Investigation Shortcomings in Terrorism Funding Across Multiple Nations Revealed in New Report
In a recent report, the Financial Action Task Force (FATF) has identified countries with weak measures against terrorism financing and money laundering, highlighting the urgent need for concerted international action. The report, the first published by the FATF since 2015, comes at a time when the global nature of terrorism financing necessitates coordinated efforts to combat this increasingly complex issue.
Sub-Saharan Africa has become the global epicentre of terrorism, according to the report. As the threat evolves, so do the methods used to finance terrorism. The use of virtual assets (VAs), social media, and crowdfunding has significantly impacted terrorism financing globally, providing terrorists with faster, more efficient, and often anonymous ways to raise and move funds.
Virtual assets, particularly cryptocurrencies and stablecoins, allow terrorists to conduct cross-border transactions quickly and with relative anonymity, complicating detection and prevention efforts. The FATF has highlighted the surge in illicit use of stablecoins and the challenges regulators face with decentralized finance (DeFi) platforms and virtual asset service providers (VASPs).
Many jurisdictions have made progress in regulating virtual assets under FATF’s Recommendation 15, but challenges remain in identifying and supervising entities conducting virtual asset service activities, especially those operating offshore. The FATF and international bodies are updating standards and enhancing cooperation to prevent terrorists from exploiting these digital financial instruments.
Terrorist groups increasingly use social media platforms to solicit donations and support through online crowdfunding mechanisms. These platforms enable them to reach a wider audience, including sympathizers globally, making fundraising easier and less traceable. Crowdfunding via online platforms and social media offers terrorists an innovative channel for raising funds that may bypass traditional financial scrutiny, thereby complicating efforts by authorities to track and disrupt these flows.
The evolving use of these technologies demands coordinated global efforts involving governments, financial institutions, and international organizations to strengthen detection, regulation, and disruption capabilities against terrorism financing networks. Several initiatives, such as FATF’s updated guidelines, international standards for payments, and capacity-building projects, are underway to enhance regulatory frameworks and improve detection technologies across borders.
However, terrorists continue to use formal financial services such as wire transfers and prepaid cards, and digital payments are becoming more popular, especially those that can get around "due diligence." The impact of terrorism financing-related flows in Syria also requires monitoring, as per the report.
The report found that a majority of the 194 countries assessed have significant holes in how they investigate terrorism financing cases. North Korea, Iran, and Myanmar are on the FATF's "blacklist," considered high-risk. Lebanon, Syria, and Yemen are on the FATF’s "grey list," under increased monitoring and working to address their deficiencies.
Armed conflicts, terrorist propaganda, and the potential diversion of humanitarian aid are challenges in countering terrorism financing. Countries must protect humanitarian activity and expand their outreach to uncovered areas in countering terrorism financing. Additionally, countries must enhance support for counter-terrorist financing efforts in the private sector.
In conclusion, virtual assets, social media, and crowdfunding have introduced new financial conduits for terrorist groups that are faster, more anonymous, and more globally accessible, increasing the complexity of counter-terrorism financing measures. However, they have also spurred international efforts to implement stronger regulations and improve collaborative enforcement to mitigate these risks.
- The Financial Action Task Force (FATF) has identified Yemen as part of a group of countries with inadequate measures against terrorism financing and money laundering.
- The report published by the FATF indicates that Sub-Saharan Africa has become a global hotspot for terrorism.
- One of the evolving methods used to finance terrorism globally is the use of virtual assets, such as cryptocurrencies and stablecoins.
- These virtual assets, particularly stablecoins, offer terrorists a way to conduct cross-border transactions quickly and relatively anonymously.
- The report highlights the surge in illicit use of stablecoins and the challenges regulators face with decentralized finance (DeFi) platforms and virtual asset service providers (VASPs).
- Many jurisdictions have implemented regulations for virtual assets under FATF’s Recommendation 15, but challenges remain in identifying and supervising entities conducting virtual asset service activities.
- The report found that certain countries, such as Iran, North Korea, and Myanmar, are on the FATF's "blacklist," considered high-risk.
- The report also identified Lebanon, Syria, and Yemen as being on the FATF’s "grey list," under increased monitoring and working to address their deficiencies.
