Terrorists are technology-neutral and adaptive. With the rapid technology evolution, terrorists are increasingly misusing financial services facilitated by new and emerging technologies, including in response to increased monitoring and controls in the formal financial system. The scale and types of abuses vary considerably depending on regional and economic context, targets set by terrorists in terms of their financing sources and methods.
In its resolution , the United Nations Security Council recognized that innovations in financial technologies, products and services may offer significant economic opportunities but also present a risk of being misused, including for terrorist financing. In this regard, it reiterated its concern at the continuing use by terrorists and their supporters of information and communications technologies to fund terrorist acts, and further expressed a grave concern that terrorists and terrorist groups raise funds through, inter alia crowdfunding, and may move and transfer funds through the use of emerging payment methods, such as prepaid cards and mobile -payments or virtual-assets.
It therefore called on all Member States to assess and address potential risks associated with virtual assets and as appropriate, the risks of new financial instruments, including but not limited to crowd-funding platforms, that may be abused for the purpose of terrorist financing and to take steps to ensure that providers of such assets are subject to anti-money laundering (AML) and countering the financing of terrorism (CFT) obligations. It also called for the full use of new and emerging financial and regulatory technologies to bolster financial inclusion, and to contribute to the effective implementation of AML/CFT measures.
During the CTED-led technical sessions held in virtual format on 23 and 26 September 2022 ahead of the special meeting of the Counter-Terrorism Committee on countering the use of new and emerging technologies for terrorist purposes, more than 20 experts from international and regional organizations, national authorities, civil society, academia and the private sector discussed:
- global and regional trends in the misuse of new payment technologies and fundraising methods for terrorism financing purposes; and
2. the opportunities offered by the new technologies to make CFT responses more effective.
Examples of methods to raise funds for terrorist purposes include abuse of social media services, including social networking services (used to solicit donations through traditional payment methods), content hosting services, online merchandise sales (with a noticeable shift from payments in fiat to cryptocurrencies), and crowdfunding platforms (often disguising the use of funds for charitable or humanitarian causes). Despite repeated public warnings about the misuse of social media and crowdfunding platforms by terrorists for financial activities, neither the enforcement of terms of services nor the internal monitoring mechanisms based on these provisions seem to have significantly improved on these global platforms. There is a persistent need to address fundraising loopholes, such as the “super chat” facility or brands’ advertising and monetization alongside terrorist content.
Although cash and Hawala-type transfers remain the prevalent methods used by terrorists to store and move money, there is also an increase in their use in combination with the new payment methods. Terrorists are also known to have abused mobile payment systems, virtual assets (including Bitcoins, lesser known cryptocurrencies and privacy coins), and online exchanges and wallets. Blockchains, cryptocurrencies, and crowdfunding sometimes pose a more complex money-trail for financial investigators to follow. Some of these products can enable anonymous cross-border peer-to-peer funds transfers, which can occur without the involvement of a virtual asset service provider (VASP). These risks are compounded by the increase in the number and types of VASPs and persisting gaps in their regulation and supervision. Implementing AML/CFT measures is becoming more challenging with a growing use and materiality of decentralized finance (DeFi), nonfungible tokens (NFT) and unhosted wallets.
Regulation is further complicated by the global nature of the crypto ecosystem. Companies providing digital finance services in a particular country may not be domiciled or registered in that country, so global regulation is needed, but it needs to be activated in a coordinated way. This has been described by the Financial Action Task Force (FATF) as a “sunrise issue” with respect to the impact of the uneven implementation of the “travel rule” across jurisdictions, resulting in some VASPs interacting with foreign counterparts without similar requirements.
In recent years, some countries have started to regulate the virtual asset sector, while others have prohibited virtual assets altogether (issuance of statement of prohibition is not always followed by implementation, however). There is also some evidence of a developing maturity of both the analytical tools needed to identify suspicious activity involving blockchain transactions and the regulatory frameworks that require it to be reported to authorities. However, as of yet, the majority of countries have not started regulating the sector. These gaps in the global regulatory system have created significant loopholes for criminals and terrorists to abuse. Of the 98 jurisdictions that responded to FATF’s March 2022 survey, only 29 have passed relevant laws, and a small subset of these jurisdictions has started enforcement.
New technologies also have the potential to make AML/CFT measures in both public and private sectors faster, cheaper, and more effective. When used responsibly, technology can facilitate data collection, processing and analysis and help actors identify and manage terrorist financing risks more effectively and closer to real time. Collaborative analytics can help financial institutions better understand, assess, and mitigate money-laundering and terrorism-financing risks. They can also help prevent criminals from exploiting information gaps, pooling data from multiple domestic and international financial institutions. Available technology and data, including blockchain intelligence, can be used to map up illegal financial networks, track and report suspicious activity.
Robust public-private partnerships (PPP) are essential to share information, understand evolving trends, increase knowledge and skills of relevant experts, and strengthen the integrity of the financial sector. Such partnerships should include dialogue between the financial intelligence units and the relevant FinTech sector with regards to data sharing as part of suspicious activity reporting. With regards to social media, such PPPs help ensure that social media company CTF efforts are informed and effective. PPPs have also served as a useful forum for the authorities to disseminate regular guidance to the private sector. Partnerships with the private sector also present opportunities to promote the meaningful involvement of civil society, aimed at ensuring that such partnerships do not infringe upon financial inclusion and civic space.
Discussions also frequently highlighted the need to ensure that unintended consequences and impacts on human rights and legitimate activity, including non-profit organizations and civil society, are adequately safeguarded against. A multistakeholder approach that involves the relevant national authorities, private sector, civil society and academia is key at all stages – from assessing risks and threats, to developing response measures, to conducting reviews and assessments on impact.
Useful resources on the topic referred to during the sessions include:
- Global survey of the implementation of Security Council resolution 1373 (2001) and other relevant resolutions by Member States (2021)
- of the Analytical Support and Sanctions Monitoring Team pursuant to resolutions 1526 (2004) and 2253 (2015), which was submitted to the Security Council Committee pursuant to resolutions 1267 (1999), 1989 (2011) and 2253 (2015) concerning Islamic State in Iraq and the Levant (Da’esh), Al-Qaida and associated individuals, groups, undertakings and entities, February 2022
- Joint Asia-Pacific Group on Money Laundering (APG) and Middle East & North Africa FATF (MENAFATF) , January 2019
- Report of the European Center for Not-for-Profit Law Stitching (ECNL) “”, June 2022
- Global Counterterrorism Forum (GCTF) “” (2021)
- “”, Royal United Services Institute for Defence and Security Studies (RUSI), April 2022
- Ms. Jessica Davis, President, Insight Threat Intelligence, September 2022
- Global Research Network on Terrorism and Technology: Paper No. 10 “”, Royal United Services Institute for Defence and Security Studies (RUSI), August 2019
- Remarks on “Trends in the financing of the so-called terrorism motivated by xenophobia, racism and other forms of intolerance with the misuse of new technologies”, Dr. Hans-Jakob Schindler, Senior Director, Counter Extremism Project, September 2022
- , Ms. Tracey Durner Director of Financial Integrity and Inclusion, Global Center on Cooperative Security, September 2022
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