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Russia, Al-Qaeda and Hamas use cryptocurrencies to circumvent sanctions - US Treasury Department

Russia, Al-Qaeda and Hamas use cryptocurrencies to circumvent sanctions - US Treasury Department Wally Adeyemo (Getty Images)
Author: Maria Kholina

The US Department of the Treasury has expressed concerns that terrorist groups will increasingly resort to using virtual currencies and other digital assets if Congress does not approve new regulatory tools, according to the Deputy Treasury Secretary Wally Adeyemo.

In his prepared remarks for hearings at the Senate Banking Committee, Adeyemo warned that groups like Al-Qaeda, Hamas, and countries such as Russia and North Korea are finding new ways to move resources using virtual currencies.

Adeyemo stated that the US Treasury has had some success in rooting out illicit financial operations in the digital ecosystem, but emphasized that the United States needs to expand law enforcement to prevent similar activities by "malign actors."

"While we continue to assess that terrorists prefer to use traditional financial products and services, we fear that without congressional action to provide us with the necessary tools, the use of virtual assets by these actors will only grow," Adeyemo said.

He said that while the Treasury has used its authorities to cut off these groups from traditional financing, their use of virtual assets has expanded.

According to him, North Korea has been able to buy, launder, and store illicit proceeds through sophisticated cyber thefts, relying on technologies that enhance anonymity to conceal the sources of funds.

He also added that the Treasury has observed Russia increasingly using alternative payment mechanisms to circumvent sanctions and finance the war against Ukraine.

Adeyemo called on Congress to pass legislation aimed at enhancing its tools to pursue such entities, including secondary sanctions targeting foreign providers of digital assets that facilitate illicit financing.

Such tools would help the Treasury expand its targeting capabilities to combat foreign cryptocurrency exchanges and some financial services that do not use correspondent accounts.

He also urged steps to address gaps in existing authorities by broadening them to include explicit coverage of entities such as virtual asset wallet providers and cryptocurrency exchanges that have emerged since the enactment of current laws.

Congress should also mitigate jurisdictional risks associated with offshore cryptocurrency platforms to ensure that the Treasury can access them abroad when subjects engaged in digital assets pose a threat to US national security, he said.

Moscow's malicious activity

The US and UK have begun investigating cryptocurrency transactions worth over $20 billion that passed through the Moscow-based cryptocurrency exchange Garantex using Tether, a dollar-pegged cryptocurrency.

In May of last year, it was reported that the US Department of Justice was investigating Binance's involvement in helping Russians circumvent sanctions. The world's largest cryptocurrency exchange is believed to have assisted in transferring money to Russian citizens.