Hamas Used Crypto to Get Money From Iran

 

"In mid-2019, Israel's military used a precision strike on a narrow street to kill a Hamas commander whom it called Iran's money man in Gaza.

The commander ran an off-the-books system of remittances in which trusted agents shuttled physical cash and goods across borders to settle customers' balances. This so-called hawala network, as it is known in the Middle East, funneled tens of millions of dollars in financing from Iran to Hamas's military wing.

His replacement, a Palestinian businessman called Zuhair Shamlakh, changed strategy to evade the Israelis: He turned to digital currencies.

Shamlakh's money exchanges increasingly sent digital tokens to operators abroad to settle hawala balances, according to current and former Israeli law-enforcement officials and former U.S. officials. Crypto sent to the digital wallets controlled by the Hamas-affiliated money exchanges also could be swapped for cash at their offices in the Gaza Strip.

This pivot helped Hamas and affiliates such as Palestinian Islamic Jihad to receive large sums from Iran during the two years that preceded the Oct. 7 attacks on Israel, the officials said. It was an attempt to use a new financial technology to lessen the risks of moving physical money and goods.

Since 2021, Israel's National Bureau for Counter-Terror Financing has issued seven orders to seize crypto funds held by three of these Gazan exchanges.

Digital wallets identified by the NBCTF in two of these orders as being connected to the exchanges got $41 million in crypto, show research by Tel Aviv-based analytics and software firm BitOK. Wallets linked by the bureau in another order to PIJ got another $93 million.

Officials at the NBCTF said a significant portion of the funds received by the Gazan exchanges were for Hamas, citing Israeli intelligence that went beyond blockchain analysis. They said the PIJ crypto transactions also used the network of money-service businesses aiding Hamas and its affiliates.

Some of the exchanges identified by Israel look like typical storefront operations that offer international money transfers. Part of their businesses involved legitimate activity such as remittances to generate enough cash flow to obscure the Islamist groups' financing, the NBCTF officials said. They said, at times, as much as half the money going through the exchanges went to Hamas.

Hamas, Shamlakh and his businesses didn't respond to requests for comment.

Iran's mission to the United Nations didn't comment. Iranian government officials have characterized Western sanctions as illegal financial warfare and have said Iran has secret financing mechanisms designed to sidestep the sanctions and fund its regional allies.

Shamlakh, owner of the Al Mutahadun exchange, which was cited in five of the seizure orders, was Hamas's "main money changer" tasked with arranging the transfer of Iranian money, according to the Israeli defense ministry, which oversees the NBCTF.

The owner of another exchange, called Dubai Money, was a "key figure in Hamas's economic infrastructure for laundering and transferring capital" from abroad, the defense ministry has said.

After one 2020 order by the ministry to seize his company's assets, Shamlakh denied that Al Mutahadun received funds from Iran in a statement carried by Palestinian media, saying Israel's allegations were "pure lies and slander."

Initially, Hamas used crypto only to receive small-scale donations from supporters as part of a broader crowdfunding effort, which Israeli officials said likely has raised several million dollars.

Around 2020, crypto became a method of large-scale transfers between Iran and the group within the hawala networks, according to the current and former Israeli officials and ex-U.S. officials.

Since then, crypto has been "an essential part for their operational activity," one senior NBCTF official said.

Iran has long been Hamas's primary benefactor, with the U.S. putting regular funding from Tehran at roughly $100 million a year. Hamas also has earned income from a global investment portfolio, raised money through charitable organizations, and skimmed off funds from official foreign aid and tax revenues in Gaza.

The U.S. designated Hamas a terrorist organization in 1997, limiting the group's access to the international banking system. Israel's blockade of Gaza has made it hard for Hamas to obtain physical cash. Researchers say the group often has resorted to a network of tunnels to smuggle in bills. Israeli officials said in recent years most of Iran's financing of Hamas moved through the chain of hawala dealers and money-service providers that are spread across Gaza, Lebanon, Syria and Turkey.

Western intelligence and security officials say that Iran and its proxies often own or control exchange houses as critical nodes for financing their operations. "This is the silent way for them to get money into Gaza," said Tom Alexandrovich, director of the cyber-defense division at Israel's National Cyber Directorate, which has supported the NBCTF's crypto investigations.

Hamas's use of digital currencies has intensified scrutiny on the crypto industry.

While crypto transactions are visible on public blockchain ledgers, many foreign platforms that customers use to trade digital currencies have weak compliance controls or are designed to conceal their identities.

The Treasury Department last month designated foreign "mixer" crypto platforms, which enable users to exchange cryptocurrency with relative anonymity, as primary money-laundering hubs to combat their use by terrorist groups.

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Rory Jones and Omar Abdel-Baqui contributed to this article.

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New System Is More Sophisticated

The use of crypto by the Gaza money exchanges was more sophisticated than Hamas's earlier fundraising efforts in bitcoin.

Digital wallets connected to the companies moved funds overwhelmingly in the form of the stablecoin tether on a blockchain system called Tron, which has heightened user privacy.

To obscure the money trail, the exchanges often changed the wallet addresses they used each day, and sent funds through mixers, Israeli officials said.

They also received funds from Garantex, a large Russian crypto exchange under U.S. sanctions, and several Iranian exchanges, according to the ex-official and blockchain analytics research.

A Garantex spokeswoman said it adhered to international compliance standards on financial crime.

The Gazan exchange network remains active. In late September, another exchange-service company called AlKahira, which shares an address and phone numbers with Dubai Money, posted a Facebook ad for cash withdrawals and deposits via tether at its two branches in Gaza.

The National Bureau for Counter-Terror Financing officials said AlKahira and Dubai Money were affiliated and linked to another money-changing house in Istanbul that the bureau targeted in a July order to seize $1 million in assets.

AlKahira didn't respond to requests for comment.

AlKahira periodically has alerted customers on its Facebook page that it was "paying out funds for the martyrs and wounded inside its branches." Its most recent such post was on Oct. 3, four days before the attack on Israel." [1]

Israeli intelligence is clearly not catching mice here.

1.  World News: Hamas Used Crypto to Get Money From Iran --- Pivot helped militants obtain significant funds ahead of Oct. 7 attacks on Israel. Berwick, Angus; Talley, Ian.  Wall Street Journal, Eastern edition; New York, N.Y.. 14 Nov 2023: A.8.