Joburg man’s terror financing case using crypto is a test for the FIC

Joburg-based Ziyadh Hoorzook (35) is accused of shipping bitcoin to a Syrian-based charity linked to terror organisations in 2017.

The case – set to be heard in the Lichtenburg Magistrate’s Court in North West on Wednesday 22 January – is seen as a test of South Africa’s commitment to removing itself from the grey list imposed by the Financial Action Task Force (FATF) two years ago.

Hoorzook appeared in court last week to apply for bail, denying that he had funded terror activities as the recipient of the funds, Al-Sadaqah, was not listed as a terror organisation at the time the payment was made in 2017.

His lawyer argued in court that many human rights organisations in SA highlighted the plight of innocent civilians in Syria and Al-Sadaqah (meaning ‘charity’ in Arabic) was seen as an appropriate channel for donations. The case was postponed to next week.

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The charges

Hoorzook faces charges under the Protection of Constitutional Democracy against Terrorist and Related Activities Act, as well as contraventions of the Regulation of Foreign Military Assistance Act and the Firearms Control Act “for failing to secure firearms in the prescribed manner”, according to a statement by the National Prosecuting Authority.

He is accused of purchasing bitcoin worth R11 500 through Luno in 2017 and transferring it to a wallet belonging to Al-Sadaqah, a Syrian-based organisation operating social media accounts that solicited bitcoin as a way of funding terrorism, according to a 2020 forfeiture case involving 155 virtual currencies in the US.

If anything, the case highlights the futility of making payments with bitcoin and expecting to remain anonymous.

Terror organisations discovered this several years ago and started recommending payments be made in privacy coins such as Monero, which are virtually impossible to trace.

The Financial Intelligence Centre (FIC), working with law enforcement, will be keen to use this case to demonstrate SA’s commitment to removing itself from the grey list imposed by the FATF in February 2023.

The FATF found little wrong with SA’s legislation covering terror financing and combatting money laundering, but wants to see stronger enforcement of these laws.

A 2024 report by security research group Soufan Center found that Jihadi terrorist groups are increasingly relying on virtual assets to fund their operations.

“The virtual nature of cryptocurrencies and the fact they are encrypted make them an interesting alternative for terrorist groups and sympathisers. While cryptocurrencies are significantly more traceable than cash transfers, cryptocurrencies can be a faster alternative than cash and provide significantly more privacy than wire transfers,” says the report.

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Providing ‘weapons, financial aid’

The US case cited earlier claims that Al-Sadaqah used multiple platforms to solicit terrorism financing through bitcoin (BTC).

“They described themselves as ‘an independent charity organisation that is benefiting and providing the Mujahidin in Syria with weapons, financial aid and other projects relating to the jihad. You can donate safely and securely with Bitcoin’,” reads the court filing.

On its Telegram channel, Al-Sadaqah openly solicited donations via BTC to an address starting with 15K9Z.

ALSO READ: Dodgy Bitcoin transfer to a ‘charity’: Hawks arrest alleged Joburg terror financing suspect

Luno’s response

Asked to comment on the case, Luno SA country manager Christo de Wit responded that the company “is required to and does comply with anti-money laundering (AML) legislation in South Africa”.

“This includes submitting reports to the FIC concerning suspicious and unusual activities or transactions on its platform. Luno is prohibited by law from sharing details of any reports submitted, but we can confirm that where such reports lead to law enforcement or other investigations, we provide the necessary support and assistance to relevant authorities.”

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The FIC’s response

The FIC responded to Moneyweb questions, saying it was likewise prohibited from disclosing details of investigations.

“It should be noted that while the FIC continuously assists investigating authorities with their investigations, its mandate does not encompass the actual conduct of investigations.

“The FIC is mandated to assist in identifying the proceeds of unlawful activities, assist in combating money laundering and the countering of terrorist financing and related activities. The FIC processes, analyses and interprets information from accountable institutions and businesses registered with it.”

Its intelligence reports are shared with law enforcement bodies such as the State Security Agency, the Directorate for Priority Crime in the South African Police Service as well as international counterparts, and the South African Revenue Service.

This information is used for investigative purposes, prosecutions and in asset forfeiture.

The FIC does not itself have investigative powers.

“Through the gathering of information, conducting analysis and providing financial intelligence to competent authorities, the FIC supports SA’s criminal justice system and assists in the detection of serious crime and terrorist financing. In addition, the FIC is part of various government-led intelligence structures established to detect, monitor, investigate and prosecute terrorism-related activities including potential use of crypto currencies as a method to fund terrorist activities.”

The Soufan Center report notes that the short history of cryptocurrency usage by terrorist groups shows resilience and a capability of adapting to counter-terrorism financing measures.

That means law enforcement, finance institutions, banks and others will have to collaborate to plug loopholes as they are discovered.

This article was republished from Moneyweb. Read the original here.