Terrorist Financing

What is terrorist financing?

Terrorist financing refers to the financial support provided to terrorist organizations or individuals to facilitate their activities, which may include planning, carrying out, or promoting acts of terrorism. This type of financing is a critical component of the overall effort to combat terrorism, as it enables terrorists to acquire the necessary resources to carry out their operations.

FATF Recommendation 5: Terrorist financing offence states

Countries should criminalise terrorist financing on the basis of the Terrorist Financing Convention and should criminalise not only the financing of terrorist acts but also the financing of terrorist organisations and individual terrorists even in the absence of a link to a specific terrorist act or acts. Countries should ensure that such offences are designated as money laundering predicate offences.

Gist of Recommendation 5 Interpretive Note:

Objective of Recommendation 5 Interpretive Note:

• Ensure countries possess legal capacity to prosecute and impose criminal sanctions on individuals financing terrorism.
• Emphasize the connection between international terrorism and money laundering.
• Countries to designate terrorist financing offences as predicate offences for money laundering prosecutions.
• Terrorist financing offenses should include individuals intentionally providing or gathering funds, directly or indirectly, with the unlawful intent for use in conducting terrorist acts; supporting a terrorist organization; or aiding an individual terrorist.
• Terrorist financing offences should extend to any funds, whether from a legitimate or illegitimate source.
• Terrorist financing offences should not require that the funds that were actually used to carry out or attempt a terrorist act or be linked to a specific terrorist act(s).
• Countries should ensure that the intent and knowledge required to prove the offence of terrorist financing may be inferred from objective factual circumstances.
• Effective, proportionate and dissuasive criminal sanctions should apply to natural persons convicted of terrorist financing.
• Companies must incur criminal, civil, or administrative consequences, ensuring effectiveness, fairness, and deterrence, while preserving individual criminal liability.
• Offence to attempt to commit the offence of terrorist financing will also be a punishable offense.
• Terrorist financing offenses have worldwide scope, regardless of the criminal's location, the terrorists involved, or the nature of the acts.

Why do Terrorist organisations need funds?

Terrorist organizations need funds:

: to carry out specific terrorist attacks and undertake pre-operational scrutiny.

: to successfully recruit members and raise funds, which can be expensive as this recruitment process involves using different means.

: to enable training of operatives and sympathisers in a number of areas including, weapons training, bomb-making, clandestine communication and ideology.

: for the salaries of their leadership and members, as well as for the families of jailed or deceased members

: to establish or subsidise social institutions that provide health, social, and educational services.

Common ways terrorist organizations generating revenue.

Private donations to terrorist organizations can originate from diverse sources, including individuals, businesses, or charities. These contributions may be made knowingly or unknowingly, providing financial support for the organization's activities. Monitoring and regulating such funding sources are crucial for counterterrorism efforts.

?Abuse of Non-Profit Organizations (NPOs): Terrorist entities may target NPOs to exploit their networks and gain access to materials and funds. The intentional misuse of NPOs allows terrorists to infiltrate and benefit from their resources.

Kidnapping for ransom (KFR) is a rising income stream for terrorist organizations. This criminal act involves abducting individuals to demand monetary payment, providing funds to support the group's activities. The trend highlights the adaptability of terrorists in seeking financial resources.

Law enforcement investigations have revealed connections between terrorist organizations and seemingly legitimate businesses, such as used car dealerships and restaurant franchises. In these cases, funds generated from the commercial enterprises were discovered to be redirected to support terrorist activities. This highlights the need for scrutiny and regulatory measures in sectors prone to such financial involvement.

State Sponsorship: Allegations suggest that certain terrorist groups receive financial support from national governments.

Self-Funding: Individuals often use funds from legitimate sources (e.g., employment income, social assistance, family support, bank loans) to finance their travel to the conflict zone.

How to Terrorist Move Funds?

Terrorist financing can take various forms, few examples could be:

1. Terrorists may use regular banking/ FI systems to transfer funds or engage in transactions to finance their activities. This could involve the use of both formal and informal banking channels.

2. Many Terrorist groups may engage in the physical transportation of cash across borders to fund their operations. This method helps them avoid detection by traditional financial systems.

3. Terrorists may engage in money laundering activities to disguise the illicit origins of their funds. This involves passing the money through a complex sequence of banking transfers or commercial transactions to make it difficult for authorities to trace.

4. Terrorist organizations may raise funds through legitimate or seemingly legitimate means, such as charities or businesses, to conceal the true nature of the funds and their ultimate destination.

5. The use of digital currencies, like Bitcoin, may provide terrorists with an alternative and potentially more anonymous means of financing. Cryptocurrencies can be used to transfer funds across borders with reduced oversight.

?Conclusion:

Combating the financing of terrorism (CFT) regulations are designed to identify and prevent financial transactions that may be linked to terrorism. FIs and non-FIs are often required to implement measures such as customer due diligence, reporting suspicious transactions, and conducting risk assessments to prevent their systems from being used for terrorist financing.

Governments and non-Governmental organizations must work together to combat terrorist financing through various measures, including strict regulations, financial intelligence units, and international cooperation.