Content area
Full Text
Introduction
Cryptocurrencies are often accused of being an ideal instrument for terrorists. As Bitcoin and similar alternative currencies are completely anonymous, they are, hence, very difficult to trace. However, it is questionable whether they are indeed suitable for financing terrorism. This paper investigates the steps taken by terrorists to finance terrorism through cryptocurrencies without being caught. It will emphasize both the strengths and drawbacks of this method from the perspective of terrorist financing, with the aim of increasing insight into how it should be combated.
Literature review
There is no uniform definition of terrorist financing or even of terrorism itself (Cooper, 2001, p. 881; Ruby, 2002, p. 9 f.; Tilly, 2004, p. 5 f.; Tofangsaz, 2012, p. 386). Hence, this article will use the definition contained in the International Convention for the Suppression of the Financing of Terrorism, adopted by the General Assembly of the United Nations in resolution 54/109 of 9 December 1999. Multiple countries have used this definition as a foundation for their national legislative measures.
The existing literature discusses several different types of funding. In particular, it points out that terrorists rely upon both legal and illegal funding sources. Examples of legal sources include stock market and real estate investments, as well as salaries. Illegal funding is often gained through robbery, theft, kidnappings and drug trafficking (Dalyan, 2008, p. 139; Raphaeli, 2003, p. 59). Furthermore, donations from supporters, which could be classified as either legal or illegal funding sources, also appear to play a role (Engel, 2004, p. 251 f.; Flanigan, 2006, p. 641 f.; Hroub, 2006, p. 73; Roy, 2007, p. 162; Tierney, 2017, p. 15).
In addition, the literature on terrorist financing describes a selected number of transferring methods, including hawala banking, cash couriers, money transfer and regular bank services, as well as cryptocurrencies (Cassella, 2004, p. 285; Dalyan, 2008, p. 140; Irwin and Milad, 2016, p. 407; Ridley, 2008, p. 29 f.; Vlcek, 2008, p. 296). However, while the literature identifies those asset-transfer methods as possibly relevant for terrorist financing, it does not explicate exactly how terrorists must proceed to enable financing of their activities without being caught.
Regarding cryptocurrencies, the literature is limited to emphasizing that terrorists could use Bitcoin to receive donations from supporters, meaning they pose...
