A Palestinian holds Hamas flags while awaiting the release of prisoners in exchange for Israeli hostages held by Hamas, in Ramallah in the occupied West Bank on November 27, 2023.
John Macdougall | AFP | Getty Images
Financial investigators in Israel have identified a significant increase in donations to Hamas-linked charities since the group’s deadly Oct. 7 attack in Israel, according to current and former Israeli officials, some of whom of them requested anonymity to discuss sensitive national security information.
“We saw a 70% increase in money given to charities associated with Hamas,” said Uzi Shaya, a former high-ranking official in Mossad, Israel’s intelligence service.
In pure dollar terms, this equates to an increase of about $100 million over the past seven weeks, according to Israeli Defense and Foreign Ministry officials who requested anonymity.
CNBC could not independently confirm the amount of money flowing to Hamas-linked charities. But current and former US intelligence officials say Israel has the ability to track this data.
Since the October 7 attack, Israel’s revenge campaign has halted commerce in the Hamas-controlled Gaza Strip, making international aid, which has only recently begun to flow, its only lifeline.
In addition to waging war on land, sea and air, Israel is fighting on a fourth front: the international financial system.
It is difficult to stop the flow of money to Hamas, because the charity groups that collect funds are scattered around the world and their structures can be fluid. Charities suspected of funneling money to Hamas also frequently change their names, making them harder to track.
“We don’t want to single out charities and cut funding for legitimate things,” a Foreign Ministry official told CNBC.
At Mossad, Shaya was responsible for stopping the flow of money to organizations such as Hamas, Islamic Jihad and Lebanon-based Hezbollah.
Following the October attacks, he returned to assist the Israeli government, where he once again tracked down money bound for organizations the US and Israel consider terrorist groups.
Traditionally, foreign currency has flowed into Hamas accounts from one of three main sources: Iran, the Islamic person-to-person banking system known as Hawala, and cryptocurrency.
A fighter from Izz al-Din al-Qassam stands in front of a tunnel during an exhibition of weapons, missiles and heavy equipment for the military wing of Hamas at the Maghazi camp in the central Gaza Strip, during commemorating the 2014 war that lasted 51 days between Gaza and Israel.
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Money from Iran
While Iran sometimes supplies arms directly to allies, over the past four years, Iran has provided Hamas with between $70 million and $100 million annually in cash for guns, missiles, systems communications and other military purposes, Israeli officials said. This money is believed to have paid for many of the missiles and small arms used in the October 7 attack.
Hamas also siphoned off foreign aid from other countries intended for the citizens of Gaza and used the money to build a massive underground network of tunnels and bunkers that kept the Israeli army at bay. Many of the hostages taken on October 7 are believed to be held captive inside those tunnels.
Hawala
Another significant source of funding comes from an ancient Islamic money transfer system called Hawala, which is based on trust rather than hard assets. Similar to a network of IOUs, Hawala facilitates the transfer of money from one party to another, bypassing Western-style banks.
Charity money given to Hamas through Hawala is sometimes earmarked for legitimate humanitarian needs in Gaza such as medical care, food and education. But Israel says most of it is spent by Hamas for military purposes.
The movement of money within Gaza’s insular networks is both highly fluid and opaque, making the task of Israeli financial monitors even more difficult.
“We recognize that the people of Gaza are desperate, and that there is great anxiety and poverty,” an Israeli official told CNBC. “The complication is making sure the charity goes to the right places, because in the past that hasn’t happened.”
Israel’s National Bureau of Counter Terror Financing maintains a list of charitable organizations which it accuses of directly aiding the Hamas military. Many of them feature the Gaza crisis prominently on their home pages. One group is even pledging to match any donation, up to $1.5 million, made in Nov. 28, the global charity awareness day known as “Giving Tuesday.”
Members of the Egyptian and Qatari Red Crescent and other workers unload a shipment of humanitarian aid bound for the Gaza Strip from a Qatar Emiri Air Force C-17 Globemaster III military transport aircraft after landing at Arish International Airport in North Sinai province in northeastern Egypt on November 9, 2023 amid ongoing fighting between Israel and the Palestinian group Hamas.
