A sophisticated terrorist-financing network in France took advantage of the anonymity offered by cryptocurrency and especially cryptocurrency “coupons” to move funds to al-Qaida and Islamic State militants in Syria, French authorities said.
After a nine-month investigation, French law enforcement on Tuesday arrested 29 individuals suspected of transferring “hundreds of thousands of euros” to the blacklisted organizations last year via cryptocurrency and cryptocurrency coupons, a type of voucher that can be purchased in tobacco shops with cash or a credit card, without having to provide identification.
“A few isolated cases of terrorist financing through cryptocurrencies had already been identified in the United States,” Jean-Charles Brisard, chairman of the Center for the Analysis of Terrorism in Paris, told ACAMS moneylaundering.com. “But this case is a first in France, and, more significantly, shows an unprecedented scale and complexity.”
The case that culminated Tuesday with 55 raids in dozens of towns across France began in January after the country’s financial intelligence unit, Tracfin, detected dubious financial flows from France to Syria.
“Investigations revealed that several dozen people living in France had visited repeatedly, over the past few months, tobacco shops throughout the country to anonymously purchase coupons worth between €10 and €150 [that] were then credited to accounts [digital wallets] opened from abroad by jihadists,” the national anti-terrorism prosecutor’s office said in a statement.
Most of the suspects are accused of financing terrorism. Two of them are also accused of “providing logistical support” in coordination with Mesut S. and Walid F., two 25-year old French nationals who traveled to Syria in 2013 and have since joined Hayat Tahrir Al-Sham, a terrorist group affiliated with al-Qaida.
The suspected jihadists and their financial supporters allegedly used encrypted messaging services, cryptocurrency and cryptocurrency coupons to stay under the radar.
“This architecture combined several types of entities, which allowed the suspects to exploit several vulnerabilities and accumulate layers of anonymity,” said Brisard, a former intelligence adviser who authored an influential report on al-Qaida’s financial networks and use of fraudulent charities in the months after the Sept. 11 terrorist attacks.
A cryptocurrency coupon is a ticket that includes a numerical code or two-dimensional barcode, to move the purchased cryptocurrency into a digital wallet.
Wallet providers must vet clients for anti-money laundering purposes when onboarding them but purchases of the coupons do not automatically trigger due-diligence processes in and of themselves.
With more than 30,000 retail locations, Keplerk and Digycode lead France in offering cryptocurrency coupons and prepaid cryptocurrency cards that range from €10 to €250 in value.
The scheme outlined Tuesday showed innovation by relying on cryptocurrency coupons but also employed traditional money-laundering strategies, said Aurelien Vuilleumier, a consultant with Heptagone in Switzerland. “The process is similar to smurfing, which lends itself well to this type of organization with a large base of supporters, each with limited means.”
Digycode’s founder told French magazine Capital that the company only processed one transaction, for €250, to a wallet controlled by the two jihadists, and claimed that the firm has since made its services unavailable outside of France and Switzerland.
Investigators are reportedly focusing their inquiries on Keplerk, the second cryptocurrency coupon provider, which did not respond to requests for comment by press time. Shortly after launching in January 2019, the fintech suspended operations after failing to obtain an e-money license and reopened seven months later after partnering CFS-Zipp, an e-money services provider based in London.
French prosecutors and Tracfin, which initiated the investigation, declined to comment.
The case shows that cryptocurrency coupons can shield the originators of transactions from identification, said Vuilleumier, the consultant. But the beneficiaries of those transactions still risk detection at the point that they attempt to convert the coupons into government-issued banknotes at a cryptocurrency exchange, he said.
“If the exchange is domiciled in Europe, know-your-customer measures had to be put in place and there theoretically would be no need to impose additional measures elsewhere, such as on these coupons sellers, because in the end there will be a control at some point in the process,” Vuilleumier said.
Contact Gabriel Vedrenne at email@example.com
|Topics :||Counterterrorist Financing , Cryptocurrencies|
|Document Date:||October 2, 2020|