Funding Terrorism – Historical Review and Future Trend

Dr. Udi Levi

Introduction^[1]

• Since the September 11, 2001 terrorist attacks, the financial arena has become key to the global war on terrorist organizations. It is based on the premise that financing is critical to the threat, and disrupting it can impair the capabilities of terrorist elements. The international campaign against financial systems has made the movement of money one of the critical areas in which terrorist and criminal organizations invest resources to find ways to circumvent the global system created to block funds used to finance terrorism.
• This study analyzes terrorist financing from a historical and developmental perspective, focusing on the transition from traditional banking methods to hybrid and decentralized systems. It reviews the principal mechanisms of operation, from the penetration of established banking systems, to informal money-changing networks, the use of charitable organizations, synergy with organized crime, and the use of digital asset exchanges and artificial intelligence technologies.
• Over the past twenty-five years, a complex dynamic has developed in the economic campaign against terrorist elements, involving on the one hand international legislation and stringent regulation and on the other, the development of creative solutions for circumventing sanctions and locating assets. Terrorist elements operate entire systems for monitoring weaknesses and loopholes in the international financial system while developing new methods for transferring funds under the watchful eyes of the authorities.
• The current international banking system is still central to the financial apparatus of terrorist organizations. However, the role of money changers and cryptocurrency exchanges has grown in recent years and has become more dominant, primarily in view of weak regulation and enforcement tools.
• In recent years, there has also been an increased effort by Iran, Russia and China to create an alternative system which would undermine the principal tools available to the United States for conducting economic warfare, foremost among them reliance on the dollar as a central currency in global trade and oversight of the SWIFT code system.^[2]
• This study is the first in a series which will deal with terrorist financing. The subsequent studies will focus on the financial systems of Hamas and Hezbollah and on how they support operational and political activity, military force buildup and preparations for terrorist attacks.

Money-Changing Offices and Hawala

• The connection between money changing and terrorist financing is not new, but rather a direct continuation of ancient financial systems created to circumvent borders and established systems. Throughout history, informal money-changing networks were essential for international trade, but those same mechanisms, based on anonymity, trust and secrecy, were eventually adopted by terrorist and guerrilla organizations to move funds beyond the reach of law enforcement authorities.
• The first network linking money changing with clandestine financing emerged in South Asia and the Middle East before the development of the Western banking system. Merchants along the Silk Road^[3] needed a way to transfer capital without carrying gold and cash, which made them targets for highway robbers. The mechanism served not only merchants but also insurgent movements, rebels and extremist political groups in the Ottoman Empire and the Islamic caliphates, for financing internal struggles and smuggling weapons without the central government’s being able to track them. With the rise of modern terrorist organizations in the second half of the 20^th century, including the PLO, the Irish underground and guerrilla organizations in South America, the global banking system began to tighten its oversight and the use of money changers became more widespread. Until 2001, the West regarded informal money changing primarily as a problem of tax evasion or illegal immigration. The September 11, 2021 attacks completely changed global financial perception, and money-changing offices became a cornerstone of the hybrid financing systems of terrorist organizations because of their ability to transfer value rapidly, with relative anonymity and while obscuring the path to its source.
• The principal mechanism is based on hawala, an informal value transfer system based on a network of trust relationships among money changers (hawaladars) in different geographical locations. The money is given in cash to a money changer in the country of origin and an identical amount is withdrawn from a local money changer by a representative of the terrorist organization in the destination country. Settlement between the money changers is carried out internally through fictitious commercial invoices and the smuggling of goods or gold without any visible physical or electronic movement of capital across sovereign borders

• The need for money changers to move funds for the financing of terrorist and criminal organizations led to the establishment of an internal system for operating money changers as an integral part of the organizations themselves. For example, the Iranian Revolutionary Guards incorporated money-changing offices into the organization’s operational apparatus. After Iranian banks were excluded from the SWIFT system, Iran’s central bank began channeling capital directly to money changers linked to the Revolutionary Guards, who were responsible for establishing front companies and shell accounts around the world for military procurement and money transfers.

