Hamas turned to crypto to receive financial support from Iran

In mid-2019, the Israeli military carried out a precision strike on a narrow street to kill a Hamas commander whom it called Iran's money man in Gaza. The commander was running an informal hawala system where trusted intermediaries carried physical cash and goods across borders. Known as the hawala method in the Middle East, this system was funneling tens of millions of dollars in funding from Iran to Hamas's military wing.

His successor, a Palestinian businessman named Zuhair Shamlakh, changed the strategy: He turned to digital currencies. According to current and former Israeli law enforcement officials and former U.S. officials, Shamlakh's money exchanges increasingly sent digital tokens to operators abroad to settle hawala balances. Crypto sent to digital wallets controlled by Hamas-affiliated money exchanges could also be exchanged for cash at their offices in the Gaza Strip.

Israel has been trying to seize funds since 2021

Officials said this shift helped Hamas and affiliates like Palestinian Islamic Jihad receive large sums from Iran during the two years leading up to the attacks on Israel in October. It was an attempt to use new financial technology to reduce the risks of moving physical cash and goods. Since 2021, Israel's National Bureau for Counter Terror Financing (NBCTF) has issued seven orders to seize crypto funds held by three of these exchanges in Gaza.

According to research by Tel Aviv-based analysis and software firm BitOK, digital wallets identified by the NBCTF in two of these orders as being linked to the exchanges received 41 million dollars in crypto. Wallets linked to PIJ in another order by the bureau received an additional 93 million dollars. NBCTF officials, citing Israeli intelligence that goes beyond blockchain analysis, said a significant portion of the funds received by the Gaza exchanges was for Hamas. Officials said PIJ crypto transactions also used the network of money service businesses that help Hamas and its affiliates.

Some of the exchanges identified by Israel resemble typical storefront operations that offer international money transfers. NBCTF officials said some of their businesses include legitimate activities such as commercial payments and remittances to provide sufficient cash flow to hide the financing of Islamist groups.

"Lies and slander" defense

Iranian government officials have characterized Western sanctions as an illegal financial war and have said that Iran has covert financing mechanisms to evade sanctions and provide funds to its regional allies. According to the Israeli Ministry of Defense, which oversees the NBCTF, Shamlakh, the owner of the Al Mutahadun exchange named in five of the seizure orders, was Hamas's main money changer tasked with arranging the transfer of Iranian money. The defense ministry said the owner of another exchange called Dubai Money was also a key figure in Hamas's economic infrastructure for laundering and transferring capital from abroad.

News Source: 12punto