Assessment of the situation
The announcement by some countries to have listed the Islamistic movement Hamas as a banned terrorist organization has had a significant indication: Countries and organizations exposed to sanctions, usually do their financial activities and money transfers through illegal channels of the internet to escape sanctions and run their business. These illegal businesses have mostly a direct connex to prostitution, drug and weapons trafficking, using the „dark internet“ as a marketing and delivery tool.
The Al Qassam Brigades, the military wing of Hamas, has called its advocates around the world via its social media channels to provide financial support to Hamas with the help of bitcoin technology.
Reasons and aims of using bitcoin by Hamas
Hamas is currently suffering from a tremendous financial crisis, affecting its various activities. This crisis doesn’t only affect the public sector and government institutions, but also Hamas’ private institutions. Even the “Al Aqsa“ Satellite Channel, the public voice of Hamas on TV, stopped its broadcast due to financial difficulties, and after the Israeli Army targeted its headquarters in Gaza. Although Ismael Hanyah, head of the Political Bureau of Hamas, revoked his decision to close it, it has severe impact, referring to the financial circumstances of Hamas and the channel as one of the most important tools for Hamas, being the media arm promoting Hamas’ ideology. Many civil servants working for Hamas have stated that they have been getting only 50% of their salaries for few months, as Hamas institutions have been economizing on their expenditures.
Experts have stated that the financial crisis of Hamas is due to the change of interests by countries used to support it. This change was the result of US pressure on these countries for their support to Hamas.
This financial crisis is the main reasons for Hamas’ new bitcoin strategy. It emerged after Egypt destroyed the tunnels leading from Egypt to the Gaza Strip. They used to make huge financial incomes through taxes imposed on imported and exported goods from and to Gaza Strip. Even Qatar, which used to be one of the top supporters of Hamas, has recently shown reluctance to support Hamas anymore.
Qatar is reconsidering its options as it is looking for possible alternatives transfering money to members of Hamas, fearing allegations supporting terrorism.
According to Israeli Walla News website, a document internally circulated by Qatari high officials. They argued that the Qatari money transfers to Hamas was a controversial issue, causing a lot of criticism by Israel and Palestinian authorities. It says that the Qatari financial support to Hamas has stimulated negative attitudes towards Qatar, being recognized internationally as a state supporting terrorism and working against Sunni countries in the region. The report also states that if Qatari money was meant for government officials in the form of salaries, it could have been transferred to bank accounts rather than cash delivery, reminding of mafia structures.
The international community is aware of the fact that Iran is the primary and most important supporter of Hamas and its military wing. Despite the setback in the relations between Hamas and Iran, following Hamas’ attitude towards the Syrian Revolution against Assad’s Regime, the intensity of this relation was immediately restored, but not as warm as before. Yet, the internal crisis Iran has been going through concerning economic recession and supporting Hezbollah together with the international isolation due to US sanctions have all made the ongoing financial support to Hamas more problematic than before.
Hamas doesn’t only depend on Turkish, Qatari and Iranian support, but also on investing its money in the local, regional and international markets. According to Middle East Newspaper, many Hamas-affiliated businessmen are running different projects, commercial firms, shopping malls, cars exhibitions, electronic shops, computer centers and factories in Gaza Strip and West Bank.
In general, sources talking about Hamas’ financial sources are dependent on media reports, but those reports generally lack accuracy and objectivity. Shen Bit, the Israeli Intelligence Agency – also known as Shabak – estimated Hamas’ annual budget around 200 million USD, covering primarily the costs for Hamas’ government institutions, apart from another 50 million USD used for Hamas’ private civil services together with around 40 million USD spent for the military wing of Hamas.
Using bitcoin, Hamas wants to bypass possible sanctions by Palestinian authorities and banks. Hamas in fact wants to wriggle out of those transparent financial requirements. It also seeks to enable all those who want to donate any sums to Hamas without making them scared that their names might become public. This is not limited to prominent figures with huge amount of money, it also aims to facilitating any transfer of this digital currency for less than 5000 USD. In fact, the organization wants to globalize this financial support. This should not be limited to entities that have got direct and strong ties with Hamas or its leaders. Support, according to Hamas, should extend to include individuals sympathizing with it or rejecting the existence of the state of Israel.
Hamas bets on many sympathetic individuals throughout the world supporting them, but they are also concerned regarding any public accusation of supporting terrorism. They could escape those accusations through the bitcoin system and solve the problem of possible revelation of the donor’s identities.