Front Organizations

• Charity (zakat) is one of the Five Pillars of Islam, with a Muslim required to give 2.5% of his annual income for religious purposes, which according to the Quran are intended for the poor, the needy and those who collect the donations, for strengthening the Islamic faith among those whose faith has weakened, for captives and debtors, for those who are traveling and for the cause of Allah.
• Terrorist organizations with international infrastructures exploit zakat to operate charitable organizations to raise funds under the guise of donations for the needy and moving the money around the world. They choose charitable organizations because they provide terrorist organizations with operational, financial and perception-related advantages, they handle millions of small transfers from various donors, making it relatively easy to mix terrorist funds into the background noise of innocent donations. In many countries, they enjoy tax concessions and experience more lenient financial oversight than commercial companies, and in crisis areas, such as the Gaza Strip, Lebanon and Syria, they are sometimes permitted to operate in places where ordinary commercial banks do not. That enables them to bring equipment, supplies and cash into the area, with some of the resources often ultimately reaching terrorist operatives.
• In addition, terrorist organizations, such as Hamas and Hezbollah, also operate civilian infrastructures and use charitable funds to operate clinics and schools and distribute food, creating civilian dependence on the organization and granting it public legitimacy. Educational and welfare institutions funded through charitable organizations often serve as fertile ground for incitement propaganda, indoctrination and recruitment of a new generation of terrorist operatives. In this sense, certain charitable organizations are a link in the global financial system.

The Interaction between Terrorism and Organized Crime

• The crime-terrorism nexus is the blurring of boundaries between organizations driven by ideological motives and transnational criminal networks whose motives are economic. Terrorist organizations have turned to criminal activity to generate independent sources of income and reduce their dependence on states that support terrorism.
• One method is the involvement of terrorist organizations in drug smuggling and trafficking, generally in cooperation with local criminal organizations or foreign organized crime cartels. The profits are laundered through financial institutions around the world and channeled to the activities of the terrorist organization.
• Terrorist organizations are also involved in the production and distribution of counterfeit currency, the counterfeiting and sale of branded goods, armed robbery and complex cyber fraud, which generate liquid funds which are integrated into internal money-changing networks. For example, those involved in the first terrorist attack on the Twin Towers in New York in 1993^[4] sold knockoff shirts in a store on Broadway, while the terrorists who attacked the Charlie Hebdo office in Paris in 2015^[5] sold knockoff shoes to finance the purchase of weapons.

States Assisting and Enabling Terrorism: the Geopolitical Dimension

• The ability of terrorist organizations to survive Western sanctions regimes depends to a large extent on the sponsorship of states which exploit the global financial system to advance strategic interests. The connection between the inter-bloc struggle and the issue of terrorist financing worldwide cannot be ignored. China has become a major financial haven for states and organizations subject to sanctions, including Iran, Russia and North Korea. As part of the power struggle with the United States, Chinese banks enable the use of financial platforms to transfer capital to Western banks in foreign currencies, while circumventing international regulation. In doing so, they provide a lifeline for the survival of the Iranian regime and its terrorism budgets.
• One challenge facing regimes imposing is the tendency of sovereign states to turn a blind eye to terrorist and criminal capital moving through national banking systems and sometimes actively encourage them. Their willingness is primarily ideological, such as anti-Western policies, or caused by a Zeitgeist of extortion through threats, according to which refusal to cooperate could result in harm to the states themselves.
• Iran: For many years, Iran has used its banking system as a conduit for transferring funds to its proxy organizations throughout the Middle East. Its activity continued after extensive sanctions were imposed by the United States and other Western countries. Even today, when most banks in Iran are subject to international sanctions, Iranian banks are manipulated by the Central Bank of Iran, which is as a direct arm of the ayatollah regime, to transfer funds to proxies in the Middle East and other terrorist elements. There are, for example, Bank Saderat Iran, which was a major conduit for Hezbollah and Hamas; Bank Sepah, which to this day is bank used by the Iranian Ministry of Defense; and Bank Mell, which operates front networks to circumvent sanctions for the benefit of the Revolutionary Guards’ Qods Force.

