The Financial Action Task Force (FATF), the global anti-money laundering (AML) watchdog, has warned that terrorist group ISIS is increasingly using virtual assets such as cryptocurrency to finance its activities.
The Paris-based body, which sets AML standards worldwide, urged governments and the private sector to strengthen monitoring of virtual assets and develop tools to detect potential terrorist financing.
FATF President, Elisa de Anda Madrazo, told the United Nations Security Council at the weekend that the organisation completed a comprehensive update of terrorist financing risks in June, in collaboration with UN officials and France. The report detailed how terrorist groups, including Daesh and its affiliates, continue to exploit financial systems.
“What we see is that over the past decades, terrorists have demonstrated a persistent ability to exploit the international financial system,” Madrazo said, noting that methods vary but increasingly involve digital technologies.
According to FATF, despite improvements in transparency within the private sector, terrorists still use traditional financial channels such as deposit accounts, wire transfers and prepaid cards. However, digital platforms—including social media, messaging applications, crowdfunding systems, and integrated payment services—are being abused more frequently to bypass due diligence measures.
The report highlighted that in 2024, ISIL-K ramped up its use of virtual assets for organisational transfers and international donations, often employing obfuscation techniques and privacy-focused alternatives. Lone actors radicalised by ISIL ideology are also turning to microfinancing through petty crime, online gambling, and digital platforms.
Madrazo noted a growing decentralisation of terror financing, with regional hubs and self-financed cells relying on diverse sources, from criminal activities—such as ISIL’s branches in Africa—to legitimate business investments. These models, she warned, are “more resilient and less vulnerable to traditional disruption efforts.”
FATF called for stronger global measures, including prioritising multilateral designation of terrorist organisations under UN Security Council sanctions, enhancing implementation of Combating the Financing of Terrorism (CFT) standards, and improving investigative and prosecutorial capacities.
It also urged countries to close loopholes in areas such as regulation of virtual asset service providers (VASPs) and transparency of legal entities.
“This is fundamental to choke the flow of funds to terrorism,” the watchdog said.
