Israel thwarts Hamas on the financial battlefield

Ilit Ostrovitch-Levi credit: Rami Zarnegar
Ilit Ostrovitch-Levi credit: Rami Zarnegar

Israel Money Laundering and Terror Financing Prohibition Authority head Ilit Ostrovitch Levi tells "Globes" that to defeat terrorist organizations, their economic oxygen must be cut off.

Two weeks into the war, the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA) received secret intelligence information from two European countries that warned: "A large, well-known organization is raising funds for Hamas through posts on social networks, and fintech company platforms outside Israel, under the guise of donations to Gaza residents." The information included the name of the organization, its fundraising methods, and the identity of the entities behind it. Their concern was that, within days, the millions of dollars raised would go directly to the military arm of Hamas. In a swift joint international action, at IMPA’s request, one of the European countries blocked the organization’s money pipeline by immediately freezing its financial activities.

"We are talking about a matter of minutes here. From the moment the authorities in Europe received the information, and we requested the money be blocked, with no court orders or delay, they blocked the transfer of millions of dollars to one of the most active organizations, and from it to Hamas. This is a real-time deterrence," reveals IMPA director general Adv. Ilit Ostrovitch-Levi. "And then there was a domino effect. Following this blocking, more countries began to look around, and blocked funds intended for terror. All this information, which is now shared at an international level, leads to the closing of more and more Hamas funding pipelines, in real time. With worldwide cooperation, Israel’s security and enforcement authorities are thwarting the transfer of millions of dollars earmarked for terrorism, every day."

Headed by Ostrovitch-Levi since May 2022, IMPA is an intelligence body that conducts the most complex of international economic investigations, and fights terror financing routinely. On October 7, Ostrovitch-Levi received a painful reminder of the vital importance of her work. "Already on that Saturday night, with Israeli under heavy rocket fire, we talked about preparing ourselves for the campaign we’re now entering, the fight against terror financing channels. Dozens of our staff have been called up to reserve duty, in large part managers working regularly in the fight against terror financing."

Since then, most of IMPA’s work has focused on identifying and blocking the terror money pipelines. "We work very reactively - we see a fundraising campaign, try to deter it, and stop it from happening again. There are no breaks, because they are constantly active. It’s a daily struggle. Our analysts have been sitting on the social networks from day two of the war, just manually monitoring visible sources of information on these networks to locate fundraising campaigns for terrorist organizations operating in Gaza."

Three days after the war began, IMPA also issued a call to all global regulated entities for increased vigilance towards terrorism financing campaigns in response to the ongoing war and state of emergency, and to report all activities that raise suspicion of terror support and terror financing, in an effective and immediate manner.

"Overnight, we started receiving hundreds of reports about unusual activity by customers of financial institutions in the State of Israel," she says. Before October 7, IMPA received about 100 reports a day dealing with terror financing. That number jumped to about 1,000. "There is a 900% increase in reports on terror financing, and we don't waste time, everything happens very, very quickly. As we receive the information, we simultaneously pass it on to the operational professionals who locate the money pipelines, and block them. Some information will not necessarily lead to terror financing, but we don’t have time to waste. Bank CEOs call and draw our attention to the information they convey to us that warrants special attention."

Has information from banks and financial institutions led to blocking the money pipeline for terrorism?

"There was very high-quality intelligence that we passed on to the security agencies. We don't always know the results."

"Gaza could be more beautiful than Dubai "

The network to block terror financing funds includes many entities, including private citizens. "The world's financial intelligence authorities are now at the heart of this struggle, and we’re working together to thwart the financing channels that we’ve located. In addition, we’ve been approached by many experts from the private sector; people with intelligence experience because they’ve worked in these organizations, or have high-tech experience, and have mobilized like crazy. Israeli entrepreneurs in Silicon Valley have contacted us; they write code, search for information, and give us lots of information. We aggregate and examine everything."

IMPA is charged with rooting out the sources of funding for terrorism, working together with the National Bureau for Counter Terror Financing of Israel (NBCTF) in the Ministry of Defense, which is the coordinating body of all activities to thwart terror financing, the Shin Bet, Military Intelligence Directorate (AMAN), and all other relevant intelligence and security agencies. "The most significant way to finance terrorism is to finance countries, not fundraising campaigns. These have intensified greatly over the last month, but the core of the budget - for Hamas, Hezbollah, the Houthis, and the Palestinian Islamic Jihad is Iran, in particular the Quds Force (the special forces of the IRGC, Iran's Islamic Revolutionary Guard Corps). Hamas has all kinds of additional sources of self-financing, including businesses, associations, investments, and all kinds of arrangements they’ve tried to set up over the years. They need state funding, and without Iran they have no ability to exist."

How much money does Iran transfer to Hamas?

"As far as we know, the budget from Iran to Gaza is in the order of $100 million a year. Gaza could do very nice things with this money, make it even more beautiful than Dubai. But from what we know, most of this budget goes to the military wing of Hamas."

Qatar also transfers money to Hamas.

