Global anti-money laundering (AML) watchdog, Financial Action Task Force (FATF) has raised the alarm that terrorist group, ISIS is using virtual assets such as crypto to fund their operations.

It urged countries and the private sector to monitor the development of virtual assets and provide tools to identify potential underlying terrorist activities.

FATF, which was originally created in 1989 to tackle money laundering, was mobilised within just one month of the 9/11 attacks to also include in its mandate, combating terrorist financing.

The Paris-based group, which sets AML standards worldwide, said the virtual assets technology is being used as a way to conceal payments.

FATF President, Elisa de Anda Madrazo told the United Nations (UN) Security Council at the weekend that the agency had in June this year, completed a Comprehensive Update of Terrorist Financing Risks, with the professional collaboration of UN officials and France.

The report, she noted, examined different types of financing of terrorist groups and individuals, and included detailed information on the financing of Daesh and affiliates.

Madrazo stated: ?What we see is that over the past decades, terrorists have demonstrated a persistent ability to exploit the international financial system.

?And these methods they employ vary widely, but we see the trend that underscores both their adaptability and determination.

?Context really matters. Depending on contextual circumstances, we see that the type of terrorist organisations, individuals and those who finance terrorism have varying financial needs and consequently adapt their financial management strategies,? the FATF chief said.

According to her, despite improvements in transparency and risk management practices of the private sector, FATF observed that terrorists continue to use formal financial systems, including deposit accounts, wire transfers, and prepaid cards.

?The major evolution is due to digital transformation. Digital platforms such as social media, messaging applications, and crowdfunding systems are increasingly being abused for terrorist financing, particularly when they offer integrated payment systems that bypass due diligence measures.

?We see an increasing level of abuse of virtual assets, with some groups systematically leveraging them and employing obfuscation techniques and shifting towards alternatives promoted as more private and secure.

?In particular, our report highlights that in 2024, ISIL-K has increasingly used virtual assets for organisational transfers and to collect donations internationally. ?To address this, the updated FATF Standards support countries and the private sector to monitor the development of virtual assets and provide tools to identify potential underlying terrorist activities.

?In parallel, the threat posed by lone individuals radicalised by ISIL ideology often younger in age is rising, with such actors relying on microfinancing strategies drawn from both licit sources, petty criminal activity, as well as technology-enabled methods, including gambling online, which we call gaming, and social media features.

?While traditional financing channels and schemes continue to be used, there is a marked increase in the interlink of diverse methods and the use of digital technologies. This adds to the complexity of the shields we have to put in place to combat terrorist financing.

?We also see an increased decentralisation, with regional financial hubs and self-financed cells playing a larger role, adapting to local contexts, and employing a broader range of funding sources, from criminal activities (as we see with ISIL?s branches in Africa) to investments in business activities. ?These financing models are more resilient and less vulnerable to traditional disruption efforts.

?This is of course a complex environment, highlighting the importance of the complementarity of the FATF and UN mandates in combatting terrorist financing.?

FATF outlined a number of measures to combat the existing and emerging challenge terrorist financing risks, and building upon requirements in Security Council resolutions and the guidance of the UN Security Council Counter-Terrorism Committee, including the Algeria Guiding Principles.

It called for the making of multilateral designation of terrorist organisations under Security Council sanctions regimes a key priority, alongside regional and national mechanisms established pursuant to UNSCR 1373.

It also urged strengthening implementation of the global Combating the Financing of Terrorism.

(CFT) standards, adding that the FATF was actively working to support countries to increase their investigative and prosecuting abilities after identifying that less than a third of countries are investigating and prosecuting terror financing adequately.

?There is also an area of opportunity in closing the loopholes particularly in areas such as virtual asset service providers (VASPs) and transparency of legal persons. This is fundamental to choke the flow of funds to terrorism,? the global anti-money laundering watchdog said. (AriseNews TV)