Cryptocurrency network Tron attracts scrutiny as a funding source for terror organizations
By Tom Wilson and Elizabeth Howcroft
Israel has faced a new challenge in its efforts to quell the funding of Iran-backed militant groups, as a fast-growing crypto network called Tron has become a platform for financial transfers associated with designated terror organizations. This increasingly popular network has now surpassed Bitcoin as the preferred platform, revealed interviews with seven financial crime experts and blockchain investigations specialists.
A Reuters analysis of crypto seizures announced by Israeli security services since 2021 showed a notable shift, with a sharp rise in the targeting of Tron wallets and a decline in Bitcoin wallet seizures. The trend underlines the fast and low-cost transactions which Tron offers, making it an appealing choice for these groups. Merkle Science, a New York-based blockchain analysis firm, reported that law enforcement agencies in the United States, Britain, and Singapore are among their clients.
Israel’s National Bureau for Counter Terror Financing (NBCTF) has frozen 143 Tron wallets between July 2021 and October 2023, which they believe were linked to designated terrorist organizations or “severe terror crimes”. This aggressive move follows the recent attacks by Hamas on Israel, which resulted in significant casualties. Israel has also intensified its efforts to scrutinize Hamas’ financing.
Tron’s popularity with terror groups is evidenced by the fact that almost two-thirds of Israel’s Tron seizures were made this year, including 39 wallets linked to Lebanon’s Hezbollah and 26 associated with Palestinian Islamic Jihad. The latter is a Hamas ally involved in the assault on Israel. Additionally, 56 Tron wallets were connected to Hamas, including 46 linked to a Gaza-based money exchange company called Dubai Co. For Exchange.
Despite severe criticism, Tron has emphasized that it does not have control over those using its technology and has distanced itself from the groups identified by Israel. However, some of those whose funds were frozen in Israel’s biggest known seizure of crypto accounts yet have denied any connection with militant groups, stressing that their crypto trading was purely for business or personal financial purposes.
Iran has previously utilized Tron to circumvent U.S. sanctions. This, coupled with the increased anonymity it offers, has made it an attractive choice for terrorist organizations, who are now shifting to Tron from more closely scrutinized networks like Bitcoin. It is believed that the anonymity offered by Tron is a key factor driving terrorist groups to employ the network for their illicit activities.
The emergence of Tron as a preferred network for terror financing has raised serious concerns. While the fight against criminal activity in the cryptocurrency space is ongoing, the use of Tron by terrorist organizations presents a significant challenge to law enforcement efforts. Shlomit Wagman, a senior fellow at Harvard University and former director-general of the Israel Money Laundering and Terrorism Financing Prohibition Authority, emphasized the urgent need to address this “blind spot” in the network security.
In light of the increasing popularity of Tether transfers on Tron, the Financial Action Task Force has warned that terrorist organizations are seeking to exploit the growing popularity of this network to further boost donor anonymity. This is a troubling development that requires immediate attention from law enforcement and global financial regulators.
It is clear that Tron’s role in terror financing is a pressing concern that demands urgent action from global law enforcement agencies and financial regulators. As technology evolves, so too must the methods used to track and combat illicit financing activities. The emergence of Tron as a preferred choice for terrorist organizations underscores the pressing need for collaboration between governments, law enforcement agencies, and financial institutions to combat such illicit activities in the cryptocurrency space.
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