• Over the past decade, terrorists have demonstrated a persistent ability to exploit the international financial system to support their activities and carry out attacks. 

• While the methods they employ can vary widely, the overall trend underscores their adaptability and determination. This continued abuse of the financial system poses a serious threat to global security and undermines international peace.

• A new report by the Financial Action Task Force (FATF) highlights serious and evolving terrorist financing risks and warns of gaps in countries’ abilities to fully understand terrorism financing trends and thus respond effectively.

• The report, ‘Comprehensive Update on Terrorist Financing Risks’, reveals terrorists’ persistent ability to exploit the international financial system to support their activities and carry out attacks. 

Pulwama, Gorakhnath attackers used online payment services 

• The report revealed that the 2019 Pulwama attack and the 2022 Gorakhnath Temple attack were funded through online payment services while explosives were procured through e-commerce sites.

• FATF, citing a case study from India, revealed how terrorists procured aluminium powder, which is used for making IED bombs, through Amazon. The use of aluminium powder increases the impact of the blast. The report also detailed that online marketplaces are used to acquire weapons, equipment, chemicals and 3D printing materials.

• In the Gorakhnath Temple attack on April 3, 2022, an ISIS terrorist was arrested for attacking security personnel. FATF said the attacker used VPN to hide his IP address and transferred Rs 669,841 via PayPal to ISIS terrorists abroad, including 44 international third-party transactions. He also received Rs 10,324 from abroad. The account was suspended by PayPal over suspicion of illicit fund transfer.

Key points of the report:

• With terrorism financing methods varying depending on several factors and contexts, the report highlights terrorists’ adaptability, underscoring the need for risk-based counter-terrorist financing measures.

• Despite improvements in transparency and identity verification, terrorists continue to make use of formal financial services, including deposit accounts, wire transfers, and prepaid cards.

• Digital platforms — such as social media, messaging applications, and crowdfunding sites — are increasingly abused for terrorism financing, particularly when they offer integrated payment services that bypass due diligence. 

• Although the level of abuse of virtual assets by terrorists remains difficult to measure precisely, their use is increasing, with some groups systematically leveraging virtual assets and employing obfuscation techniques and/or shifting towards alternatives virtual assets promoted as more private and secure. 

• Moreover, the misuse of legal entities — including shell companies, trusts, and non-profit organisations (NPOs) — remains a persistent concern. These structures are used to transfer or launder funds and to support terrorist operations, with some terrorist organisations leveraging sham NPOs or abusing legitimate ones for fundraising, recruitment, and logistical support and/or operating legitimate cash-intensive businesses to generate revenue for terrorism financing in their areas of control.

• To generate revenue, terrorist organisations have also been reported to exploit, trade and trafficking natural resources (energy commodities, agricultural products, wildlife, precious metals and stones, etc). 

• They are also relying, sometimes to a large extent, on proceeds from various criminal activities: extortion, kidnapping for ransom, human trafficking and trafficking and smuggling of goods, including drugs and arms, etc.

Manorama Yearbook app is now available on Google Play Store and iOS App Store