Treasury enlists banks to root out Hamas financing

Bloomberg News

WASHINGTON — Treasury's Financial Crimes Enforcement Network urged financial institutions Friday to vigilantly monitor and report activity suspected of being related to financing the militant organization currently at war with Israel known as Hamas.

"Hamas raises funds to support its operations and members in a variety of ways, including … fundraising campaigns involving virtual currency and fictitious charities raising both fiat and virtual currency," Fincen's alert noted. "Hamas moves funds through the smuggling of physical currency as well as a regional network of complicit money transmitters, exchange houses, and Hezbollah-affiliated banks."

Hamas is an Islamist political and military organization which has governed the Gaza Strip of the Palestinian territory since it came to power after elections in 2007. It has been designated as a foreign terrorist organization by the U.S. government — and thereby subject to sanctions by the Treasury Department — since Oct. 8, 1997. Hamas attacked Israel on Oct. 7, killing an estimated 1,400 people. Hamas reportedly raised millions in funding through cryptocurrency transactions in the years leading up to the attack.

Fincen's alert identified several red flags it says banks should watch which could indicate suspicious activity. These include watching for customers that conduct transactions with entities designated by the Office of Foreign Assets Control or transactions linked to designated groups' or individuals' contact information or virtual currency addresses. Fincen also told banks to be wary of customers that interact with higher-risk financial institutions in high-risk jurisdictions with inadequate anti-money-laundering practices and customers that do business with shell corporations or entities tied to Iran-backed militant groups, including Lebanon-based Hezbollah and Palestinian Islamic Jihad. 

Fincen also advised firms to be on the lookout for questionable conduct by charitable or nonprofit organizations that solicit donations without providing services or overtly support Hamas, large and sudden donations from unknown sources followed by substantial transfers and transactions involving "virtual currency addresses associated with terrorism or terrorist financing campaigns." The agency also noted that while these red flags should be used as guidelines to help detect and report potential illicit funding, banks should take a holistic approach to considering risks posed by customers.

"As no single red flag is determinative of illicit or suspicious activity, financial institutions should consider the totality of available facts and circumstances, such as a customer's historical financial activity, whether the transactions are in line with prevailing business practices, and whether the customer exhibits multiple red flags, before determining that a behavior or transaction is suspicious," Fincen's alert noted.

Politics and policy

Scott to introduce anti-Iran funding bill amid violence in Middle East

October 17, 2023 5:00 AM

In addition to the advisory alert, Fincen last Thursday issued a notice of proposed rulemaking that would compel banks to report information about a transaction when they have reason to suspect it involves Convertible Virtual Currency mixing within or involving jurisdictions outside the United States.

CVC mixing is a practice of using multiple accounts to anonymously trade or move cryptocurrencies and the agency is classifying it as a primary money laundering concern.

"CVC mixing offers a critical service that allows players in the ransomware ecosystem, rogue state actors, and other criminals to fund their unlawful activities and obfuscate the flow of ill-gotten gains," said Fincen Director Andrea Gacki. "This is Fincen's first ever use of the Section 311 authority to target a class of transactions of primary money laundering concern, and, just as with our efforts in the traditional financial system, Treasury will work to identify and root out the illicit use and abuse of the CVC ecosystem."

The American Bankers Association praised the agency on X, formerly known as Twitter, for responding to banker concerns on this issue.

"ABA thanks [Under Secretary Brian Nelson and Fincen Director Andrea Gacki] for this new guidance to assist bankers in identifying funding streams supporting the terrorist org Hamas," ABA wrote on X. "We value ongoing dialogue with [the Treasury] to help bankers deter illicit finance and protect the U.S. financial system."