Coins for Bombs: Increased Transparency of the Global Financial System - Evidence from Terrorist Attacks Financing Detection in Blockchain-based Currencies

43 Pages Posted: 17 Nov 2020 Last revised: 1 Dec 2020

See all articles by Dan Amiram

Dan Amiram

Tel Aviv University - Coller School of Management

Bjorn Jorgensen

London School of Economics & Political Science (LSE) - Department of Accounting and Finance

Daniel Rabetti

Tel Aviv University - Coller School of Management

Abstract

The proliferation of blockchain-based cryptocurrencies, which essentially use public accounting ledgers, has two opposing effects related to the global financial system's transparency. On the one hand, governments, market regulators, and financial institutions make significant efforts to curtail the financing of illicit activities that cryptocurrencies may be able to circumvent. On the other hand, funds and transfers that used to be known only by the involved parties are now transparent to anyone with knowledge of blockchain and accounting. This study empirically examines whether it is possible for outsiders to identify evidence of financing international terrorist attacks on public blockchain systems. We do so by utilizing empirical strategies based on accounting and finance literature, forensic accounting, and machine learning algorithms on millions of cryptocurrencies' transfers. We provide evidence that blockchain-based cryptocurrencies are used to finance terrorist attacks. However, the blockchain ledger underlying transparency also enables outsiders to identify the fund trails and predict terrorist attacks.

Keywords: Financial Regulation, Terrorist Financing, Economics of Blockchain, Forensic Accounting, Bitcoin, Ripple

JEL Classification: G15, G18, G29, K29, K42, O16

Suggested Citation

Amiram, Dan and Jorgensen, Bjorn N and Rabetti, Daniel, Coins for Bombs: Increased Transparency of the Global Financial System - Evidence from Terrorist Attacks Financing Detection in Blockchain-based Currencies. Available at SSRN: https://ssrn.com/abstract=3616207 or http://dx.doi.org/10.2139/ssrn.3616207

Dan Amiram

Tel Aviv University - Coller School of Management ( email )

Tel Aviv
Israel

Bjorn N Jorgensen

London School of Economics & Political Science (LSE) - Department of Accounting and Finance ( email )

Department of Accounting Room, OLD 2.17
Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://www.lse.ac.uk/accounting/people/bjorn-jorgensen

Daniel Rabetti (Contact Author)

Tel Aviv University - Coller School of Management ( email )

Ramat Aviv
Tel-Aviv, 6997801
Israel
972-54-9107234 (Phone)

HOME PAGE: http://https://en-coller.tau.ac.il/

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