• • Saudi Arabia: Until the beginning of the 21^st century, the Saudi banking system served as a major conduit for money transfers for global jihad networks. Its activity came from a combination of an ideological perceptions, within which Saudi Arabia viewed itself as the leader of the Islamic world and as promoting the interests of the Muslim Brotherhood; a perception that allowing terrorist elements room to operate could serve as a kind of insurance policy against harm to Saudi Arabia itself; and an assessment that the United States would refrain from imposing sanctions on the Saudi oil empire. Banks such as Al-Rajhi Bank, one of the country’s major banks, were at the center of civil lawsuits and intelligence reports alleging they had been used to transfer funds to al-Qaeda operatives before the September 11, 2021 attacks, as well as to other terrorist organizations in the Middle East. Documents published over the years indicated that American intelligence officials examined possible links between customers and accounts at the bank and extremist Islamist elements. The United States Senate subcommittee on money laundering and terrorist financing mentioned the bank in the context of broader discussions of terrorist financing risks in the Saudi banking system. However, American courts dismissed most of the lawsuits against the bank and it was never officially designated as a bank serving terrorist organizations. Today, the narrative of Saudi Arabia as a financier of Sunni terrorism is no longer accurate. Saudi Arabia can be defined as a power attempting to dismantle jihadist and pro-Iranian networks, but displays considerable pragmatism toward Islamist movements which can serve its regional interests.
  • Qatar: The September 11, 2001 attacks led Saudi Arabia to change its assistance to terrorist organizations and the Qatari banking system entered the resulting vacuum. Like Saudi Arabia, Qatar viewed support for terrorist organizations and Iran as a tool for advancing its status in the Islamic world and an instrument for protection against future threats. Qatar made effective use of its relationship with the United States and the West, both as the world’s largest gas exporter and because of the American military presence on its territory, security cards against the imposition of sanctions for its activity. Intelligence reports cited Qatar National Bank (QNB) as a platform for transferring funds to Islamic terrorist organizations; Qatar Islamic Bank (QIB) channeled capital under the guise of charitable mechanisms to the civilian infrastructures of extremist organizations; and Masraf Al Rayan maintained accounts of charitable organizations which transferred funds to Hamas, the Palestinian Islamic Jihad (PIJ) and terrorist organizations in Syria. Current indications suggest that the October 7, 2023 terrorist invasion and massacre and the war with Iran have not changed the trend and the Qatari financial system continues to be used by terrorist organizations and their financiers.
  • The UAE: The United States Treasury Department identified the UAE as an arena for the activity of financial institutions and front companies which helped finance the activities of Sunni and Shi’ite terrorist organizations. The UAE, particularly Dubai, served as a significant platform for the Iranian Revolutionary Guards under an unwritten arrangement of financial haven in exchange for security protection. That policy changed following regional geopolitical developments, including the Gaza Strip War and the war between the United States and Iran in 2026, which led to a broad freezing of Iranian bank accounts in Dubai. The Abraham Accords were a catalyst for the change in the UAE’s policy toward terrorist financing, primarily because they connected Abu Dhabi more deeply to the security and financial systems of the United States and Israel. Nevertheless, in case of Iran, a gap remains between the UAE’s official policy and what occurs in Dubai, Sharjah, the free trade zones and the system of front companies and trade. Iran continues to use the UAE as one of the world’s most important centers for circumventing sanctions.
  • Venezuela: The regime in Venezuela, until the arrest of President Nicolás Maduro by American forces in January 2026, also provided sovereign protection for the use of the official banking system by terrorist organizations for many years. The country’s banking infrastructure, especially the Central Bank (BCV) and the development bank BANDES, was a conduit for money laundering, forged documents and the acquisition of military technologies for the Iran-Hezbollah terrorist axis.
  • South Africa: Because of a combination of diplomatic ties with Tehran and serious regulatory loopholes, the country became a haven for money laundering and fundraising for Iran, Hamas, Hezbollah and ISIS. Financial networks, such as that of Nazem Said Ahmad, operate front companies in South Africa and conduct transactions worth millions of dollars through leading banks in the country, with little enforcement by the authorities.

The International Banking System as a Financing Conduit

• The international banking system is one of the main conduits used by terrorist and criminal organizations to transfer funds. Although the international system has enacted a broad range of laws and regulations intended to reduce the organizations’ ability to move money, they have developed methods and operational strategies which enable them to maintain access to the formal banking system.

