FATF ¦ R.5 Ter­ro­rist Fi­nan­cing Of­fen­ce

Recommendation 5: Building Strong Legal Foundations to Combat Terrorist Financing

Recommendation 5 of the FATF Recommendations sets out a clear objective: countries must have the legal capacity to prosecute and sanction anyone who finances terrorism. This is not simply about stopping money flows to violent acts — it is about recognizing and criminalizing the broader infrastructure that sustains terrorism, including the funding of travel, training, and organizational support. Crucially, Recommendation 5 also reinforces the link between terrorist financing and money laundering by requiring countries to treat terrorist financing as a predicate offence for money laundering. This alignment strengthens investigative tools, fosters cross-border cooperation, and enables broader asset tracing and recovery.

Defining the Terrorist Financing Offence

At its core, the terrorist financing offence under Recommendation 5 is intentionally broad and purpose-driven. It extends to any person who willfully provides or collects funds or other assets, directly or indirectly, with the unlawful intention that they be used — or with knowledge that they are to be used — by:

• A terrorist organization,
• An individual terrorist, or
• For the commission of a terrorist act (in whole or in part).

The scope includes financing related to travel for terrorist purposes, such as facilitating the movement of foreign terrorist fighters or funding the provision or receipt of terrorist training. This ensures legal systems capture the full lifecycle of terrorist support, beyond the immediate execution of attacks.

Importantly, criminalization cannot rely solely on theories like aiding and abetting, attempt, or conspiracy. While these remain relevant, Recommendation 5 requires a standalone offence that directly captures the act of financing. The offence must apply to funds and assets from both legitimate and illegitimate sources, acknowledging that terrorist support often exploits lawful income streams, charities, and commercial entities.

Bastian Schwind-Wagner_Follow "Recommendation 5 sets the legal foundation to criminalize and deter the financing of terrorism by focusing on intent and knowledge rather than requiring proof of use in a specific attack. Implementing its standards strengthens preventive action, international cooperation, and the ability of financial systems to identify and disrupt funding networks."

No Requirement to Prove Use or Link to a Specific Act

A defining feature of Recommendation 5 is that the offence does not require proof that the funds or assets were actually used to carry out a terrorist act, nor that they were linked to a particular attack. This is vital. Terrorist networks are fluid, compartmentalized, and global. Waiting for a demonstrable link to a specific act would undermine prevention. By criminalizing the intent or knowledge that funds could support terrorist purposes, countries can intervene earlier and more effectively.

Establishing Intent and Knowledge

Proving intent in financial crimes is often complex. Recommendation 5 addresses this by allowing courts to infer intent and knowledge from objective factual circumstances. This can include patterns of transactions, the use of intermediaries, ties to designated persons or entities, and repeated engagement with known risk channels. The standard does not lower evidentiary thresholds — it recognizes the realities of terrorist financing and equips prosecutors with realistic tools to build cases from credible indicators.

Sanctions: Effective, Proportionate, and Dissuasive

The Recommendation requires that natural persons convicted of terrorist financing face criminal sanctions that are effective, proportionate, and dissuasive. The same principle applies to legal persons (companies, foundations, associations). Where criminal liability for legal persons is not available due to domestic legal principles, civil or administrative liability must nonetheless be in place. Parallel proceedings (criminal, civil, administrative) are permissible, provided they are coherent and fair. The aim is clear: penalties must deter, disable, and signal zero tolerance.

Criminalizing Attempts, Participation, and Organizational Support

Recommendation 5 goes beyond the act of financing. It requires countries to criminalize:

• Attempts to commit the offence,
• Participation as an accomplice,
• Organizing or directing others to commit the offence, and
• Contributing intentionally to a group acting with a common purpose, either to further the criminal activity or with knowledge of its intent to commit terrorist financing.

This captures the networked nature of terrorist support structures, where facilitators, organizers, and group contributors play crucial roles even if they do not directly move funds themselves.

Geographic Scope: A Cross-Border Offence

Terrorist financing often crosses borders — funds may be collected in one country, moved through another, and applied elsewhere. Recommendation 5 ensures the offence applies regardless of the location of the offender, the organization, or the terrorist act. This facilitates international cooperation, mutual legal assistance, and harmonized enforcement, while reducing safe havens for financiers.

Implications for Compliance, Supervision, and Enforcement

For financial institutions, DNFBPs (Designated Non-Financial Businesses and Professions), and VASPs (Virtual Asset Service Providers), the breadth of Recommendation 5 has practical consequences:

• Risk assessments must factor in the possibility of legitimate-looking funds sustaining terrorist activity.
• Monitoring systems should detect patterns linked to travel facilitation and training support, not just direct attack-related expenditures.
• Customer due diligence must consider connections with designated entities and aliases, and flag high-risk corridors and typologies.
• Reporting suspicious activity must prioritize indicators of intent and knowledge inferred from objective patterns, even in the absence of a known attack plan.

For law enforcement and prosecutors, the focus shifts to early intervention, corroborating intent through contextual evidence, and using financial intelligence to map networks. For regulators, supervisory frameworks must ensure that institutions apply targeted controls and escalate alerts related to terrorist financing, treating them with the urgency they require.

Conclusion: A Preventive, Network-Aware Legal Architecture

Recommendation 5 constructs a legal architecture tailored to the realities of terrorist financing: preventive, broad in scope, resilient to the lack of direct links to specific acts, and capable of addressing both individuals and organizations. By mandating clear offences, robust sanctions, and cross-border applicability, it empowers countries to disrupt financing chains before harm occurs.

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