Israel crushes Hezbollah crypto network in historic seizure, credits Chainalysis and Binance
On Tuesday, Israeli Defense Minister Yoav Gallant announced that the National Counter-Terrorist Financing Agency had seized $1.7 million from crypto accounts linked to the Quds Force of Iran’s Islamic Revolutionary Guard Corps, the elite military intelligence agency of the country. country, and the Iranian-backed terrorist organization Hezbollah. .
Though only a small fraction of the hundreds of millions of dollars Hezbollah rakes in each year, Israeli officials and crypto researchers hailed the removal as a historic first against the Lebanon-based terrorist group, as well as a sign of Israel’s growing prowess at crypto tracing. In April, Hamas’ military wing announced it would stop accepting Bitcoin donations, in part because of Israel’s successful operations against the organization.
Paul Landes, head of Israel’s NBCTF, said the cooperation of industry firms, including crypto exchange Binance and blockchain analytics firm Chainalysis, was needed to confirm his intelligence and freeze the funds.
“We see [crypto firms] as partners, or at least we see them as gatekeepers,” he said Fortune in an interview. “They want to work together because they fear the risk of being associated with terrorism and financial terrorism – they want the industry to be clean.”
Track attempts
While past counter-terrorism funding efforts have focused on groups like ISIS and Hamas, this week’s effort was the first against Hezbollah. The effort proved more challenging given the role of Hezbollah’s patron, the Iranian intelligence agency Quds. Nation-state-backed groups are more adept at circumventing sanctions, according to an investigator from Binance’s sanctions and terrorism financing risk team, who spoke to Fortune on condition of anonymity.
Quds is capable of transferring money through a financial transfer system popular in regions of the world, including the Middle East, called hawala – a network of money brokers operating outside the traditional banking system, although many are still subject to to regulations. Many hawala operators offer ramps from fiat currency to cryptocurrency, which in turn can be sent to wallets on exchanges such as Binance, as well as non-hosted “cold” wallets that are not connected to the internet.
Landes said that after the NBCTF received intelligence about crypto transfers between Quds and Hezbollah, the agency worked with Chainalysis to track down the activity, as well as Binance — and other exchanges, which asked not to be publicly named in the investigation — to the internal withdrawal paths of the interactions. As the Binance researcher explained, tracing within exchanges is often limited, meaning analytics firms and intelligence agencies need the cooperation of companies like Binance.
Another obstacle was establishing that the exchange accounts were indeed linked to Hezbollah. According to the Binance researcher, the dozens of accounts all met the “know your customer” and “know your business” compliance processes.
The investigation allowed the organizations to link the accounts to Hezbollah figures, including Muhammad Ja’far Qasir, Hezbollah’s central financier; Muhammad Qasim al-Bazzal, who handled Hezbollah’s crypto route; and Tawfiq Muhammad Said al-Law, a Syrian hawala operator – then freeze and seize the money. Landes added that the research was also able to trace cold wallets, or wallets not hosted on exchanges, adding another layer of complexity.
The growing popularity of Tether on Tron
While terrorism financing previously relied on Bitcoin, the seized Hezbollah funds in Tether were issued on the Tron blockchain, reflecting a growing trend in cryptocurrency as illegal actors move away from Bitcoin.
According to a report from blockchain analytics firm TRM Labs released Wednesday, Tether on Tron now accounts for 92% of total crypto terrorism financing — up from 240% over the past year.
While the vast majority of terrorism financing still comes through fiat currencies, the move to Tether — which is pegged to the US dollar — reflects illicit actors’ search for non-volatile assets, according to the Binance researcher.
In addition, Bitcoin has lost its guise of opacity, with government agencies using analytics software like Chainalysis to take down dark web marketplaces and other illicit networks. The Binance researcher said there is an impression on the Telegram channels they monitor that Tether on Tron is operating with less scrutiny from regulators, though they expect that to change with the recent Israeli investigation.
Landes said crypto in general still represents an attractive opportunity for terrorist groups, given its reputation for anonymity and lower regulations compared to the traditional banking system. In addition, it is easier to move crypto funds across borders, with entries and exits all over the world.
“That’s why it not only attracts terrorists, but also criminals and money launderers and people who want to transfer money worldwide,” he said. Fortune.
As terrorist groups develop their methods of transferring funds via cryptocurrency, the Binance researcher said one of the goals of the research is to discourage further activity, just as Hamas stopped accepting Bitcoin donations.
“The intense investigation that will result from the Israelis making this public and offering the information will result in more discoveries that will only help all of us conduct our research and disrupt more financial operations,” the researcher said.
This story was originally on Fortune.com
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