The Establishment, Takeover and Infiltration of Financial Institutions

• One strategy developed by terrorist organizations is the establishment, takeover or clandestine infiltration of financial institutions. They have done so by exploiting the Muslim and Iranian diasporas around the world, with particular emphasis on personnel within the banking system. The exploitation has been effected by deliberate infiltration operations, extorting bankers through threats or identifying individuals with ideological sympathy for terrorist organizations:
  • BCCI Bank: The Bank of Credit and Commerce International, founded in Luxembourg in the 1970s, operated in more than seventy countries and served as a covert financial infrastructure for criminal elements and terrorist organizations, including the PLO, the Abu Nidal Organization and al-Qaeda. Beginning in the 1990s, Osama bin Laden’s terrorist network had secret accounts and transferred funds which financed the organization and “jihad fighters.” American intelligence officials testified that the bank’s closure in July 1991 severely damaged bin Laden’s financing channels. As a historical irony, during the 1980s the Central Intelligence Agency (CIA) used channels through BCCI branches in Pakistan to transfer funds to assist the mujahideen rebels in Afghanistan, the network from which al-Qaeda later emerged. The bank was not officially controlled by terrorist or criminal organizations, but rather was established and managed by ostensibly legitimate businessmen and government entities which exploited its structure to cooperate with criminal elements and terrorist organizations in exchange for profit and power. In practice, terrorist elements succeeded in infiltrating its senior business ranks, and the bank operated as a service provider for them. Managers knowingly agreed to open accounts, launder money and obscure trails for drug cartels, corrupt regimes and terrorist organizations. The bank also operated an internal clandestine unit, the Black Network, which functioned as a private intelligence organization and used bribery, extortion and threats to protect the secrets of the bank’s criminal clients.
  • Al-Shamal Islamic Bank: The bank was established in Khartoum, the capital of Sudan, and began operating in January 1990. At the time, the Islamist regime in Sudan was a haven for Osama bin Laden, who lived in the country from 1991 to 1996. According to official United States State Department reports and Congressional testimony, bin Laden himself was one of the bank’s principal financiers and invested approximately $50 million of his personal fortune when it was established. During trials of terrorist operatives held in the United States, former al-Qaeda operatives, including Jamal Ahmad al-Fadl, who managed the organization’s finances, testified that bin Laden and the organization maintained active accounts at the bank. Al-Qaeda used Al-Shamal’s banking system to transfer funds around the world, including for logistics and financing of the attacks against the American embassies in Kenya and Tanzania in August 1998. A United States Federal Court previously described the bank as the clearest example of cooperation between the Sudanese government and bin Laden. In 2019, the bank changed its name to al-Balad Bank.
  • Al-Taqwa Bank: Al-Taqwa Bank, whose name is based on an Islamic term meaning fear of God, was founded in 1988 by senior figures in the Muslim Brotherhood, including bank chairman Youssef Nada. The institution operated as an offshore financial network and was registered in the Bahamas, while managing financial branches and asset management companies in Switzerland, Liechtenstein and Italy. Immediately after the September 11, 2001 attacks, the bank was identified by the American administration as a principal global jihad money conduit. The Treasury Department described the bank as a financial adviser and asset manager for Osama bin Laden and al-Qaeda. According to American intelligence investigations, the bank also served as a platform for transferring funds to Hamas. In 1997, approximately $60 million was transferred through the bank’s accounts for Hamas in Judea, Samaria and the Gaza Strip. On November 7, 2001, police in Switzerland and Liechtenstein raided the bank’s offices and the homes of its founders. At the same time, the bank was placed on American and UN Security Council sanctions lists and its assets were frozen worldwide.

