On October 20 2023 the Financial Crimes Unit of the U.S. Treasury Department issued a stern warning to financial institutions in the U.S. concerning money transfers to the terrorist organization Hamas. The document advises financial institutions to conduct a comprehensive review of all financial transfers to ensure they are not facilitating direct or indirect support for terrorist organizations.
Similar warnings were issued to banks in the United Kingdom and the European Union, making it more challenging to execute an unrecognized transfer and requiring thorough documentation to identify both the funding source and its destination. However, these efforts often amount to a futile exercise in securing the stable after the horses have already escaped.
After the initial Twin Towers disaster in February 1993, authorities implemented new measures to track funding sources and transfers. Three decades ago, surveillance primarily targeted individuals or small-cell terrorism with limited budgets for guerrilla operations.
It’s worth noting that the first Twin disaster, often forgotten by the public, resulted in six fatalities and over 1,000 injuries. Perhaps not coincidentally, the event has faded from public memory, overshadowed by the security system’s exposure after missing the subsequent, much larger attack of 2001 inspired by the 1993 failed attempt.
Although the repercussions of the attack and the armed American response affected Osama Bin Laden, the leader of the organization behind the 1993 terror, he was not marked as a target for elimination initially. Khaled Sheikh Mohammed, who planned and directed the attack, also escaped targeting. Starting in 1996, he continued planning the more successful attack on September 11, 2001.
Billions in Damage on a Shoestring Budget
From an economic standpoint, the 1993 attack exemplifies the effectiveness of terrorist organizations. Executed at a negligible cost, Muhammad Salama, the assistant to the attacker, was arrested while attempting to file a stolen car claim after renting a Ford car critical to the operation. The bomb, consisting of 600 kg of improvised explosive materials, including cyanide intended to poison the building’s occupants, cost only a few hundred dollars. The entire attack was funded by a minor budget for plane tickets and a small expense account.
This limited cost resulted in substantial expenses for building restoration, rehabilitation of 1,041 injured individuals, loss of income due to communication and electricity disconnection, and operational activities to locate, eliminate, and arrest those directly involved. The expenditure amounted to tens of billions of dollars in response to an attack costing mere thousands.
As we now know, this attack served as a precursor to the successful September 11 attack which caused 2,977 deaths and approximately 25,000 injuries. The economic damage from the September 11 disaster significantly impacted Western economies following the collapse of U.S. capital markets. The U.S. stock markets, closed for a week, lost over 14% of their value, equating to more than $1.5 trillion directly lost by investors. New York’s economic losses surpassed $27 billion, contributing to a national economic slowdown of $400 billion, resulting in the closure of over 18,000 small businesses and the loss of more than 400,000 jobs.
Most countries sponsoring or harboring terrorism are economically disadvantaged nations with a desire to eliminate the West and establish Islamic dominance worldwide. The twin attacks represent a milestone in their vision of subduing the West. These countries, including Afghanistan, Qatar, and Iran, have learned that, while they stand no chance in a traditional war against the U.S. and its Western allies, they can effectively target the West through terrorist organizations, achieving a cost-benefit ratio far superior to other fighting options. This approach allows them to inflict substantial damage to the world’s economies without incurring significant human or infrastructure costs.
Hamas: A Leading Terrorist Organization in the World by Budget
The deadly attack that initiated the War of Iron Swords (the Israeli war against Hamas in 2023) cannot be comprehended without considering critical events that reshaped perceptions of organized terrorism. Until the September 11, 2001 attack, the most deadly terrorist incidents claimed up to 224 lives (the series of attacks by al-Qaeda in 1998 on the U.S. embassies in Kenya and Tanzania). While earlier terrorist attacks achieved tactical goals, they lacked ambitious strategies.
Since then, terrorist organizations have become more established, functioning as small armies with clear roles, professional salaried militants, administrative organization, training areas, comprehensive budgets, and territorial control. Organizations like Hamas in the south and Hezbollah in the north are among the world’s leading non-state entities in terms of budget size. According to Forbes (2022), Hezbollah ranks third globally amongst non-state actors with an annual budget of $1.2 billion, while Hamas holds fifth place with an annual budget of half a billion dollars. In reality, their budgets are likely much larger, considering in-kind funding such as arms and other aid, along with other unknown donations and revenues.
Western countries avoid direct confrontation with benefactors like Iran and Qatar. Lebanon is often perceived as a victim of Hezbollah. U.S. negotiations with Iran focus on nuclear agreements, overlooking Iran’s funding and operation of these organizations with financial, logistical, diplomatic, and strategic support.
Cryptocurrencies in Service of Terrorism
In the last decade and a half, Western countries, led by the United States, have faced challenges in combating terrorist organizations on the economic front, particularly in blocking their revenue channels. Organizations manage to smuggle weapons through the guise of “humanitarian aid,” as seen in the October 7 attack when assailants brought along bags of rice concealing hidden weapons while committing a massacre. They also transfer funds using various methods developed alongside the fintech revolution and digital currencies introduced in 2008.
According to leading companies in the cryptocurrency arena, one out of every five digital wallets is currently owned by terrorist organizations and their supporters. This channel has become the primary portal for money transfers to terrorist organizations. For instance, between 2021 and 2023, most of Hamas’s budget was transferred through Bitcoin and Dogecoin (the currency promoted by Elon Musk and later embraced widely). Analysts and companies specializing in these currencies suggest that terrorist organizations may be engaged in digital currency mining. The only way to curtail this revenue stream, potentially generating substantial profits, is to limit electricity supply in terrorist-affiliated countries and territories. However, terrorist organizations exploit the humanitarian concerns that Western countries often impose on themselves.
The U.S. and other Western countries are reawakening to the need for more stringent enforcement measures to prevent terrorist fund transfers. Recent reports in the U.S. and the U.K. indicate that banks are exercising greater caution in verifying the identities of parties involved in money transfers and delaying the execution of suspicious transfers. The ongoing economic war persists, driven by the clear interest of Western countries not only in preventing terrorism but also in halting money laundering in way that causes real harm to their revenues.