"Qatar transferred suitcases of cash to Gaza through Israel. Everyone knows this. This money allegedly went to pay salaries and civilian needs (education, health, infrastructure), and therefore Israel transferred it, so it’s incorrect to say that it all went to fund terrorism."

From money-changers to chocolate

How have these billions reached the Gaza street, and Hamas over the years? There are quite a few methods, including cryptocurrencies and trade. But the main and easiest method for money transfer to Gaza is hawala.

Ostrovitch-Levi explains, "Most of the money does not reach Gaza physically through the border crossings, but via hawala, a financial channel that is based on trust and connections, and enables the transfer and exchange of funds between countries, without the cash physically passing through them. It’s a channel for transferring the funds raised in other countries. In Gaza there are all sorts of wealthy individuals who can transfer large amounts in cash to Hamas upon receiving request from entities abroad."

How does the method work?

"Money changers in places all over the world, let's say Turkey, receive money, and inform the hawaladars (money changers) in Gaza who transfer the money on their behalf. When a customer comes to a hawaladar in Turkey and asks to transfer money to Gaza, he does not physically transfer money, but settles accounts internally with money changers in Gaza, and Judea and Samaria. The funds are de facto not transferred. Occasionally, or when the amount of the debt reaches a predetermined ceiling, a transfer is made between the money changers to reset the outstanding debt."

Is it possible detect the money pipeline between hawaladars and halt the transfer?

"Transfers are made between two ‘exchangers,’ and don’t include the identity of the beneficiaries, or the persons who gave the money. They don’t know what the transactions were, they only know there are debts to offset. We are in a constant battle against this phenomenon. In recent years, Israeli authorities have designated several currency service providers in Gaza as conduits facilitating the transfer tens of millions of dollars a year to terrorist organizations in Gaza."

Another way to transfer money is trade. Transferring goods, or inflating their value. For example, only days ago, containers of goods worth hundreds of thousands of shekels were seized at Ashdod Port, which were destined for Hamas merchants in Nablus and other cities, with the proceeds intended to go on to finance Hamas operations. Another example is the 23 tons of chocolate bars that were seized in August 2021 in a joint operation by the NBCTF, AMAN, and the Tax Authority at the Nitzana Border Crossing between Israel and Egypt. It was suspected that the snack bars, destined for Gaza, were purchased with terror financing funds, with the proceeds from their sales earmarked for Hamas.

Another affair that was uncovered, combined trade and hawala. Hamas funds originating in Iran, which were transferred in cash to money changers in Turkey for transfer to Gaza. At the same time Hamed al-Khachari, a Gazan money changer who worked for Hamas (who was assassinated by Israel in 2019), located Gazan merchants who imported goods from Turkish companies and owned payment on the goods. They paid cash to Khachari, who transferred the money to Hamas in Gaza. Meanwhile, the money changers in Turkey received funds from Hamas abroad that were used to pay the Turkish companies.

Hamas is already preparing for "the day after"

Although it has been almost impossible to transfer money and goods to Gaza since October 7, with hawala shuttered, and no trade, Hamas continues to raise funds. "The situation in Gaza is known, and nothing can be brought in, but fundraising activity continues in Judea and Samaria. It’s also possible to make bank transfers to Judea and Samaria, and the fundraising activity hasn't stopped, because while the fighting is going on, they’re continuing to fill their reserves for ‘the day after’ [the war]. We realize they’re raising funds for their continued operations. Hamas is taking advantage of the current sympathy for the Gazans’ situation, and is using online platforms, both of organizations whose business is crowdfunding, and also through the creation of fictitious projects to raise funds: throw-pillows, jewelry and whatnot, and more."

All this happens openly, for all to see, in Europe, and other places around the world. "Hamas and Islamic Jihad carry out recruitment operations under the guise of humanitarian aid campaigns, and use Telegram, Twitter, Facebook, Instagram and TikTok to disseminate their announcements. The facade is always supporting humanitarian goals, but in practice it's about channels for funding individuals and entities connected directly to Hamas or Islamic Jihad."

However, IMPA’s goal, Ostrovitch-Levi explains, is not only to stop the individual raising of funds for terror financing, but the entire interrelated chain, from the fund-raiser to the transferrer, and on through to the recipient. "We have the ability to build the intelligence scenario, synchronize all the sources of information received, and delineate the money trail from abroad to Hamas. We’re interested not only in who is running the campaign, the association or entity, but where the money is coming from, and where it’s going. We need to stop all of the elements in this network."

Ever since October 7, everyone has been discussing and analyzing the question of about the intelligence agencies, and why there was no warning. Where was IMPA before?

"Hamas collects lots of money all the time, and the security agencies deter money transfers. There was no sudden increase in the raising of billions, and you must also remember that most of the money is raised globally, not in Israel. The hundreds of millions of dollars that Hamas receives have been accumulating for years. We had no possibility of seeing a spike in fundraising towards October 7."

