FATF ¦ Comprehensive Update on Terrorist Financing Risks

FATF report highlights evolving terrorist financing risks and warns of gaps in global understanding of the threats

Terrorist financing remains one of the most pressing challenges to global security, as terrorist groups continue to exploit a wide array of financial channels to fund their operations. The Financial Action Task Force’s (FATF) July 2025 report offers an in-depth examination of how these groups adapt to changing environments, blending traditional methods with cutting-edge technologies to evade detection and sustain their activities. Over the past decade, terrorists have shown remarkable resilience and adaptability in using the international financial system for illicit purposes. While cash remains the predominant medium for raising, moving, and storing funds due to its anonymity and universal acceptance, terrorists have increasingly embraced informal money transfer systems like hawala, mobile money platforms, and digital payment services. These channels offer rapid, low-cost transfers with limited regulatory oversight, allowing funds to flow across borders with ease. The rise of virtual assets such as cryptocurrencies further complicates efforts to trace and disrupt terrorist funding, as these digital currencies can be moved pseudonymously and combined with obfuscation techniques like mixers and chain hopping.

The FATF report highlights that terrorist financing risks vary significantly depending on local contexts. In regions where terrorist groups control territory, they can impose taxation-like systems on local populations, exploit natural resources such as oil and minerals, and operate cash-intensive businesses. Conversely, when territorial control is lost, groups shift to decentralized fundraising methods and online campaigns. Conflict zones exacerbate these risks by fostering instability, which terrorists exploit through the diversion of humanitarian aid, illicit arms trafficking, and human trafficking. Porous borders and weak governance further facilitate the movement of funds and fighters.

Terrorist organizations range from large networked groups with global reach to smaller regional affiliates and lone actors. Groups like Al-Qaida and ISIL maintain complex, international financial networks supported by donations from sympathizers worldwide, while regional affiliates often rely on a combination of local fundraising and criminal activities such as extortion and kidnapping for ransom. Ethnically or racially motivated terrorists (EoRMT) tend to have lower financial needs but increasingly use legal means like rallies and merchandise sales to generate funds. Lone operators typically finance attacks through legitimate income sources or petty crime, making their financial activities particularly difficult to detect.

Bastian Schwind-Wagner_Follow "Terrorist financing continues to evolve rapidly, blending traditional cash-based methods with advanced digital technologies, which poses significant challenges to global security. It is essential that governments, financial institutions, and international partners strengthen cooperation, enhance regulatory frameworks, and adopt innovative tools to effectively detect and disrupt these illicit financial flows while ensuring that humanitarian efforts remain protected. Only through coordinated, adaptive, and inclusive approaches can we successfully counter the complex and dynamic threats posed by terrorist financing in today’s interconnected world."

Gender dynamics play an important yet frequently overlooked role in terrorist financing. Women are increasingly involved in logistical support and financial facilitation, sometimes using their identities to avoid suspicion or lead fundraising campaigns. Mobile money and virtual assets provide new avenues for such activities, underscoring the need for counterterrorism financing (CFT) strategies that consider these gender-related factors to avoid unintended consequences.

The FATF report also draws attention to emerging threats from digital finance services including neobanks, online payment platforms, and virtual International Bank Account Numbers (IBANs), which can obscure ownership and transactions. Terrorists exploit these services alongside traditional banking systems by opening accounts under false names or through shell companies to move funds in small amounts that evade detection.

Regional hotspots such as sub-Saharan Africa’s Sahel region remain critical centers of terrorist financing activity. Here, fragile governance, informal economies, and porous borders enable groups to raise substantial funds through extortion, resource exploitation, trafficking, and smuggling. Meanwhile, conflict zones like Syria and Afghanistan pose ongoing risks related to foreign terrorist fighters and criminal fundraising networks.

Humanitarian aid diversion continues to be a significant concern, as terrorist groups exploit crises to channel funds under the guise of humanitarian work. Counterterrorism measures must strike a delicate balance between disrupting these illicit flows and protecting impartial humanitarian efforts conducted in accordance with international law.

To effectively combat this multifaceted threat, FATF emphasizes the need for coordinated multilateral cooperation and the consistent implementation of international standards across all vulnerable sectors. Strengthening regulation and supervision of money value transfer services (MVTS), virtual asset service providers (VASPs), real estate markets, social media platforms, crowdfunding sites, and gaming ecosystems is crucial. Public-private partnerships play a vital role in sharing intelligence, raising awareness, and developing targeted training programs.

Advanced analytical tools that leverage blockchain tracing technologies must be combined with traditional investigative techniques to keep pace with evolving terrorist financing tactics. Capacity building should integrate CFT priorities within broader security frameworks to enhance border controls and financial investigations.

Dive deeper

• FATF ¦ Comprehensive Update on Terrorist Financing Risks ¦ Link