Exploiting Vulnerabilities in Legitimate Western Banks

• Over the past decade, the Western banking system has become a major front in the global geopolitical struggle. Although sanctions and anti-money laundering and counter-terrorist financing regulations (AML/CFT) have been tightened to an unprecedented degree, hostile state actors, criminal networks and terrorist organizations continue to penetrate financial security barriers. Their success is generally not the result of direct technological failure, but from the systematic exploitation of structural weaknesses, information gaps and operational overload in banks’ compliance systems, and sometimes also from extortion and fear.
• The fundamental element in circumventing sanctions and inserting terrorist funds into the Western system is severing the connection between the capital and its true source or destination. That is done by several basic methods: establishing fictitious corporate entities (shell and front companies) in neutral intermediary states or jurisdictions with lenient regulation, such as some Persian Gulf states, Central Asia and Southeast Asia; registering companies in the names of proxies, preventing banks from identifying the original or final beneficiary; and using small local banks in developing countries which maintain correspondent accounts^[6] with major Western financial institutions for dollar or euro clearing. In such cases, information about the end customer is omitted or obscured during the transfer chain, and the Western bank carrying out the clearing sees only the intermediary bank as legitimate.
• International trade finance systems provide fertile ground for transferring money disguised as innocent business activity. One example is trade-based money laundering (TBML), which exploits banks’ weaknesses in examining physical documents. Through forged invoices, deliberate over- or under-invoicing of goods and falsification of bills of lading and shipping routes, funds are transferred directly to sanctioned entities or terrorist cells under the guise of payment for legitimate goods.
• The internal weakness of Western banks is also a direct result of how they manage risk:
  • Technological disparities: Automated screening systems (watchlist screening) have difficulty dealing with minor spelling variations, the use of initials or the transliteration of names from foreign languages such as Arabic or Russian. A slight change in a company name can allow a transaction to pass through the filters without triggering an alert.
  • Operational overload and false positives: Monitoring systems generate an enormous volume of false alerts every day. The mental and operational burden placed on human analysts causes fatigue and allows sophisticated networks which imitate normal patterns of financial behavior to introduce prohibited transactions without arousing suspicion.
• Over the years, numerous cases have been exposed, primarily in the legal arena, highlighting the serious problems arising from bank weaknesses in dealing with terrorist financing, crime and sanction evasion. Examples include Hezbollah’s use of the Lebanese banking system and the historical use by Hamas and the PIJ of banks such as Cairo Amman Bank, Arab Bank and Bank of Palestine to manage the accounts of the dawah and distribute allowances to the families of terrorists. Reports by the commission investigating the September 11, 2001 attacks showed that the hijackers used legitimate American banks, including SunTrust and Bank of America, to manage funds for the attacks. Major institutions such as HSBC paid heavy fines for transfers of criminal and terrorist funds; Turkey’s Halkbank served as a major tool for Iran to circumvent sanctions through fictitious gold and food trade transactions; BME Bank in Tanzania was accused of enabling the activity of international criminal organizations, front companies and entities suspected of terrorist financing; and Riggs Bank was accused during a Senate hearing of allowing senior bank officials to knowingly conceal the identities of account holders and transfer funds for corrupt regimes. Although that was not terrorist financing, it was one of the best-documented cases of bank management involvement in deliberate failures in the field of anti-money laundering.

Cryptocurrency and Digital Assets

• Terrorist organizations, including Hamas, Hezbollah and Iranian-backed entities, use cryptocurrencies to circumvent international sanctions and raise funds below the radar. They use thousands of anonymous digital wallets, money-laundering networks and unregulated cryptocurrency exchanges. The public, widespread use of cryptocurrencies by terrorist organizations began between 2014 and 2019. ISIS and al-Qaeda made initial attempts, primarily by publishing Bitcoin addresses on closed global jihad forums and encrypted applications. In 2019, the institutionalization and crowdfunding phase began, when Hamas called on its supporters to donate through Bitcoin and even published illustrated guides explaining how to purchase cryptocurrency, transfer it and attempt to preserve anonymity. Since then, the activity has expanded from Hamas to the PIJ, Hezbollah and the Iranian Revolutionary Guards, with a shift from Bitcoin to faster networks and stablecoins such as USDT on the TRON network.
• Iran has turned the use of cryptocurrencies into a strategic part of its national security and terrorist financing, with the objective of circumventing the international economic sanctions which constrain it. The regime operates a sophisticated state cryptocurrency system worth billions of dollars. Iranian activity has divided into two main channels:
  • State Bitcoin mining (converting energy into money): Iran uses surplus oil and gas from its power plants and energy reserves to operate large Bitcoin mining farms, some of them managed directly by the Revolutionary Guards. Mining allows Iran to convert oil and gas, which it cannot sell because of sanctions, into clean Bitcoin which can easily be made liquid on the global market and used to purchase military equipment or imported goods.
  • Local exchanges and global laundering networks: Local cryptocurrency exchanges in Iran operate as a major financial conduit enabling the regime, the Revolutionary Guards and civilians to circumvent international sanctions. In 2025, the Iranian cryptocurrency market recorded approximately $9.9 billion in activity, with most of it concentrated in four major local exchanges accounting for 78% of all Iranian activity. The exchanges were subjected to comprehensive American sanctions in June 2026:
• Nobitex: Iran’s largest cryptocurrency exchange, serving more than 11 million users. Nobitex’s strategic importance for the Iranian economy now extends far beyond its role as a cryptocurrency exchange. It is not a substitute for the Iranian banking system and does not manage a large share of Iran’s GDP, but it has become one of the important gateways connecting a sanctions-bound economy to the digital dollar and the international financial system. In June 2026, the United States Treasury Department determined that Nobitex had helped the Central Bank of Iran obtain hundreds of millions of dollars in stablecoins and the digital currencies were used in the central bank’s efforts to support the value of the rial and finance the Revolutionary Guards.

