Terrorists are Funding in the Digital Age Via Crypto, Gaming, and Pay Apps

The FATF has released a comprehensive update on Terrorist Financing (TF) risk, highlighting the shortcomings of various jurisdictions and the methods that criminals have been using to exploit the international financial system.

This report includes the analysis of Round Four Mutual Evaluation carried out over 194 jurisdictions with nine FATF-style Regional Bodies, which work to promote and implement global anti-money laundering (AML) and counter-terrorist financing (CFT) standards.  It reflects that 69% of jurisdictions lack structural deficiencies in investigating, prosecuting, and convicting terrorism financing cases.

It highlights how terrorists are exploiting both traditional and emerging financial tools across a wide range of jurisdictions, many of which lack the regulatory measures to stop them.

The report incorporates more than 10 years of case studies, input from 80+ jurisdictions, and over 840 contributions from academia, NGOs, and the private sector.

The FATF report has warned that terrorist groups have diversified their financing channels and utilize digital platforms, mobile money, and virtual assets. In addition, criminals are using e-commerce marketplaces like Amazon, as well as payment services like PayPal, to abuse the digital economy for terrorist funding.

According to the FATF, self-financed cells and lone actors, who are frequently younger individuals, are increasingly financing micro-scale attacks that evade conventional detection. They are using social media tools with built-in payment capabilities, crowdfunding channels, and gaming platforms.

Groups are tapping into profits from drug trafficking, human smuggling, and illicit commodity trade, which include precious metals, timber, and wildlife trafficking, to finance operations. In conflict zones, the diversion of humanitarian aid and abuse of non-profit organizations (NPOs) further complicates efforts to trace illicit flows.

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Financial institutions and regulated sectors are under increasing pressure to adopt effective measures to overcome growing financial crimes.

The FATF has urged jurisdictions and financial actors to refine risk assessments and enforce Enhanced Due Diligence (EDD) for high-risk sectors such as money value transfer services (MVTS), virtual asset service providers (VASPs), and legal entities such as shell companies. The report also recommends risk-based screening of charities and humanitarian transactions to prevent disrupting legitimate aid efforts.

This update has introduced new terrorist financing risk indicators, based on transaction patterns, geographic risks, customer types, and emerging technologies. The FATF recommends that financial institutions and national authorities incorporate these indicators into their training programs, monitoring systems, and detection procedures as part of their broader AML/CFT strategies.

FATF and the United Nations Security Council (UNSC) stress jurisdictions to enhance both technical compliance and operational effectiveness, urging coordinated action across the public and private sectors to close the enforcement gaps

Terrorist financing operations are becoming increasingly decentralized, technically sophisticated, and geographically diffuse. The FATF’s findings serve as a wake-up call. For Compliance teams to evolve the due diligence process and actively collaborate with law enforcement, regulators, and emerging sectors.