Funding the Flames: The Dark Side of Crowdfunding and Terrorism
Edition 3 of the Insight Monitor Bookclub
Hello, Insight Monitor subscribers. Welcome to another week and a new research reads review. In this series, we review and summarize recent research in illicit financing, highlighting new data, insights, or findings that can inform how we counter this threat. I hope you find this insightful, and if you want to suggest a book or article for review, let us know in the survey. As always, please read and share this with colleagues who might be interested. Thanks for caring about illicit finance and international security!
~Jess
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Review: Shai Farber and Snir Ahiad Yehezkel, “Financial Extremism: The Dark Side of Crowdfunding and Terrorism,” Terrorism and Political Violence 0, no. 0 (2024.): 1–20, https://doi.org/10.1080/09546553.2024.2362665.
BLUF: This article seeks to fill a gap in academic research by describing and explaining how terrorist organizations exploit crowdfunding platforms and digital currencies. The article includes a set of observations about terrorist crowdfunding campaigns that form the basis of policy recommendations.
Author info: Shai Farber is a senior lecturer at the Max Stern Yezreel Valley College and Snir Ahiad Yehezkel is a student in the faculty of law at Bar-Ilan University.
Brief summary:
Methods: The authors combine open-source material (including academic literature, policy documents, news reports, crowdfunding platform archives, text from extremist communication channels, telegram chats, international conventions, laws, and regulations) with three semi-structured interviews.
Based on this research, the authors make nine key observations: Terrorist crowdfunding campaigns are used to facilitate online payments and payment methods and attract public attention (both increasing the terrorist’s reach and exposing it to potential law enforcement action). Terrorists often launch campaigns soliciting funds for false charitable causes, and they tend to raise modest donations. Terrorists prefer to use small and unpopular crowdfunding sites when they use formal platforms, and multiple credit cards from the same individual are sometimes charged on crowdfunding sites. Off platform, terrorists sometimes solicit cash. Terrorists also use non-profit organizations as a “front” for raising money but redirect those funds to their accounts. Funds for these campaigns often originate from countries “at risk” or tax havens.
From these observations, the authors propose the following strategies to mitigate the risk posed by terrorist exploitation of crowdfunding sites. They argue that crowdfunding platforms should be regulated and adhere to counterterrorist financing regulations and that platforms should adopt a risk-based monitoring approach for their campaigns. Further, the authors argue that cryptocurrency exchanges should be regulated to help mitigate these risks and that international cooperation should be fostered to help understand and articulate crowdfunding risks. The authors also suggest that technology firms and financial institutions should collaborate to detect and disrupt terrorist financing, making a case for the broader adoption of blockchain analytics tools and technologies. They also suggest that public awareness campaigns should be launched to educate the public about the vulnerabilities of crowdfunding platforms, that crowdfunding regulation and monitoring should be within the scope of Financial Action Task Force mutual evaluations, and that more research money should be allocated to help develop novel technological solutions for detecting and disrupting terrorist financing online.
Who should read this article? This article is a good primer for anyone new to the area of crowdfunding and terrorist financing, and should be read in conjunction with other research in this area including:
Jessica Davis, “New Technologies but Old Methods in Terrorism Financing,” Royal United Services Institute for Defence and Security Studies, CRAAFT Research Briefing, no. 2 (July 22, 2020): 7.
Financial Action Task Force, “Crowdfunding for Terrorism Financing,” October 2023, https://www.fatf-gafi.org/content/dam/fatf-gafi/reports/Crowdfunding-Terrorism-Financing.pdf.coredownload.inline.pdf.
Alex Newhouse, “From Classifieds to Crypto: How White Supremacist Groups Have Embraced Crowdfunding” (Middlebury Institute of International Studies at Monterey, 2019), https://www.middlebury.edu/institute/sites/www.middlebury.edu.institute/files/2019-06/Alex%20Newhouse%20CTEC%20Paper.pdf?fv=9T_mzirH.
Stephen Reimer and Matthew Redhead, “Bit by Bit Impacts of New Technologies on Terrorism Financing Risks,” Occassional Paper, Project Craaft (Royal United Services Institute, April 2022), https://static1.squarespace.com/static/5e399e8c6e9872149fc4a041/t/624c339b2bb62359821fa1dd/1649161117463/Bit+By+Bit.pdf.
Smith, Brenna, “The Evolution Of Bitcoin In Terrorist Financing,” Bellingcat, August 9, 2019, https://www.bellingcat.com/news/2019/08/09/the-evolution-of-bitcoin-in-terrorist-financing/.
Advancing the Research
This article is a good starting point for formalizing observations about terrorist financing and crowdfunding. However, differentiation between formal and informal crowdfunding campaigns (those using official platforms and those using messaging services to solicit funds) and categorization of methods and observations between these two types of crowdfunding might have yielded different and interesting results.
Further work should explore the circumstances in which terrorists adopt crowdfunding as a method of raising funds and how states and counterterrorism investigators can anticipate the adoption of this technique. Further research should also collect data more broadly (ideally, interviews with people in multiple jurisdictions) and specify, possibly using a large n set of case studies, how often terrorist actors (movements, groups, and individuals) use crowdfunding and how this differs across ideologies.
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