• • Biptin: A popular and technologically advanced exchange that serves as a major hub for domestic trading against the Iranian rial and its conversion into global digital assets.
  • Wallex: A leading platform used primarily as an on-ramp for converting local fiat currency, dollars or euros, into cryptocurrency and then transferring it to foreign exchanges.
  • Ramzinex: One of the country’s oldest exchanges, which was also identified by the American administration as part of the institutional money-laundering infrastructure.
• Because Iran’s local exchanges are isolated from the rest of the world, they rely on foreign shadow networks to make the funds liquid:
  • CoinEx: An exchange registered in the Seychelles which according to financial intelligence reports from June 2026, became Iran’s largest conduit for foreign cash flows. Iranian entities have transferred more than $3.84 billion through it since 2019.
  • Zedcex and Zedxion: Two exchanges registered in the United Kingdom by Iranian proxies and sanctioned in January 2026 after processing transactions worth tens of billions of dollars for the Revolutionary Guards.
  • Aban Tether: A dedicated Iranian platform focused primarily on trading the Tether stablecoin (USDT), which is preferred by terrorist financing networks because of its stability and the ability to transfer it rapidly over the TRON network.
• Terrorist organizations and Iranian entities have made extensive use of the world’s largest cryptocurrency exchange, Binance, to move funds around the world. The company’s assistance to these organizations, whether by deliberately turning a blind eye or criminal negligence, led to its conviction in the United States and major lawsuits by Israeli and American victims of terrorism. That was made possible by a business model designed to circumvent anti-money laundering and know-your-customer regulations (AML/KYC). As early as 2019, the company’s former chief compliance officer acknowledged in internal conversations that the platform was being used to transfer funds to Hamas. Official United States Department of Justice investigations revealed that Binance enabled the transfer of more than $1.7 billion from accounts belonging to customers and proxies connected to Iranian terrorist financing networks and their proxies. Despite the sanctions on Iran, Binance allowed more than 2,000 accounts physically located in Iran to operate freely and, according to reports from February 2026, even dismissed internal investigators who had warned about this flow of funds.

The Modern Combination: Charity and Cryptocurrency

• In recent years, particularly since 2019, the charitable networks of terrorist organizations have undergone technological development through a combination of traditional mechanisms and digital assets. Instead of relying solely on traditional bank transfers, which are subject to strict regulatory oversight, charitable organizations publish calls for donations on social media using cryptocurrency wallet addresses and stablecoins. The funds are collected under the guise of emergency aid for the residents of Gaza or Ramadan charity, and converted into cash through local money changers, hawala mechanisms or decentralized cryptocurrency exchanges (DEX) and mixing protocols. These assets are converted into fiat currencies, dollars or euros, at endpoints where regulation is weak, and are then channeled into Western banks as clean capital.

The Future of Funding Terrorism and Evading Sanctions

• Within the framework of future trends in terrorist financing, four principal methods can currently be identified. They are the construction of an international system alternative to the existing one, which will enable countries led by China to reduce American hegemony over the current financial system; attempts by states that support terrorism, such as Qatar and Iran, to gain control over legitimate banks around the world, based on the understanding that the banking system remains essential and critical. In the long term, such a move could help them contend with American control of the international financial system; the evolution of the global financial system is creating a dynamic arena of confrontation, a game of cat-and-mouse, in which every technological innovation is rapidly adopted by terrorist elements to circumvent financial compliance mechanisms; the final trend is a return to basics and renewed use of traditional methods for transferring funds.

Constructing an Alternative to the Dollar and SWIFT Codes

• An alternative financial system is intended to neutralize the hegemony of the US dollar through de-dollarization and circumvent sanctions imposed through the SWIFT network. Constructing such a system requires separating the communications layer from the financial liquidity layer. The combination of parallel communications systems, such as China’s CIPS, with decentralized CBDC-based settlement platforms, such as the mBridge platform, is gradually creating a multipolar financial world. The long-term success of the system depends on the ability of the participating countries to generate liquidity depth, ensure value stability through commodity backing and provide a technological alternative which is more efficient and less expensive than the existing Western system. Iran, which was first disconnected from the SWIFT network in 2012 and again in 2018, serves as a kind of global testing laboratory for circumventing the dollar, and today it is joining forces with China, Russia and the BRICS bloc (Brazil, Russia, India, China and South Africa) to turn sanctions-evasion solutions into institutionalized infrastructure.

