š¹ Definition
Terrorist Financing refers to the provision, collection, or movement of funds or other assetsāwhether from legal or illegal sourcesāwith the intention or knowledge that they will be used to support terrorist acts, organizations, or individuals. Unlike money laundering, where the focus is on concealing the origin of illicit funds, terrorist financing may involve clean money being directed toward criminal objectives.
It is criminalized under international standards such as the FATF Recommendations and enforced in national legislation including the Terrorism (Suppression of Financing) Act (TSOFA) in Singapore and the USA PATRIOT Act in the United States.
š¹ Frequently Asked Questions (FAQs)
Q1: What distinguishes terrorist financing from money laundering?
- Money laundering conceals the origin of illicit funds
- Terrorist financing may involve legitimate or illegitimate funds being used for illicit purposes
- The core distinction lies in intent: laundering hides crime proceeds; terrorist financing enables criminal violence
Q2: What are common methods of terrorist financing?
- Cash donations or informal remittance systems (e.g., hawala)
- Misuse of non-profit organizations or charities
- Trade-based schemes (e.g., over- or under-invoicing of goods)
- Use of virtual assets or crowdfunding platforms
- Structuring transactions to avoid detection or regulatory thresholds
- Personal bank accounts with seemingly legitimate activity
Q3: How are institutions required to detect and prevent terrorist financing?
- Implement Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD) for high-risk customers
- Monitor for red flags such as:
- Transactions involving high-risk countries
- Unusual cash flows through non-profit accounts
- Use of shell companies or unregistered remittance channels
- Conduct regular sanctions screening, especially against UN-listed terrorist entities
- File Suspicious Transaction Reports (STRs) promptly when suspicion arises
Q4: What are key regulatory frameworks addressing terrorist financing?
- FATF Recommendation 5: criminalizes terrorist financing and requires effective implementation
- UN Security Council Resolution 1373: obligates states to prevent and suppress financing of terrorism
- Singaporeās TSOFA: prohibits providing property or services to designated terrorists
- EU AML Directives, U.S. Patriot Act, and similar laws globally
Q5: What are the penalties for involvement in terrorist financing?
- Criminal liability for natural persons and legal entities
- Penalties may include fines, imprisonment, asset confiscation, and license revocation
- Regulatory sanctions, reputational damage, and potential blacklisting by authorities or banks
