Bitcoin, PayPal used to finance terrorism, says Indonesian agency

A PayPal sign is seen at an office building in San Jose, California. | Reuters/Beck Diefenbach

Bitcoin and PayPal have been used by Islamic militants in the Middle East to fund members and associates in Indonesia, the country's anti-money laundering agency claimed on Monday.

Indonesian Financial Transaction Reports and Analysis Centre (PPATK) chairman Kiagus Ahmad Badaruddin revealed in a press briefing that they saw the number of terrorism-related fraudulent transactions rise from 12 to 25 cases in 2016. Because of this, the agency, which directly reports to President Joko Widodo, is monitoring financial transactions from overseas more closely.

According to Kiagus, the agency has identified local terror groups, which were exposed last year by the country's counter-terrorism police unit, Detachment 88 (Densus 88), as having connections with the Islamic State, as the likely recipients of the funds. PPATK examination and research director Ivan Yustiavandana shared with reporters that jihadists are exploring non-conventional means of moving funds. "Today we are talking about PayPal, bitcoins. Two to three years from now, we may talk about other means, new ways. The more sophisticated we are at getting them, the more they will try to look for new ways," he said.

PayPal has already announced its commitment to take "all appropriate actions" and work with Indonesian authorities to help put an end to terrorism and criminality.

Bitcoin may be harder to scrutinize because of the way it was designed as it will be difficult for authorities to have a view of the transactions that use this digital currency.

The Islamic State has long been suspected of using bitcoin and other virtual currencies to raise funds and distribute financing, but authorities and private investigators around the world have been divided in confirming such. In 2015, Europol dispersed suspicions that cryptocurrencies like bitcoin were being used by ISIS.

"Despite third party reporting suggesting the use of anonymous currencies like bitcoin by terrorists to finance their activities, this has not been confirmed by law enforcement," Europol indicated, as reported by International Business times.

In 2015, a pool of "hactivists" called Ghost Security Group told Michael Smith II, co-founder of national security advisory firm Kronos Advisory, that they had discovered several bitcoin accounts controlled by ISIS.

According to Juniper Research, as reported by Fox News, there were 1.3 million bitcoin users in 2016. This figure is expected to escalate to 4.7 million by the end of the current year.