Taking Control of Western Financial Institutions

• Over the past decade, Qatar has begun a gradual process of acquiring holdings in financial institutions within the international system. Beyond being part of Qatar’s global influence strategy, such holdings provide access to centers of financial power and, at times, facilitate turning a blind eye to the movement of problematic funds. Through its sovereign wealth fund, the Qatar Investment Authority (QIA), Qatar has invested enormous sums in acquiring holdings in leading international banks, thereby gaining access to financial networks and global decision-making centers:
  • Qatar holds almost complete control over banks such as QNB Finansbank (Turkey), QNB Alahli (Egypt) and Ecobank, which operates a cross-border network in more than thirty countries in sub-Saharan Africa.
  • Qatar is a major shareholder in Barclays (United Kingdom, since the 2008 crisis) and Deutsche Bank (Germany, where the Qatari royal family holds close to 10% of the shares), and maintained major holdings in Switzerland’s Credit Suisse until its collapse in 2023.
• Iran, however, does not openly acquire banks, which would be immediately blocked by the authorities. Instead, it operates through a three-layer financial system of front companies and money changers, accounts in local banks in third countries and the use of correspondent banking accounts (see Footnote 6). Iranian intelligence networks establish fictitious trading companies in countries such as the UAE, Turkey and Hong Kong, managed by proxies with no overt connection to Iran. The companies open ostensibly legitimate accounts in local banks in Asia and the Middle East which maintain correspondent accounts with major banks in the United States and Europe. This enables dollars and euros to be channeled into the Western system without Iran’s name appearing directly.

• Iran’s objective in the West is not managerial control over banks, but rather to become a concealed shareholder and channel capital through complex investment portfolios. Department of Justice investigations have focused on major banks such as JPMorgan Chase and Citigroup, amid suspicions that financial networks belonging to the asset empire of Iran’s leader circumvented due diligence mechanisms and manage accounts and capital investments worth billions of dollars.
• The Central Asian states Kazakhstan, Turkmenistan and Uzbekistan provide Iran with a critical area for maneuver because of their geographic proximity and their interest in infrastructure projects with Iran. The Central Bank of Iran is promoting the CIMS system, an alternative interbank messaging system, and signing agreements with commercial and government banks in Kazakhstan and Turkmenistan to enable direct trade in local currencies, such as the Kazakh tenge or Chinese yuan, while circumventing the dollar.

Artificial Intelligence (AI) as a Tool for Circumventing Monitoring

• While the banking system uses AI to detect anomalies, terrorist elements are adopting the technologies to automate fund-splitting operations (smurfing). Advanced algorithms are used to analyze the activity patterns of bank monitoring systems and create financial activity profiles that appear legitimate through numerous small, decentralized and coordinated transactions, reducing the likelihood of real-time detection.

Hybrid Financial Infrastructures and Stablecoins

• The use of stablecoins has become a major tool in informal financial networks because of their stability and speed of transfer. However, since most of the economy still relies on fiat currencies, particularly the dollar, the future trend is toward the establishment of hybrid infrastructures, that is, close integration between decentralized cryptocurrency systems and physical money-changing offices, which serve as the endpoint for converting digital assets into cash for operational activity, logistics and procurement on the ground.

New Geographic Centers and Shadow Industries

• Online money-laundering centers: Countries with fragile sovereignty, such as Cambodia, are becoming centers which combine payment services, digital asset trading, encrypted instant messaging platforms and money-changing services within a single integrated system.
• The online gambling and gaming industry: Gaming platforms are used as a means of transferring monetary value across borders. The model is based on depositing funds in one geographic area, conducting minimal gaming activity and withdrawing the funds in another area while disguising the users’ identities as part of legitimate recreational activity.
• FinTech and payment companies: The rapid growth of FinTech companies is being exploited as an alternative route around traditional banking. Cases such as the collapse of Wirecard demonstrated how complex payment networks, front companies and trust accounts can be exploited to conceal enormous movements of capital.

Renewed Appearance of Physical Assets (Cash, Gold and Jewelry)

• Along with digitization, tighter electronic monitoring is leading to a return to anonymous physical assets. There is evidence of significant amounts of cash being smuggled on aircraft and in shipments and stored in friendly countries. Gold plays a particularly important role because it retains its value and is not dependent on institutional systems. One common, sophisticated method is converting gold into jewelry, a method that makes it possible to effectively disguise financial value as personal belongings which blend naturally into international passenger traffic and are declared as private property which does not arouse suspicion at customs. Within this framework, international religious events, such as the annual Hajj in Mecca in Saudi Arabia, which brings together millions of participants, create an environment involving the mass movement of people, cash, donations and gifts. The environment can be exploited to transfer financial assets through numerous couriers while embedding the activity in accepted and legitimate patterns of behavior and culture.

