The crowdfunding market is experiencing significant growth worldwide. While most crowdfunding activity is legitimate and may serve an important public benefit, there are significant risks for misuse for terrorist financing. Indeed, groups including ISIL (Da’esh), Al Qaida and their affiliates, and other terrorist groups have exploited crowdfunding to raise money to fund their activities.
To address this, CTED recently joined a panel of experts convened by the Financial Action Task Force (FATF) to help better understand the crowdfunding methods used by terrorists, as well as the challenges and good practices central to identifying and preventing potential terrorist financing.
The experts gathered noted that most crowdfunding is a legitimate financial activity, with the development of formal crowdfunding platforms and informal social-based fundraising tools offering the potential to provide new ways to move and raise funds for perfectly legitimate causes, including protected charitable causes. At the same time, and given the relative immaturity of many such platforms in forming their financial crime controls and becoming familiar with the risks they may face, it is possible that terrorist financiers choose to abuse them amid weaker regulations compared to the formal financial sector with greater experience in anti-money laundering and combating the financing of terrorism (AML/CFT) compliance.
Globally there is little awareness of how this sector can be misused to finance terrorism. It is therefore essential that countries work to assess and address the risks related to the sector and take appropriate and proportionate actions to mitigate these risks. Experts also cautioned against overregulation of this sector as it may hamper legitimate activity of non-profit and humanitarian work, including to those in greatest need in conflict or terrorism-affected areas.
Of all the different forms of crowdfunding, donation-based crowdfunding was identified as most likely to be exploited for terrorist financing purposes. The four main forms in which crowdfunding platforms can be abused for this purpose are: abuse of humanitarian, charitable or non-profit causes; use of dedicated crowdfunding platforms or websites; use of social media platforms and messaging apps; and the interaction of crowdfunding with virtual assets.
Yet, the regulatory oversight of the crowdfunding industry globally is still fragmented, including as it relates to AML/CFT. Despite repeated instances of misuse of social media and crowdfunding platforms by terrorists for financial activities, many platforms or chat applications still have weak self-monitoring and moderation systems when it comes to terrorist financing. In fact, GoFundMe is currently the only crowdfunding platform that has specific provisions on terrorist financing in its terms of reference.
The discussion underscored the need for a strategic and multi-stakeholder approach to address challenges faced by investigative agencies, and combat terrorist financing effectively. The importance of transnational cooperation between law enforcement agencies and other relevant authorities and stakeholders, including the private sector, was also mentioned with the view to fostering a collaborative environment to combat global terrorism financing.
CTED’s Coordinator on Countering the Financing of Terrorism, Svetlana Martynova, recalled the need to ensure that response measures to the threat of terrorism financing are built-for-purpose, rooted in evidence-based risk assessment rather than assumed vulnerabilities, and are in line with international human rights law. They should also be balanced against the potential for new financial technologies to enhance financial inclusion as a key enabler of various Sustainable Development Goals, as well as for innovating payments and the means to transact them safely in crisis situations.
CTED was also part of the FATF project team that worked on the 2023 report on Crowdfunding for Terrorism Financing, which highlights the main ways in which terrorist groups exploit this mechanism. The report also looks at challenges faced by those involved in the crowdfunding scape, including investigative agencies, and the good practices and recommendations for countries in developing a deeper risk understanding of this sector and effectively combatting terrorist financing.
Additional information
FATF event page: Crowdfunding for Terrorism Financing