Mounting evidence of crypto usage by ISIS

Blockchain intelligence platform TRM Labs has recently published a report shedding light on the increasing adoption of cryptocurrency by the affiliates of the Islamic State of Iraq and Syria (ISIS) in various parts of Asia. The report reveals significant on-chain connections between these groups and pro-ISIS fundraising campaigns in Syria, indicating a concerning trend in terrorist financing through digital assets.

Released on July 21, the report highlights “mounting on-chain evidence” over the past twelve months of pro-ISIS networks in Tajikistan, Indonesia, and Afghanistan utilizing cryptocurrencies to support their operations. Among the various cryptocurrencies being used, Tether (USDT) on the Tron network emerges as the primary choice for these transactions.

TRM Labs points out that a majority of the transactions associated with these cases involved the use of Tether on the Tron network. This finding aligns with a presentation by Tara Annison, former head of technical crypto advisory at Elliptic, who also emphasized the popularity of Tron and Tether among illicit actors. Criminals have been shifting away from Bitcoin in favor of stablecoins like Tether due to the liquidity and volume available in decentralized exchanges (DEXs), making money laundering “super easy.”

The report exposes instances where individuals using Indonesian-based exchanges sent substantial funds, amounting to over USD 517,000 in 2022, to addresses linked to pro-ISIS fundraising campaigns in Syria. The funds were claimed to support and aid ISIS families held in Syrian camps. Notably, all transfers were conducted using USDT on the Tron network, typically in increments of $10,000.

In Tajikistan, the report reveals a case where cryptocurrency was utilized to recruit fighters for ISIS’s affiliate in Afghanistan. A fundraising campaign, operational for more than a year, was linked to an address that received approximately $2 million in USDT on Tron in 2022. Through blockchain tracing, TRM Labs identified the flow of funds and notified the exchange involved, leading to the arrest of a senior ISIS fundraiser by Turkish authorities.

Additionally, a media unit connected to ISIS’s affiliate in Pakistan began promoting its ability to accept donations in the form of cryptocurrency during the latter half of 2022. TRM Labs identified the addresses controlled by the group, estimating a total volume of approximately $40,000 over the past twelve months.

These findings underscore the growing concern surrounding terrorist financing via cryptocurrencies. TRM Labs had previously reported that the volume of illicit finance involving Bitcoin had significantly declined over the past seven years. However, the current report indicates that Tron has now become the preferred cryptocurrency for 92% of terrorist financing cases, reflecting a worrying shift in the landscape of digital asset-enabled illicit activities.