FIAU Alerts on Crypto Risks in Terror Financing Among Global Threats

The Financial Intelligence Analysis Unit (FIAU) of Malta has raised concerns about the growing use of cryptocurrency exchanges as channels for financing terrorism. Institutions subject to AML laws must comply with the Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR) to mitigate possible terrorism financing risks on time.

In a recent update, the FIAU has emphasized that digital asset platforms pose emerging threats of financing terrorists. Criminals exploited crypto and other virtual currencies to move funds for terrorist organizations.

According to the FIAU, terrorist groups are now using digital currencies more often due to their perceived anonymity, speed, and borderless nature. These features allow actors to solicit donations globally, often using social media and encrypted messaging platforms. They convert these funds through unregulated or poorly monitored exchanges, peer-to-peer crypto services, and decentralized platforms, which increase risk by introducing further vulnerabilities.

The Financial Intelligence Analysis Unit (FIAU) and the Malta Financial Services Authority (MFSA) have been working to overcome growing financial crimes for the integrity of the economic system. In the recent Israeli–Palestinian Conflict Guidance Note, both FIAU and MFSA highlighted the importance of robust controls to mitigate the risks associated with funding of terrorism.

FIAU stresses the need for Enhanced Due Diligence (EDD), transaction monitoring, and compliance with the Travel Rule. This rule requires the disclosure of both sender and recipient information in crypto transactions that exceed a certain threshold.

The unit is actively working with international bodies like the Financial Action Task Force (FATF) and EU regulators to harmonize regulatory standards, close oversight gaps, and support intelligence sharing.

This warning from Malta aligns with similar alerts issued by the FATF, Italy’s Financial Intelligence Unit (UIF), and U.S. financial watchdogs. Across jurisdictions, there is growing consensus that terrorist financing methods are rapidly evolving to exploit the decentralized nature of crypto networks.

The FIAU’s latest report is a call to action for crypto service providers. It is urging them to invest in compliance systems and participate in cross-border information exchange to detect and prevent illicit activity.

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In addition to this, in the MFSA  Dear CEO letter on mitigating the Risk of FT and Crypto asset services, MFSA emphasized putting controls in place to mitigate emerging risks and financial crimes.

Both FIAU and MFSA urge crypto asset service providers, and those that are more vulnerable to potential TF abuse, to ensure significant measures in the following areas.

• Customer Risk Assessment
• Customer Screening
• Transaction Monitoring
• Reporting obligations
• Staff training and governance obligations.

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