A blockchain intelligence company, TRM Labs, reported that the Yemen-based Houthi group has acquired a great volume of cryptocurrency to evade U.S. sanctions and fund the purchasing of military equipment. These findings are indicative of the persistent problem of digital assets financing terrorism, more so than the efforts by the international community towards the prevention of terrorism financing.
TRM Labs reports that eight crypto wallets affiliated with the Houthi group have in total spent over 900 million dollars worth of various cryptocurrencies, moving them to other high-risk entities. Based on the report, the funds were probably spent to purchase military and other auxiliary equipment supporting the group’s activities.
OFAC Designation: A Target on the Blockchain
The U.S. Treasury’s Office of Foreign Assets Control (OFAC) strikingly added the eight identified addresses to their Specially Designated Nationals and Blocked Persons (SDN) List on April 2nd. The significance of these findings is added upon due to the fact that the government has described them to be linked with persons or parties that pose national security threats.
Following the Money: Unraveling the Laundering Network
TRM Labs was able to track the transaction flow from the sanctioned addresses and their subsequent transactions. From the report, there were outflows to numerous sources, with one being to addresses tied to Sa’id al-Jamal, an OFAC-sanctioned Iran-based financier, which amounted to over $900 million in total. In addition, funds were also traced to a Russian broker tied to a Chinese manufacturer of unmanned aerial vehicles (UAVs) and anti-UAV equipment.
Drones and Military Gear: The Suspected Purpose of the Funds
The recent developments in the Houthis’ UAV and anti-UAV drone capabilities, alongside the cryptocurrency transactions, lead TRM Labs to deduce that the group has been acquiring drones and other military equipment through cryptocurrency. This discovery is alarming in regard to the complexities posed by digital assets in the hands of non-state actors.
A Sanctioned Entity: The Houthis and International Security
The Houthis, a political and armed group controlling much of Yemen’s territory since 2014, have proven most notorious for their attacks on commercial ships in the Red Sea. These ship attacks—usually justified as retaliation towards Israel for their actions in Gaza—have created an additional blockade on international shipping and maritime trade. The U.S. government has classified the Houthis as a Foreign Terrorist Organization (FTO), further freezing their assets and imposing economic and military restrictions on the group.
Cryptocurrency as an Evasion Method for Sanctions: A Developing Phenomenon
The sources claim the Houthis’ cryptocurrency-related activities for sanction evasion purposes are not unique. The document draws parallels with North Korea, a country historically known to finance nuclear weapons programs through sponsoring elaborate crypto hacking schemes. This trend sheds light on an increasingly worrying fact that sanctioned entities appear to turn to cryptocurrency in order to circumvent traditional financial controls.
Retrievers and Intermediaries: An Established Support System
The report claims the Houthis are reported to have an elaborate network of facilitators and brokers who employ cryptocurrency and other forms of decentralized technologies to move funds. This network must be critical for the group in attempting to evade sanctions and acquire the required materials.
Final Thoughts: An Emerging Risk and Why We Need to Be Proactive
The findings from TRM Labs’ investigations portray a grim picture concerning mounting abuses of cryptocurrency towards illicit activities and international security undermining initiatives. The alleged exploits by the Houthis, using cryptocurrency to purchase weaponry, point to the need to develop more proactive approaches to regulate abuses involving untraceable digital currencies—especially in relation to terrorism and armed conflicts.
