FCC RegUpdate

On October 31, 2023, the Financial Action Task Force (FATF) issued a report on Crowdfunding and Terrorism Financing. The report explains how terrorist groups exploit crowdfunding platforms and offers risk indicators and recommendations to combat this activity.

To read full report, click here https://www.fcctimes.com/2023/10/31/combatting-terrorism-financing-through-crowdfunding-fatfs-comprehensive-study/

The report identifies four main ways in which crowdfunding platforms can be misused for terrorism financing:

  • Exploitation of humanitarian, charitable, or non-profit causes
  • Utilization of dedicated crowdfunding platforms or websites
  • Deployment of social media platforms and messaging apps
  • Interplay between crowdfunding and virtual assets

Additionally, the report highlights the following key factors:

  1. Terrorist organizations leverage permissive crowdfunding environments to fund terrorism financing, taking advantage of crowdfunding’s global reach.
  2. The Crowdfunding Ecosystem encompasses various methods, including formal platforms, social media-based crowdfunding, messaging applications, and hybrid models that combine digital and physical fundraising.
  3. The sheer volume and diversity of crowdfunding pose challenges in detecting illicit activities, especially with the proliferation of specialized platforms, which complicate regulatory oversight.
  4. Donations-based crowdfunding often falls outside Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) regulations, resulting in a lack of comprehensive data on its misuse.
  5. Law enforcement agencies and crowdfunding intermediaries face difficulties in detecting and deterring terrorism financing due to complexity, data limitations, anonymizing techniques, and insufficient staff training.
  6. The report recommends that crowdfunding industry stakeholders take proactive measures to understand and mitigate terrorism financing risks by implementing proportionate, risk-based measures.