Summary and Conclusions

• Terrorism financing is no longer marginal or operates outside the formal economic system, but is rather a hybrid, flexible, multilayered system operating simultaneously within the institutionalized banking system, in informal money-changing networks, in cryptocurrency arenas, through front organizations and charities and under the auspices of states that challenge the international financial order. As the West strengthens its monitoring, sanctions and compliance mechanisms, terrorist and criminal elements and facilitating states develop new circumvention routes, combine traditional and innovative tools and exploit regulatory, technological and geopolitical loopholes. Several conclusions can therefore be drawn:
  • Terrorism financing is an adaptive and evolving system: Blocking one financial channel does not necessarily dry up sources of funding, but rather pushes organizations to shift to alternative channels. The transition from formal banking to money changing, from money changing to cryptocurrency and from there to a combination of stablecoins, unregulated exchanges and artificial intelligence shows it is a dynamic arena in which technological innovation is rapidly adopted for operational needs.
  • The legitimate financial system remains essential even for illegitimate actors: Despite the expanding use of cash, gold, hawala and digital assets, at some point most financing mechanisms require the banking system, settlement services, correspondent accounts or legitimate financial institutions for liquidity, concealment and the integration of the money into the formal economy. The campaign therefore cannot focus solely on the financial margins, but must also encompass the core of the institutional system.
  • Facilitating states are a major force multiplier: State sponsorship, regulatory disregard and the use of national banking systems enable terrorist and criminal organizations to operate on a scale that would not be possible for an individual organization. Iran, Qatar, China, Russia and other countries demonstrate that terrorist financing is not merely a criminal or intelligence problem, but also a geopolitical issue involving the struggle for control of the global financial system.
  • The distinction between terrorism, crime and the legitimate economy is becoming increasingly blurred: The connection between terrorist organizations and organized crime, front companies, financial professionals, charities and digital platforms creates an economic ecosystem in which funds originating in criminal activity or hostile state activity can rapidly be integrated into ostensibly legitimate business activity. Financial analysis must therefore be based on an understanding of networks, connections and patterns of activity, rather than merely on identifying individual names or accounts.
  • The next campaign will take place in a combined technological and regulatory arena: Countering terrorist financing requires a transition from a reactive model to a proactive model that will include financial intelligence, blockchain analysis, artificial intelligence, information sharing between countries, oversight of FinTech and gaming and the application of stringent compliance rules to non-bank actors as well. Without expanding the monitoring framework beyond traditional banking, the international system will remain one step behind the adversary.
• In conclusion: the campaign against terrorist financing can no longer be limited to freezing accounts, adding names to sanction lists or blocking one bank or another. A broad systemic approach is required which views terrorist financing as a genuine strategic infrastructure: a global network of states, banks, money changers, cryptocurrency exchanges, charities, front companies and professionals. Only a combination of intelligence, regulation, technology, enforcement and international cooperation can reduce the operating space available to these networks and impair their ability to translate capital into operational, political and influence capabilities.

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1. Click https://www.terrorism-info.org.il/en to subscribe and receive the ITIC's daily updates as well as its other publications.

2. The principal international communications network for transmitting financial messages between banks and financial institutions.

3. A network of Eurasian trade routes active from the second century BCE until the mid-15th century (Wikipedia).

4. The first attack on the Twin Towers (World Trade Center) in New York took place on February 26, 1993, when a van loaded with one ton of explosives detonated in the complex’s underground parking garage. Six people were killed and more than one thousand were injured. The attack was carried out by an extremist Islamic terrorist network.

5. The attack on the offices of the satirical weekly Charlie Hebdo in Paris took place on January 7, 2015, when two Islamic terrorists, French brothers of Algerian origin, shot and killed 12 people, including the weekly’s editor and several cartoonists. The two terrorists were killed in a security forces raid after a two-day manhunt. The al-Qaeda branch in the Arabian Peninsula claimed responsibility for the attack and stated that it was revenge for cartoons against the Prophet Muhammad.

6. A correspondent account is an account that one bank maintains with another bank, generally in a country or currency in which it has no direct operations. A transaction may begin at a small local bank but pass through a large correspondent bank in New York or London. Thus, for example, a dollar transfer between two parties in the Middle East may pass through an American bank even if neither party is American.

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