Who's funding Hamas?

• Experts estimate that Hamas has an operational budget of more than $300 million.
• It gets some of its funding from taxing imports into Gaza and creating misleading charities.

Fighting a war is expensive. So how is Hamas — the militant group designated a terrorist organization by the United States and the European Union — funding their battle against Israel, which receives nearly $4 billion in US-provided military aid per year?

The answer is found in a complex web of business investments, phony charities, crypto transactions, and international support that makes it challenging to determine Hamas' exact value. However, experts estimate the militant organization has an operating budget of hundreds of millions.

"Hamas has two wings. It has a social service wing and a military wing, and the social service wing has been very active in terms of trying to raise funds — but that money is definitely going to the military," Victor Asal, director of the Center for Policy Research and professor of political science at University of Albany, State University of New York, told Insider.

Counterfeit charities

Historically, Hamas-affiliated charities — purported to provide much-needed money for residents of Gaza struggling to access sufficient food or medical care — have been a driver of funds toward its military wing. While some of the funds may ultimately reach their intended subjects, often the charitable organizations, headquartered outside Gaza and sometimes based in Western countries, are sophisticated fronts for Hamas military operations.

In 2003, the US Treasury designated five different charities — based in the UK, Switzerland, Austria, Lebanon, and France — as terrorist organizations for their support of Hamas. In 2009, the Justice Department convicted leaders from the US-based Holy Land Foundation for Relief and Development for providing financial support to the militant group.

In response to the international crackdown on Hamas-affiliated charities, the group has, in recent years, relied less on this fundraising method. However, it remains a consistent source of income for the militant group, two experts told Insider.

Support from Iran

In addition to the charitable fronts, Matthew Levitt, a former counterterrorism intelligence analyst at the Federal Bureau of Investigation, told Insider that international support, mainly from Iran, has been "the one big constant" in Hamas' funding, estimating that Iran contributes between $70 and $100 million a year to support the militant group.

"With Iran this enables them to have extended reach beyond their borders, to undermine adversaries — and they're committed to the destruction of Israel — it also enables them, to be perfectly blunt, to fight to the last Arab," Levitt told Insider. "You're not going to see actual Iranians, Persians, on the front lines in Lebanon or in the Gaza Strip. Iran is very comfortable deploying Arab Muslim assets who, when they do something, will be the ones to be suffering the brunt of the reprisal, not Iran."

For Iran, Levitt said, funding Hamas ultimately offers a financially and politically inexpensive way to undermine Israel's stability and increase the pressure against their adversaries while maintaining an air of deniability regarding its involvement.

Taxation, investments, and smuggling

Recently, the Biden administration has come under fire for a September decision to release $6 billion of frozen Iranian oil revenue as part of a deal to free prisoners, which critics argue made funds available for Iran to send to Hamas ahead of the attack on Israel. Both Asal and Levitt told Insider the funds from that transaction had little to do with the latest escalation in the conflict between Hamas and Israel.

But while Hamas' control of the Gaza territory has grown with financial support from Iran, so has the group's capability to earn money from the land it controls. As with many terrorist organizations that control swaths of land or trade routes, Hamas gets funding through taxation, extortion, smuggling, kidnapping, and robbery, Asal told Insider.

Levitt, who currently serves as director of the Reinhard program on counterterrorism and intelligence at the Washington Institute for Near East Policy, said Hamas oversees "anything and everything that crosses their borders" and controls the region's economic activity.

"When there were smuggling tunnels dug into Egypt, Hamas taxed those. When Qatar — with Israeli and US acquiescence — was giving money to pay for salaries in the Gaza Strip, Hamas was able to tax that," Levitt said. "Any business. Any aid, humanitarian aid, the truck after truck after truck that would come in on a daily basis from Israel into Gaza could all be taxed and extorted — so the largest pot of income for Hamas recently has not been Iran; it's been controlled territory, and the ability to make money off of that: probably in the $300-400 or $450 million range."

With the funds raised from taxing and extorting residents of Gaza, Hamas officials make substantial business investments in real estate and construction corporations, as well as mining and infrastructure companies in the Middle East and North Africa — some of which have been designated terrorist organizations by the State Department due to their affiliation with the group.

Money laundering and crypto

To move all its money around, Levitt said, Hamas relies largely on cryptocurrency transactions and trade-based money laundering to avoid being easily tracked.

"So instead of sending someone $100, you send them $100 worth of wheat or sugar or rice. And since wheat, sugar, and rice need to go into the Gaza Strip, that doesn't raise the same kind of eyebrows," Levitt said. "But if you send it to Hamas there, which is easy to do because they're the governing entity, then they can use it free up other funds. They can use it to give to their constituents and build grassroots support, or they can sell it and use that money as they as they see fit."

In the wake of Israel declaring war on Hamas, the US has pledged $100 million in humanitarian aid to Palestinians, which The Wall Street Journal reported may ultimately end up in the hands of Hamas due to its control over the Gaza Strip.

Such aid is meant to provide drinking water, food, and medical care, "but money is fungible," Alex Zerden, a former senior US Treasury national security official, told the Journal. "And that also allows Hamas to divert money from providing for its people to support its war machine."