has developed security measures to protect its community.

“It is easier to track cryptocurrency than it is to track cash,” Ahmed Buckley, an expert on terrorism financing, recently told the security publication Janes. “But that hasn’t prevented these terrorist groups and individuals from experimenting, from trying to adapt and learn, and see ways where they can exploit gaps in regulations pertaining to crypto, to bolster their finances.”