Terence Zimwara
Terrorism is a word that sends shivers to many whenever it
is mentioned in any conversation. Terrorists have been responsible for the most
heinous and despicable acts of violence of our time. From the September 11th
destruction of the New York Twin Towers to the London underground train bombings,
the world has constantly faced this threat since then.
In response, governments around the world have united efforts
in combating this scourge by enacting laws that pre-empt future terrorist acts.
Many such laws include the Anti Money Laundering (AML) as well as Combating the
Financing of Terrorism (CFT) provisions.
By identifying and stopping the transfer of money to
religious fanatics, authorities have been able to prevent terrorism events.
Nevertheless, the problem remains just as much as that of money laundering or
tax evasions.
Criminals and terrorists are always trying to find ways to
circumvent these regulations and crypto-currencies are identified as one of the
many ways. So while Satoshi Nakamoto had pure intentions when he released the
whitepaper for Bitcoin in 2009, somehow the narrative was changed.
Those engaged in the fight against terrorism argue that
Bitcoin and other crypto-currencies have opened a new funding channel that made
their task harder.
Crypto-currencies like Bitcoin are impossible to trace, they
offer complete privacy to holders. It is this feature that has created problems
for Bitcoin adoption efforts. Most governments and regulatory authorities have
refused to give recognition to this privately issued digital currency, in part
because it denies them the ability to determine the identity of those using the
currency.
Without knowing the identity of those behind the
transactions, many have been quick to conclude that terrorists and criminals
behind most Bitcoin transactions.
This is how they justify their fight against or opposition
to crypto-currencies, a stance supported by the gullible. But just how accurate
is this assertion that terrorists are now heavily relying on crypto-currencies
to finance their operations?
Well, no one is really in a position to tell that because crypto
transactions are private, third parties cannot really tell who is sending or
receiving funds. So opposition to Bitcoin is largely based on the assumption
that terrorists and money launders favour this currency than actual evidence.
To illustrate, in Europe, a BBC report states
that, “Europol estimates that £3-4 billion is laundered using cryptoassets each
year in Europe. This remains a relatively small proportion of total funds
estimated to be laundered in Europe, however, which stands at £100 billion.”
So even by Europol’s own admission, only a small fraction of
funds is believed or assumed to be laundered via crypto-currencies. Apparently
money launderers still prefer the traditional channels, fiat money and the
conventional financial system. It is a mystery then how opponents of Bitcoin are
so adamant that the crypto has become the terrorist’s currency of choice hence
it has to be curtailed.
Central banks around the world have issued advisories against
use or holding crypto-currencies partly because it is used to finance illicit
transactions. Regular financial institutions are forbidden from integrating
their systems with crypto exchanges.
Associating of crypto-currencies with terrorism financing
somehow blurs on-going efforts explain the actual benefits of using such a
medium of exchange. Crypto-currencies can potentially solve problems that have
existed for decades.
Take the plight of undocumented immigrants for instance. Every
year, millions of people take on the risky adventure of migrating to foreign
lands in search of better life.
Those managing to make it often lack identification
documents that are recognized by their host countries. This forces them to
accept menial jobs that pay the least. As if that is not enough, these migrants
will face problems each time they try to send money to families back home.
To use registered or formal money transfer agencies, one has
to have government issued identification documents, which is not an option for
illegal immigrants. Faced with this situation, undocumented migrants are forced
to resort to informal channels, which can be anything from unregistered
couriers to friends and family members.
These channels are not only expensive but risky as well; the
funds might not reach the intended beneficiary. Therefore the coming onboard of
crypto-currencies has been a welcome relief as this gives senders an efficient
and more secure option.
Additionally, crypto-currencies like Bitcoin prioritize
privacy, there are no cumbersome Know Your Customer (KYC) processes involved. KYC
processes are known to be the reason why many remain unbanked or choose to use
informal channels.
Clearly, it these attributes that are forcing this economic
group to use crypto-currencies when remitting funds. This might explain why the
numbers of those using crypto-currencies is increasing but how then this is
seen as terrorism financing is quite baffling.
To illustrate, in 2015 millions of migrants from North
Africa, the Middle East and Asia reached Europe in search of better economic
fortunes. Germany had the highest numbers by far. So when a bigger number of
these migrants begin sending money to their respective home countries like
Afghanistan, Syria, Mali, Somalia etc, there should be no alarm.
Things will only get murky when a Financial
Action Task Force (FATF) report to the G20 notes that suspicious
transaction reporting linked to crypto-currencies is rising globally! Such
transacting might be seen as suspicious because the receiving countries are
blacklisted as terrorist hotbeds.
A spike in crypto remittances from Germany to Syria might be
construed as growth in funding of terrorist groups when in fact it is money sent
to support those that stayed behind.
Important innovations should not be curtailed simply because
terrorists or criminals are using the same. It is imperative to remember that
terrorists or criminal gangs will always be there and they will still use the
social media that we love so much, the latest IPhone or traditional financial
systems.
It is the job of those tasked with fighting such vices to
find ways of achieving this (combating terrorism and money laundering) without inconveniencing
those who want peace and are law abiding. Also we need to assure entrepreneurs
that their efforts will be rewarded instead of being punished. That way we will
continue to enjoy new ground breaking innovations.
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