The regulatory authority in Cyprus has called upon accounting and audit professionals to play a crucial role in detecting and preventing terror financing activities. This effort emphasizes a special focus on five methods of fund transfer, including cryptocurrencies.
ICPAC Issues Terror Financing Alert
The Institute of Certified Public Accountants of Cyprus (ICPAC), the regulator for the accountancy profession in the island nation, issued a “terror financing alert” as part of a broader initiative to combat financial crimes. While law enforcement agencies typically handle money laundering and terror financing, ICPAC is urging accounting professionals to be more vigilant and involved in oversight.
ICPAC stressed the importance of the role that accounting professionals can play in preventing terror financing. The regulator stated:
“These days, given the nature of services provided and the role of professionals as gatekeepers, it is a requirement for obliged entities to take an active role in the prevention phase.”
Methods of Fund Transfer
According to ICPAC, terrorist organizations utilize five primary methods to transfer funds:
- Donations via nongovernmental organizations (NGOs)
- Cash transactions
- Bank transfers and gift cards
- Cryptocurrencies
- Shell companies
ICPAC specifically highlighted the use of cryptocurrencies, directing accountants to be particularly vigilant about anonymous cross-border peer-to-peer transfers, crowdfunding, charities, and anonymous online fundraising campaigns. The directive requires accountants, associated firms, and compliance officers to report any suspicious transactions. Failing to do so will be considered an offense.
As a result, flagged transactions will undergo scrutiny, including profiling individuals, screening crypto wallets and transactions, and implementing specialized blockchain tools.
A United States Treasury official has noted that Palestinian militant groups, including Hamas, have used small amounts of cryptocurrencies to fund terrorist activities, although they widely prefer traditional financial products and services. For instance, Palestinian Islamic Jihad was reported to have collected $12 million through crypto fundraisings. However, blockchain analytics firm Elliptic contradicted earlier reports by the Wall Street Journal that claimed much higher figures, forcing the Journal to correct its findings.
During a discussion, Representative Tom Emmer asked the Treasury’s Undersecretary for Terrorism and Financial Intelligence, Brian Nelson, to clarify the extent of Hamas’s use of cryptocurrencies. Nelson confirmed that Hamas uses crypto in relatively small amounts compared to what had been widely reported.
The initiative by Cyprus’ regulatory authority aims to enhance the role of accounting professionals in preventing terror financing, particularly through vigilant monitoring of cryptocurrencies. This effort is part of a broader strategy to maintain market integrity and align with global best practices.
| Method | Description |
|---|---|
| Donations via NGOs | Funds collected through charitable organizations. |
| Cash transactions | Direct use of cash for funding activities. |
| Bank transfers and gift cards | Utilization of banking systems and gift cards for transferring money. |
| Cryptocurrencies | Use of digital currencies for anonymous and cross-border transactions. |
| Shell companies | Establishing fake companies to facilitate and disguise financial movements. |
The call to action by ICPAC underscores the evolving nature of financial crimes and the need for a collective effort to combat terror financing. As cryptocurrencies become a more common method for transferring illicit funds, the role of accounting professionals in monitoring and reporting suspicious activities is becoming increasingly critical.
