FATF Warns of Worsening Terrorist Financing Risks and Calls for Urgent Global Action

A new report issued by the Financial Action Task Force (FATF) reveals the alarming adaptability of terrorist actors in financing their operations and criticizes the persistent gaps in many countries' ability to detect and combat these evolving threats effectively. The report, titled Comprehensive Update on Terrorist Financing Risks, presents an in-depth analysis of how terrorists continue to exploit the global financial system and adapt their methods to various local and international contexts.

While progress has been made in several jurisdictions, FATF’s findings are troubling. According to the report, a staggering 69% of jurisdictions assessed by the FATF and its Global Network have shown major or structural shortcomings in their ability to investigate, prosecute, and secure convictions in terrorist financing (TF) cases.

FATF President Elisa de Anda Madrazo emphasized the gravity of the issue, stating, “This continued abuse of the financial system poses a serious threat to global security and undermines international peace. Countries around the world must use the intelligence in this report to build a stronger picture of the threats they face and harness the tools available through the FATF Global Network to strengthen international cooperation and intelligence sharing.”

The report draws from a wide-ranging dataset, including more than 10 years of case studies and input from over 80 jurisdictions within the FATF Global Network. More than 840 submissions from the private sector, academia, and think tanks were analyzed to compile this comprehensive view of the ever-evolving terrorist financing landscape.

A central message of the report is the increasing complexity of terrorist financing methods. The FATF outlines various current strategies terrorists use to raise, move, store, and use funds—including the transportation of cash, use of hawala and other informal money transfer systems, online payment services, formal financial institutions, social media platforms, crowdfunding tools, Virtual Assets, and the misuse of legal structures such as shell companies, trusts, and non-profit organisations (NPOs).

The analysis highlights significant developments over the past decade in how terrorist financing schemes have evolved. These include a notable uptick in the combination of diverse financing mechanisms and the blending of traditional methods with digital tools, making detection more difficult. Decentralised operations have grown in prominence, with regional hubs and self-funded cells emerging as significant players. These cells frequently rely on local criminal proceeds and invest in legitimate businesses to sustain themselves.

The report raises concern about a rising threat from younger, lone actors who use microfinancing strategies sourced from licit funds and low-level criminal activities, often exploiting technologies such as online gaming and social media platforms to their advantage. Tracking these financial trails is particularly challenging in cases involving ethnically, racially, or politically motivated individuals or groups. These cases are hindered by inconsistencies in designations, as well as the typically small-scale and low-visibility nature of their financial operations.

A further complication is the growing convergence between organised crime and terrorist financing, as well as the unique challenges posed by terrorists embedded in armed conflict zones. In areas of instability and violence, terrorist organisations frequently alter their financing methods to match the chaotic environment. The FATF report warns that such environments offer fertile ground for terrorists to exploit.

Humanitarian aid, essential in these conflict zones, faces heightened risk. The report underscores the importance of protecting legitimate humanitarian efforts from terrorist misuse. It calls for proportionate, risk-based safeguards to prevent abuse while ensuring that critical humanitarian work can continue in compliance with international law.

To help countries respond more effectively to these multifaceted threats, the FATF report includes several key recommendations. These emphasize the need for bolstered international cooperation and the development of targeted public-private partnerships. Additionally, the report offers practical risk indicators that authorities, financial institutions, and other stakeholders can use to identify and disrupt terrorist financing, including suspicious patterns in financial transactions, travel activity, and online behaviors.

This extensive project was co-led by the United Nations Counter-Terrorism Executive Directorate (UN CTED) and France. UN CTED’s Assistant Secretary-General Natalia Gherman welcomed the collaboration and the final product, stating, “Co-leading this work has been a unique experience for CTED and attests to a coordinated approach between CTED and other participating UN entities, and the FATF Global Network in analyzing evolving global and context-specific TF trends and supporting Member States in this regard.”

The FATF report also ties into UN CTED’s broader mandate, including assessments of countries' adherence to the counter-financing of terrorism (CFT) provisions of key United Nations Security Council Resolutions. UN CTED has regularly published thematic summary assessments of implementation gaps, and its most recent findings echo FATF’s concerns about widespread deficiencies in tackling terrorist financing.

In light of the report's findings, the FATF has announced it will host a webinar on Tuesday, 22 July 2025. The event aims to help global stakeholders better understand the risks detailed in the report and adopt more effective responses to counter them. As the terrorist financing threat continues to evolve, the FATF is calling for decisive, coordinated, and intelligence-led action from both the public and private sectors worldwide.

By fLEXI tEAM