A majority of countries have significant holes in how they investigate terrorism financing cases, a report has found.
The report from the Financial Action Task Force (FATF), a global money laundering watchdog, said that 69 per cent of the 194 countries assessed also had deficiencies in the prosecution of terrorism financing cases. The report is the first published by the task force since 2015.
“Over the past decade, terrorists have demonstrated a persistent ability to exploit the international financial system to support their activities and carry out attacks,” the report said.
“This continued abuse of the financial system poses a serious threat to global security and undermines international peace.”
The FATF identifies countries that have weak measures against terrorism financing and money laundering. Those on its “blacklist” – considered high risk – include North Korea, Iran and Myanmar. Lebanon, Syria and Yemen are part of a list of two dozen countries the FATF has placed under increased monitoring – its “grey list” – and are working to address their deficiencies.
The report said sub-Saharan Africa has become the global epicentre of terrorism, while the impact of terrorism financing-related flows in Syria also require monitoring.
While countries have made improvements in transparency, the report said terrorists continue to use formal financial services such as wire transfers and prepaid cards. At the same time, digital payments are becoming more popular, especially if they offer a payment service that can get around “due diligence”.
“Although the level of abuse of virtual assets (VAs) by terrorists remains difficult to measure precisely, their use is increasing, with some groups systematically leveraging VAs and employing obfuscation techniques and/or shifting towards alternatives VAs promoted as more private and secure,” the report said.
Social media and crowdfunding are also becoming ways in which terrorism financing is conducted, with the former allowing for the evasion of regulatory frameworks.
“Crowdfunding, while a legitimate activity, has been exploited by various terrorist groups to raise money for [terrorism financing] purposes,” the report said. Donation-based crowdfunding is the method most likely to be abused within terrorism financing, its added.
Armed conflicts, terrorist propaganda and the potential for the diversion of humanitarian aid are among the challenges, according to the report. Food insecurity could also potentially expose vulnerability to exploitation by terrorism.
The FATF said countries must protect humanitarian activity, enhance support for counter-terrorist financing efforts in the private sector and expand their outreach to uncovered areas. It also said countries must address the evolving risks through multilateral responses.
“The global nature of [terrorism financing] necessitates concerted international action,” it said.