Hamas aims at altering the international pressure and plans to dry up sources of terrorism Usually, financial sanctions are implemented by banks through a Swift system or the International Banks Communication Association. With this system of control, it is impossible circulating or transferring money to countries or organizations subjected to sanctions. However, when some financial transactions are hidden from this bank controlling system, possible sanctions can be bypassed. For these reasons, Bitcoin and other digital currencies have become a safe haven for hidden financial transactions, because those virtual currencies have no relation to official banks.
From an Israeli point of view, this step by Hamas is a challenge to sanctions and its impact on mitigating the financial capabilities of Hamas. This challenge lies in the fact that it is not easy to access the sources of this virtual money. Israeli media and newspapers stated that those financial activities would mostly be preferred by Hamas, whose annual military budget has reached a quarter a billion USD during the last few years.
Does Hamas have the required technology for dealing with Bitcoin?
It has become very clear that the technological breakthroughs and the ability to exploit internet for intelligence purposes and hacking are no longer limited to states and intelligence agencies. On the contrary, these agencies and states themselves have become exposed to threats, as these terrorist organizations have learned technological expertise that might become even more powerful than the ones of governments in the field of information technology.
Because of the unconventional financial system of cryptocurrency, it requires highly sophisticated technology and exceptional skills, including but not limited to the so-called “dark Internet“. It of course has to be underlined that any use of cryptocurrency is per se not illegal, but can in fact be used with a criminal background or for the sake of hiding possible money-laundering activities The deep knowledge of the financial system is therefore imperative for doing secret transactions and money laundering. It also requires the ability to hide transactions and bitcoin packages against hackers and thefts.
There are many examples that prove the excellent level of Hamas in this field. The electronic engineering unit of Hamas’ military sub-structure has succeeded in penetrating the radio waves of the Israeli Army and broadcasting enthusiastic anti-Israeli propaganda, praising the Palestinian Resistance Movement.
What makes it easy for Hamas getting money is that cryptocurrency is not unfamiliar for people in the Gaza Strip. Many of the young people started using this virtual currency to get huge sums of money. In Gaza City alone, there are about 40 money exchange offices, which officially deal with Bitcoin. One person who works at a money exchange office says that many people come to these offices to change Bitcoin for other currencies and vice versa. Experts connect people’s interest in this kind of virtual currency to the difficult economic situation, the impaired investments and people’s keenness on getting quick financial gains quickly. These costumers usually do a training on using this kind of virtual currency.
The stigma of dark corridors of the internet
The „Popular Science“ website (www.popsci.com) estimates the volume of this hidden part of the internet as five times bigger than the visible part of it. This part can’t be accessed through conventional methods.
The dark internet is one of the most challenging problems for fighting terrorism and extremist organizations. Many European reports state that fanatic religious groups are using the dark internet to finance their activities with the utmost level of secrecy and security. By using it, they ensure that they can escape monitoring and surveillance. The European Institute for Security Studies emphasized that despite the powerful security system, extremist groups are still able to get sophisticated weapons and means for their terrorist activities by using the dark internet. EuroGuns, for example, sells all types of weapons via the dark internet and sends these weapons to its customers, including S-AK47 machine guns, which were used by the Charlie Hebdo attacker, whose gun was sold for 550$ USD on this platform.
The dark internet is the best environment and the best medium for circulating virtual currencies, especially bitcoin. The common thing between platform and cryptocurrency is the privacy and hidden identity. Both provide in addition swift interaction and fast deals with the least central monitoring over these transactions by authorities.
Benefiting from previous experience
Hamas is not the first organization using bitcoin. The “Islamic State” in Iraq and Sham ISIS used this virtual currency. One of the advocates of ISIS, Taki Al Deen Al Munzer, published a document entitled “Bitcoin and donation for Jihad”. In this document, the Islamic regulations for using bitcoin were set forward for the donation to ISIS. According to this document, bitcoin is the ideal solution to the problem of financial monitoring by “atheist” governments, as the document describes them. It explains how bitcoin can be used in the virtual reality and how bank accounts can be initiated on the internet without drawing the attention of authorities.
The above-mentioned document reflects the experience of the writer in bank and legal procedures, and even in the structural system of bitcoin and how it works. The writer says that anyone can send money to any Jihadi or to a person who is suspected to be a Jihadi, without any notification to “atheist” governments. Millions of Dollars can be sent to any person and this money can be immediately received.
Naturally, Hamas will try to benefit from the experience of other states and organizations that have dealt with bitcoin, China the most prominent country worldwide. Some experts attribute the fluctuation of Yuan value to the fact that most of the bitcoin is circulated in China. Bitcoin is widely used in China because it is the only way to wriggle out the regulations of personal financial assets. Also, more people have been using bitcoin in North Korea, Russia, Venezuela and Iran. Hamas is highly expected to benefit from the experience of these countries in using bitcoin, as it helped these countries in overcoming the longtime of sanctions imposed by the US.
