For instance, India has told crypto exchanges to step up their oversight of transactions originating from countries along its borders. They are especially focusing on Jammu and Kashmir. The new restrictions are intended to stifle any possible terror financing through digital assets.
Last week, the Financial Intelligence Unit (FIU-IND) went public with an advisory. They ordered crypto platforms to identify any activity associated with “non-custodial wallets.” This directive extends much deeper than the usual Suspicious Transaction Reports (STRs) that crypto companies currently must submit.
Enhanced Monitoring in a Sensitive Region
This directive comes amid mounting tension between India and Pakistan over the status of the state of Jammu & Kashmir. This region is a highly significant geopolitical flashpoint and the number one national security priority for India. The federal government’s directive highlights the fear that cryptocurrency might be used to finance illegal operations in the region.
Crypto exchanges are now required to track transactions and report suspicious activity that might suggest funding for terror operations. This means closely examining where money is coming from, where it’s going, and especially who is behind these transactions.
We’re increasing our efforts to prevent money from going to terrorist groups. This new initiative's primary target is people working in or around Jammu and Kashmir. By choking off these money trails, Indian authorities hope to hamper the financial capabilities of these organizations and in turn impact their operations.
Global Concerns Over Crypto-Financed Terrorism
India’s move is in line with international community’s mounting concerns over the use of cryptocurrency for terrorism financing. Recent cases have raised awareness of the potential for bad actors, including foreign terrorist organizations, to use digital assets to further their agendas.
Just last month, a Virginia man was sentenced to 30 years in prison. He sent over $185,000 in crypto to ISIS. He relied on encrypted chat and in-person, underground collections to make the transfers possible. Their money ultimately helped fund a women’s Islamic State detention center in Turkey. For one, they funded terrorist prison breaks and supported Syrian militants’ military activities.
The FIU-IND directive shines a light on an important 2020 U.S. operation. This operation alone seized more than 300 crypto accounts and millions of dollars associated with ISIS, al-Qaeda, and Hamas, illustrating just how widespread this problem is.
The Challenge of Tracking Crypto Transactions
One of the biggest hurdles in the fight against crypto-financed terrorism is the complexity of transaction tracking. Once crypto is exchanged and moved through numerous wallets, it makes it next to impossible to follow the money.
"such transactions would not leave a trail that Indian law enforcement agencies can track easily" - industry executive cited by The Economic Times
These challenges haven’t changed the fact that global law enforcement agencies are ramping up their efforts to track and disrupt crypto-financed terrorism. While terror groups have been successful in utilizing digital assets, that very technology is typically what leads to their demise.