Karim Jaafar | AFP | Getty Images
Cryptocurrency
Shaya said the third major source of funding for Hamas comes from both charity and direct contributions via cryptocurrency.
He said officials in the US and Israel have not yet fully grasped the extent of the transfers because Hamas and its donors do not use the same cryptocurrencies that Western officials typically monitor, such as bitcoin and ethereum. Instead, Hamas’s donor network uses smaller cryptocurrencies.
Shaya specifically mentioned the crypto company Tron, which he accused of evading requests from Israel to cut accounts. Tron has recently emerged as a major crypto operator in Iran, according to a a recent Reuters report.
The officials agreed that Hamas has become adept at raising and transferring money through crypto, but they also said that most of the blockchain companies they spoke with help stop financial transfers. They gave specific credit to Binance for complying with the requests.
Not everyone thinks Binance deserves the credit, however. On Nov. 21, US authorities announced a massive $4.3 billion settlement with Binance over alleged violations that included “failing to implement programs to prevent and report suspicious terrorist transactions — including the Al-Qassam Brigades of Hamas,” according to a Treasury Department release.
Hard lesson
Ensuring that individual Gazans have economic opportunity without simultaneously funding Hamas militants has proven a difficult challenge for Israel.
Palestinians wait to fill fuel canisters at a gas station in Gaza City, Wednesday, March 21, 2012. A test of wills between Egypt and Gaza’s Hamas government has sparked its worst energy crisis yet in years: Gazans endure 18-hour-a-day blackouts and fuel supplies are running low. (AP Photo/Adel Hana)
Adel Hana
An Israeli-Egyptian blockade of Gazawhich was imposed in 2007 when Hamas took political control of the territory, has maintained the unemployment rate at about 47%, for a population of approx 2 million people.
In recent years, Israel has provided a direct channel for Qatari financial aid for Gaza, allowing the transfer of hundreds of millions of dollars to the region as part of a broader effort to ensure that the Gazans can build a functioning economy.
Israel fears that without it, Hamas will be more likely to resort to violence. Beyond direct funding, Israel also allowed 18,000 Gazans to enter Israel to work, again hoping that a stable economy will pacify Hamas. But these hopes were dashed on October 7.
“We made a big mistake in thinking about Western values,” Shaya said in a Zoom interview from his home in Israel. “We believe that Hamas is most interested in staying in power and staying funded; we forget that we don’t live in the West.”
What’s next
Israeli officials believe that since Israel’s bombing of Gaza drove the Hamas leadership there into hiding, some funds have been transferred to Hamas in the West Bank. More money was held up in various accounts around the world.
Even Iranian funding has dried up for now, officials said, as Iranian leaders wait to see what happens in Gaza before they commit more money to Hamas.
A photo taken from a position near Sderot along Israel’s border with the Gaza Strip shows smoke billowing during Israeli bombardment of the northern Palestinian territories on November 21, 2023, amid ongoing conflict between Israel and the Palestinian group Hamas.
Fadel Senna | AFP | Getty Images
Meanwhile, most Western financial leaders are sympathetic to Israel’s demands to cut off funding for Hamas, and many have taken action themselves. This includes the Treasury Department, which has imposed sanctions on several Hamas-linked organizations in recent weeks.
However, Shaya says the West can do more.
“If the US and the Europeans want to make a bigger statement, there must be a credible threat to reduce the banks, especially those in Turkey, Qatar and Malaysia, from the US correspondent banks,” he said.
“This kind of pressure can make a real and immediate difference.”
Once the fighting ends, Gaza will likely be rebuilt in one form or another, Israeli officials said. And for that, it will require billions of dollars worth of international aid.
When this process begins, they said, it will be important to account for every dollar to ensure that it goes directly to the reconstruction effort and not to rearming Hamas.