North Korea has been accused of utilizing bitcoin to develop its spying capabilities, buying weapons on the black market, used it for money-laundering. According to CNN, experts emphasize that North Korea is accumulating most of the bitcoins by either electronic hacking or through ransoms taken in return for hacked firms or individuals. Some South Korean officials say that the northern neighbor has been attacking packages of electronic currencies.
Some reports say that the amount of cryptocurrency circulation is very high inside Iran in the light of the economic collapse and the re-activation of US sanctions against Iran under the leadership of Donald J. Trump. “The same applies to Russia and Venezuela” reports added. However, the two countries are seriously thinking of introducing new virtual currencies to bypass US sanctions. But this is not easy for Hamas to follow, so it is more likely to imitate North Korea or ISIS.
Big challenges face bitcoin as a virtual currency
Despite the difficulties facing bitcoin at presently, involved countries are trying their best to strengthen their monitoring activities, especially in relation to extremist, terroristic organizations and illegal activities. Drying up all funding sources has become of great importance and a top priority on the agenda of the International community. It has become a real concern for many countries, especially after many attacks were launched in countries like France, Germany, Kameron, Lebanon, Mali or Tunisia. What has happened in Syria and Iraq when ISIS captured oil wells in Syria is that ISIS has gained more than 2 billion USD according the estimations of the German Government.
In the same context, European justice and internal affairs ministers held a meeting where they discussed plans to impose restrains on pre-paid credit cards, money transfer and cryptocurrency. The ministers also agreed to increase the monitoring on payments used without revealing the identity of the person dealing with business. An official of the EU Commission said that more attention would be paid to the usage of electronic currencies.
The most important issue is that Israel is on top of the technology pyramid, and this made getting money through Bitcoin a very complicated issue and liable to hacking activities. In March 2017, the Israeli Army declared that it abducted a very sophisticated network of money transfer through brokers. These brokers coordinated activities between Hamas Office in Turkey and its offices in Al Khalil city and Gaza Strip. The Israeli Shen Betz arrested a number of Palestinians who were suspected Hamas supporters in Ramallah in the West Bank. They were involved in receiving money from Hamas. One of them is Omar Kaswani, head of Student Council at Ber Zeit University.
Despite the difficulty in identifying the names of the money sender and the recipient, some computer programs have been able to identify the area or province from which or to which money was sent. According to Muhammed Shurrab, a specialized technician, it is possible to identify donors to Al Qassam Battalions, if they don’t take precautious measures protecting themselves. Some of the donors were revealed because Al Qassam also revealed the package number of the donor. This number helps revealing the balance of him and all bank details, including transfer and transactions. This can be done through the investigations of intelligence agencies when they know the number of the package of the donner which donates to Al Qassam Battalions. These packages can be followed to other websites to get the personal data of the donors through electronic trade websites like Amazon or Ali Baba, and consequently the donors can be personally identified.
There is another obstacle related to the small amounts of money provided through this digital currency in the Arab region as most dealers lack the technological knowhow which not very common in the Arab and Muslim World where Hamas has got a remarkable publicity. The public is the most important target for Hamas to collect money and the problem is that most of the public don’t know how to convert cryptocurrency into another currency and keep it in their packages prior to sending it to the package of Hamas or Al Qassam Battalions.
In addition to all the above-mentioned issues, it is not easy to sell bitcoin for other currencies as the international bank security institutions have protected the global financial system against any hacking or penetrations by cryptocurrency networks and other coded currencies. Banks around the World have been imposing stern measures to mitigate any transactions related to coded currencies. In this way, it is getting more and more difficult for terrorist organizations and countries suffering from sanctions by US and EU countries.
Yet, most money exchange forums are subjugated to banks’ policies that identify the ownership of dealers and their personal details. Dealers must provide proof of their income before they are allowed to buy or sell bitcoin. By taking these measures, cryptocurrency exchange windows are subject to full control, especially when money goes across borders. Any money package is usually blocked if it deals with unidentified customers, and by doing this, Al Qassam package will be naturally added to the list of blocked packages.
Some experts think that the money coming to Hamas will not exceed the needs of Al Qassam Battalions in the deep markets of the internet. Nehad Ismael, an expert in economics, says that the bitcoin, as a virtual currency will never solve the financial problems and economic stalemate of Hamas and other terrorist organizations in Gaza Strip. According to him, global banks are still banning this virtual currency due to international concerns about illegal bank transactions that help in supporting terrorism and tax avoidance.
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