Terrorist Financing Methods Flashcards

What is 'kidnapping for ransom' (KFR) as a terrorist financing method and what are its financial indicators?

Answer: The practice by which terrorist groups (al-Qaeda, IS, Boko Haram) abduct individuals or groups and demand payment for their release, generating significant TF funds through direct cash payments or wire transfers to intermediaries in high-risk jurisdictions

Kidnapping for ransom is a major TF revenue source for groups like al-Qaeda and IS, generating hundreds of millions in ransom payments. Financial indicators include large unexplained transfers to high-risk jurisdictions, cash deliveries to intermediaries, and payments coded as consulting or services to obscure their purpose.

What is 'trade-based terrorist financing' and how does it differ from trade-based money laundering?

Answer: Both exploit trade transactions, but trade-based TF focuses on moving value to support terrorist operations (procuring materials, funding operatives) rather than integrating criminal proceeds — the purpose of the value movement distinguishes TF from ML

Both exploit trade transaction manipulation, but the purpose differs: TBML integrates criminal proceeds into the legitimate economy, while trade-based TF moves value to fund terrorist operations — acquiring materials, paying operatives, or supporting logistics — often from legitimate fund sources.

What is the 'financing of foreign terrorist fighters' (FTF) and what financial indicators are associated with it?

Answer: The financial support provided to individuals who travel from their home countries to join terrorist organizations in foreign conflict zones, including travel expenses, initial funds, and family support payments — with indicators including one-way travel purchases and small irregular transfers to conflict zone countries

FTF financing covers the financial footprint of individuals traveling to join groups like IS or al-Qaeda — travel bookings, cash withdrawals before departure, small transfers to conflict regions for family support, and cryptocurrency used to fund travel and initial establishment in conflict zones.

What are 'virtual assets' (VA) and 'virtual asset service providers' (VASPs) under FATF standards, and what AML obligations apply?

Answer: VA are digital representations of value that can be transferred or traded digitally; VASPs (exchanges, custodians, wallet providers) must register/license with competent authorities and apply AML/CFT measures including CDD, transaction monitoring, and the Travel Rule for VA transfers

FATF's updated Recommendation 15 (2019) defines virtual assets broadly and requires VASPs — exchanges, custodians, and wallet providers — to be registered or licensed and to apply full AML/CFT obligations including the Travel Rule for VA transfers above threshold.

What is 'crowdfunding' as a TF risk and how should financial institutions manage this risk?

Answer: The use of online platforms to solicit small donations from a large number of contributors, which can be exploited for TF by using misleading campaign descriptions, routing funds through third-party processors, and collecting via cryptocurrency — managed through enhanced monitoring of high-risk payment processors and social media awareness

Crowdfunding platforms can be exploited for TF through campaigns with false or misleading humanitarian descriptions, enabling small dispersed donations that individually fall below monitoring thresholds. Financial institutions must monitor payment flows to and from high-risk crowdfunding platforms and maintain awareness of flagged campaigns.

What role does the Egmont Group's FIU network play in combating terrorist financing across borders?

Answer: The Egmont Group facilitates secure exchange of financial intelligence between member FIUs specifically related to TF investigations, enabling countries to trace TF flows across jurisdictions, identify financing networks, and support prosecutions that span multiple countries

The Egmont Group's FIU network enables secure cross-border sharing of financial intelligence critical to TF investigations — allowing countries to trace fund flows, identify network members, and build multinational prosecution cases against terrorist financing networks.