"We understand the west is next"

IMPA is not alone in the fight against terror financing. Three days after the start of the war, Andrea Gacki, Director of the US Treasury Department's Financial Crimes Enforcement Network (FinCEN) contacted Ostrovitch-Levi to request a meeting. The two met at virtually the same time President Joe Biden met with the families of the hostages. "She put herself and the entity she heads, one of the most powerful financial intelligence agencies in the world, at our disposal. She said, 'Whatever you want or need, just say the word'".

Gacki has kept her promise. "Since that day, we’ve received an unprecedented flow of financial intelligence from the US, unlike anything seen before. They’ve given us valuable information that we’ve passed on to the security agencies, about organizations they didn’t necessarily know about, and people backing them, all in real time. At the same time, they’ve issued alerts to increase vigilance among the US public about terror financing."

On October 18, the US Treasury Department's Office of Foreign Assets Control (OFAC) announced that it had imposed sanctions on 10 key Hamas operatives and financial facilitators in Gaza and elsewhere including Sudan, Turkey, Algeria, and Qatar. The statement read, "This action targets members managing assets in a secret Hamas investment portfolio, a Qatar-based financial facilitator with close ties to the Iranian regime, a key Hamas commander, and a Gaza-based virtual currency exchange and its operator… To date, the Treasury has targeted nearly 1,000 individuals and entities connected to terrorism and terrorist financing by the Iranian regime and its proxies, including Hamas, Hezbollah, and other Iran-aligned terrorist groups in the region."

On October 27, OFAC imposed a second round of sanctions on key Hamas-linked officials and financial networks. The statement read, "Today’s action targets additional assets in Hamas’s investment portfolio and individuals who are facilitating sanctions evasion by Hamas-affiliated companies. The Treasury is also designating a Hamas official in Iran and members of Iran’s Islamic Revolutionary Guard Corps (IRGC), as well as a Gaza-based entity that has served as a conduit for illicit Iranian funds to Hamas and Palestinian Islamic Jihad (PIJ)."

The US is not the only one. Europe has also been mobilized in the economic fight against terrorism. "On the third day of the fighting, my colleagues from the Netherlands and Germany, both veteran heads of their authorities for the prohibition of money laundering, phoned to let me know they wanted to establish an international task force to assist Israel in the fight against the financing of Hezbollah, Islamic Jihad, and all terrorist organizations and their satellites. With them and with the US, we established a kind of task force, which is not subject to any country or unifying body, countries that are working in coordination, and meet every few days to exchange intelligence, and advance the struggle."

In general, following an appeal by IMPA to its counterparts around the world, there has been a dramatic increase in intelligence coming to Israel from abroad. "The amount of information doubled in the month of fighting, compared with the monthly average. Before the war, we received about 24 intelligence reports a month from parallel authorities, compared with 50 today."

Countries around the world cooperating with Israel to fight terrorism sounds almost ideal, but it’s hard not to wonder where they were before.

"Many countries felt this had nothing to do with them, that it wasn’t their struggle. The international and US mobilization, the task force we founded, the fact that the financial sector abroad suddenly wants to accept the Israeli announcements about the terror entities and people involved, receive intelligence from Israel, and cooperate with us is all only because of October 7. Everyone understands that ‘The West is next’ isn’t an empty statement. This event is the one to make the countries of the world understand they must fight effectively against terror financing, that they need to block Iran effectively."

IMPA is trying to convey these messages to the member nations of the Financial Action Task Force (FATF), an international body to combat money laundering and terror financing. "We are working very hard on isolating Iran in matters of terror financing. But it’s still a cash economy and it is very, very difficult to stop the financing of Hamas, Hezbollah, and Islamic Jihad. Most of the money comes from oil, but there’s actually an Iranian security system budget dedicated to this."

Another problem to be dealt with is the addiction to the cash received from the terrorist organizations. "Because it involves cash in such huge amounts, a situation has arisen in which the populations in Gaza and Lebanon become addicted to financing from Iran. There is internal collapse and a complete disruption of the ability to receive funds another way. This makes terrorism a very profitable business. It destroys the civic structure, unemployment rates rise very high, and being a Hamas operator becomes profitable. It's a vicious circle that feeds on itself. This is an alternative banking system disconnected from the general system. The Iranians are building whole mechanisms to enable intake of this money. This is something bigger than deterring one transfer or another."

Can the current global mobilization alter the fight against terror financing?

"Discussions with countries around the world and immediate deterrence are not long-term solutions. Stopping the funds from Iran should be carried out at the international level through FATF, through OFAC sanctions, through sanctions from the entire world. In the end, the solution to Iranian financing are global sanctions. It’s not something that one country can prevent. The bottom line is that without money there is no terrorism, and no matter how hard they try to decapitate the terrorist organizations, as long as they have economic oxygen, as long as the countries of the world do not fight terror financing properly, these organizations will continue to breathe."

Published by Globes, Israel business news - - on November 19, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

Ilit Ostrovitch-Levi credit: Rami Zarnegar
Ilit Ostrovitch-Levi credit: Rami Zarnegar
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