Report on Crowdfunding for Terrorism Financing

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Context

• The Financial Action Task Force (FATF) has released a Report on Crowdfunding for Terrorism Financing.

Findings of the Report

• A violent extremist organization under investigation collected funds through well-structured networks spanning the entire country.
• Resorting to solicitation at mosques and public places, the group’s fundraising tactics included offline and online mechanisms. These include circulating QR codes and account details through which donors were asked to send money.
• Over 3,000 bank accounts and informal value transfer systems were used.
• The accounts involved both domestic and foreign transactions, making this case extremely difficult to investigate.
• Funds were ultimately used to procure arms and ammunition and for training the cadres of the violent extremist organization.
• A portion of the funds raised through crowdfunding was also invested and parked in businesses and real estate projects to generate regular income for terrorism activities.

Ways in which Crowdfunding Platforms are abused

• The FATF report notes four main ways in which crowdfunding platforms can be abused for terrorist financing purposes —

1. 1. Abuse of humanitarian,
   2. Charitable or non-profit causes;
   3. Use of dedicated crowdfunding platforms or websites;
   4. Use of social media platforms and messaging apps; and interaction of crowdfunding with virtual assets.

Methods to Raise Funds

• Terrorists and violent extremists may rely on multiple methods to raise funds, for example,
  • A terrorist may establish a fundraising campaign on a dedicated crowdfunding platform,
  • Share the campaign on social media, and
  • Request payment in virtual assets.

Global Crowdfunding Market

• The global crowdfunding market at $17.2 billion in 2020 and note that it is expected to reach $34.6 billion by 2026,
• In 2022, there were over 6 million crowdfunding campaigns around the world.
• The possibility of quickly and easily reaching a global audience can make crowdfunding an attractive method of fundraising for Terror Financing.

Concerns

• Anti-money laundering and counter-terrorist financing (AML/CFT) regulation is not consistent across the globe.
• Many countries do not systematically assess the risks related to crowdfunding activity and therefore comprehensive data about its misuse is still generally lacking.

Recommendations made in the Report

• Countries should assess the nature, size and risks associated with all types and methods of crowdfunding in their particular jurisdiction, including companies, individuals or any other type of organization.
• The report further recommended that countries should also take note of the risk analysis of the sector more globally given the cross-border nature of crowdfunding campaigns and associated financial transfers.
• Countries should recognize that even if their jurisdiction does not have significant terrorism activity domestically, their jurisdiction can still be used as a pass-through for financial flows.

PRACTICE QUESTION Q. There have been recent reports that Crowdfunding Platforms are often abused for terrorist financing purposes. What are the concerns pertaining to it? Give suitable suggestions to curb the issue.