Crowdfunding for Terrorism Financing

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Crowdfunding for Terrorism Financing

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Executive Summary - Crowdfunding for Terrorism Financing

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Paris, 31 October - Crowdfunding is a very useful way to reach a large audience to raise money for a charitable cause, to fund a start-up, or finance a creative project. Crowdfunding is a growing and evolving sector, with a significant international market. In 2022, there were over 6 million crowdfunding campaigns around the world. 

The vast majority of crowdfunding activity is legitimate, but events around the world have demonstrated that it can also be exploited for illegal purposes. This includes terrorists and terrorist groups who can exploit fundraising platforms and crowdfunding activities on social media to seek funding for their terrorist cause from a global audience.

The crowdfunding landscape is likely to evolve further, with the introduction of new payment technologies and the proliferation of online platforms supporting different types of crowdfunding activity. However, globally, there is insufficient understanding of the risks related to this sector, and because of this, regulation varies from country to country.

This FATF report analyses how terrorists misuse crowdfunding platforms. The report, which draws on experiences from the FATF Global Network, industry experts, academia and civil society examines the challenges faced in detecting and preventing terrorist financing through the crowdfunding ecosphere. Challenges include the complexity of crowdfunding operations, the use of anonymising techniques, and lack of training and terrorist financing expertise within the crowdfunding industry to detect suspicious activity.

The report highlights good practices, starting with the inclusion of crowdfunding in national terrorist financing risk assessments, outreach to the crowdfunding sector, and strong domestic and international information sharing mechanisms.

A list of risk indicators aims to help public and private sector entities, and the general public, identify potential attempts at terrorist financing activity using crowdfunding:


What is crowdfunding?

Crowdfunding is the practice of soliciting contributions from a large number of people, especially from the online community and usually in smaller amounts, to support an idea, project or business venture. 

 

Main methods of crowdfunding for terrorism financing

There are four main methods that terrorists and violent extremists use to raise funds through crowdfunding. 

  • Abuse of humanitarian, charitable and non-profit causes which can act as a front to raise funds for terrorism.
  • Dedicated crowdfunding platforms or websites which, given the volume and variety of activity, makes it difficult to detect illicit activity. 
  • Social media platforms and messaging apps to allow extremists to amplify their messages and lead users to specific fundraising causes. 
  • Interaction of crowdfunding with virtual assets, including the use of privacy coins and anonymity enhancing services such as tumblers and mixers.

In practice, terrorists often use a combination of techniques and methods. For example, they may establish a fundraising campaign on a dedicated crowdfunding platform, share the campaign on social media, and request payment in virtual assets. 

Most crowdfunding is legitimate. Unfortunately, crowdfunding, and in particular donations-based crowdfunding is also being misused to raise funds to finance terrorism. The most common indicators of such terrorist financing are: 

  • Crowdfunding campaign lacks information about the purpose, goals and ultimate beneficiaries of the campaign, or is fundraising for a vague cause e.g., children in conflict zones.
  • Project description includes links to websites or social media pages with hateful rhetoric or symbolism, or praise a terrorist or violent extremist organisation.
  • Campaign encourages donors to provide funds across different platforms or provides instructions on how to fragment the payments.
  • Campaign is run by individuals or groups who are not affiliated with the charity or organisation that the funds are purported to benefit.
  • Crowdfunding platform used hosts or enables other projects related to terrorism or violent extremism, or doesn’t explicitly prohibit this type of content in their terms of service.
  • Crowdfunding campaign is taking place in geographic zones where terrorist organisations are known to operate or with links to conflict zones.

For Law Enforcement

Challenges for investigative authorities and prosecutors 

  • Proving intent may be difficult as donors may not know the true purpose of a crowdfunding campaign, and may not be aware that the funds will be used for terrorist financing. Fundraisers may lie about the true purpose and trick donors into supporting a fake sympathetic cause (e.g. to help victims of a natural disaster).
  • Frequently, crowdfunding transactions are complex and can involve multiple digital payment methods that allow users to move funds quickly across borders anonymously, making it difficult to track financial flows.
  • Many countries have not assessed the extent to which crowdfunding platforms are misused for terrorist financing and do not collect data on the subject. 
  • Transactions and communications can be split across multiple digital platforms, some of which may be encrypted, hiding amounts sent, sender and recipient identities and correspondence between them. Platforms may have varying rules regarding data sharing and confidentiality.

Best Practices 

  • Consider factors that can increase risk of terrorist financing and violent extremism, for example the same crowdfunding service providers may appear again and again in TF investigations, or crowdfunding platforms that allow fundraising through unregulated virtual asset service providers are used.
  • Take a holistic approach to considering the misuse of crowdfunding and analyse the entirety of the transaction chain, including the client's behaviour on any digital platforms, the type of crowdfunding platform used and any red flags related to the campaign itself.

Relevant Risk Indicators

The following risk indicators can help law enforcement recognise potential terrorist financing activity related to crowdfunding during their investigations.  

  • The crowdfunding platform used hosts or enables other projects related to terrorism or violent extremism, or enables payments through unregulated financial institutions.
  • The crowdfunding campaign contains a lack of information about the purpose, goals and ultimate beneficiaries of the campaign, or the project description features hateful rhetoric or symbolism.
  • The project promoter withdraws funds immediately after receiving a donation, or their account receives a conspicuously large volume of transfers.
  • Donors take great efforts to obscure the source of funds, or are connected to terrorist organisations or other organisation with violent extremist views.
  • The campaign raises money for an organisation with links to conflict zones or neighbouring countries and receives unusually substantial donations.

For Private Sector

Challenges for entities providing crowdfunding services

  • Intermediary organisations offering crowdfunding services may not have an-depth understanding of terrorist financing. They may struggle to recognise potential terrorist financing activity, and take the necessary action to disrupt it if does occur. 
  • The financial institutions that are partnering with organisations providing crowdfunding services may encounter challenges in following the source of funds, especially if a campaign is launched on social media. 
  • They may also have difficulty recognising suspicious activity given that many transactions involve small amounts of money. 

Best Practices 

  • Intermediary organisations offering crowdfunding services should develop awareness and expertise on terrorist financing, and have mechanisms in place to detect potential terrorist financing activity and report suspicious transactions.
  • Crowfunding platforms’ terms of service should explicitly prohibit fundraising for the purpose of terrorism and violent extremism, and there should be consequences when this activity is detected.
  • Platforms should balance mitigation of terrorist financing risks and innovation, without disrupting legitimate crowdfunding activity.
  • Private and public sectors should enhance collaboration and information sharing, including between private sector stakeholders.

Relevant Risk Indicators

Certain red flags, or indicators, can point to potential crowdfunding for terrorism. The most relevant for the industry stakeholders are: 

  • The crowdfunding platform used hosts or enables other projects related to terrorism or violent extremism, or enables payments through unregulated financial institutions.
  • The crowdfunding campaign contains a lack of information about the purpose, goals and ultimate beneficiaries of the campaign, or the project description features hateful rhetoric or symbolism.
  • The project promoter withdraws funds immediately after receiving a donation, or their account receives a conspicuously large volume of transfers.
  • Donors take great efforts to obscure the source of funds, or are connected to terrorist organisations or other organisation with violent extremist views.
  • The campaign raises money for an organisation with links to conflict zones or neighbouring countries and receives unusually substantial donations.

For Civil Society

The vast majority of crowdfunding activity is legitimate.  This includes donations-based crowdfunding, which non-profit organisations frequently use to raise funds for a range of important causes, including humanitarian need to those in need.   

However, donations-based crowdfunding is also the type of crowdfunding that is most at risk of being misused to raise funds for terrorism: 

  • Fraudulent campaigns that claim to be for humanitarian purposes (often in the absence of a registered charity) but are actually for terrorist financing.
  • Fundraising campaigns are organised by or affiliated with charity organisations that operate as a front for terrorist financing and do not actually undertake humanitarian work.
  • Terror groups or violent extremist entities abuse legitimate campaigns and skim the funds raised.

Best Practices 

It is important to protect the legitimate use of crowdfunding platforms and to ensure human rights due diligence:

  • Governments should balance the need to understand and mitigate terrorist financing risk with the need to support innovation and avoid hampering legitimate fundraising activity.
  • Policy makers should be mindful of potential unintended consequences on the crowdfunding industry, and on legitimate users of crowdfunding platforms.
  • The desing and review of measures to mitigate the risk of crowdfunding for terrorism financing should involve all relevant stakeholders, including representatives from civil society, to ensure human rights due diligence.
  • Countries should fully implement the FATF standards regarding non-profit organisations.

Relevant Risk Indicators

The following risk indicators relevant to non-profit organisation could indicate potential crowdfunding for terrorism financing   

  • Crowdfunding campaign is run by individuals or groups not linked to registered charities.
  • Campaign appears to be fictitious i.e., the project has a name similar to an association or another well-known campaign or seems to impersonate it.
  • The intermediary platform hosts or enables other projects related to terrorism or violent extremism.
  • Funds raised are destined for areas noted as being at high-risk from terrorist financing or conflict zones.
  • Crowdfunding campaign has a vague description and seeks funding for a general humanitarian cause like children in conflict zones.

For POLICY MAKERS

Law enforcement, reporting entities and supervisors face a range of challenges to detect, investigate and prosecute crowdfunding for terrorism financing.  To strengthen their awareness, understanding and effective action, countries should:

  • identify, assess and understand the terrorist financing risks related to the crowdfunding sector, and ensure those risks are effectively mitigated, while avoiding hampering legitimate financial activity.
  • encourage a multi-stakeholder approach to risk mitigation, including representatives from national authorities, private sector, civil society and academia when designing and reviewing risk mitigation measures to ensure human rights due diligence.
  • recognise the importance of public-private information sharing and put in place measures to do this effectively on a continuous basis.
  • fully implement the FATF Standards relevant to other sectors involved in the crowdfunding ecosystem e.g., virtual assets, non-profit organisations and money and value transfer services.

Translated documents

Related materials

Webinar on Crowdfunding for Terrorism Financing

On 18 January a panel of public sector experts held a virtual discussion on the four main ways in which terrorist groups exploit crowdfunding for terrorist financing.

Terrorist Financing

The FATF plays a central role in global efforts to combat terrorist financing, through its role in setting global standards to combat terrorist financing, assisting jurisdictions in implementing financial provisions of the United Nations Security Council resolutions on terrorism, and evaluating countries’ ability to prevent, detect, investigate and prosecute the financing of terrorism.
Crowd walking down on sidewalk, concept of pedestrians, crime, society, city life

Translated reports

Spanish - Crowdfunding for Terrorism Financing

translated by Spain's FIU, SEPBLAC

 

Filename
Spanish-Abuso-Crowdfunding-Financiación-terrorismo.pdf
Size
5 MB
Format
application/pdf
Read the report in Spanish

French - Financement participatif pour le financement du terrorisme

translated by the Government of Canada

 

Filename
Financement-participatif-financement-terrorisme.pdf
Size
5 MB
Format
application/pdf
Read the report in French

Italian - Il Crowdfunding ai fini del finanziamento del terrorismo

translated by the Italian Language Section of the OECD

Filename
Italian-Crowdfunding-finanziamento-terrorismo.pdf
Size
5 MB
Format
application/pdf
Read the report in Italian