Terrorist Financing Red Flags: What FATF's 2025 Update Means for Accountants

Money laundering usually involves large sums of dirty money that someone wants to clean. Terrorist financing can be the opposite: small amounts, often from perfectly legal sources, moving towards a violent end. That is why accountants who rely on "big and unusual" as a warning sign can miss it. This guide draws on the Financial Action Task Force (FATF), the global standard-setter, using its July 2025 Comprehensive Update on Terrorist Financing Risks, its report on crowdfunding for terrorism financing, its page on non-profit abuse and its virtual asset red flag handout. It also says plainly what we could not read. For UK practice, see our counter-terrorist and proliferation financing primer.

Why terrorist financing is hard to spot

FATF's July 2025 update, published on 8 July 2025, draws on case studies spanning more than ten years, input from more than 80 jurisdictions and more than 840 private sector, academic and think tank submissions. It says terrorist financing methods vary by context and that terrorists adapt quickly. It reports that lone actors, often younger, rely on microfinancing from legitimate sources and petty crime, and that tracing funds for ethnically, racially or politically motivated attacks is harder because of the low scale and visibility of financial activity before attacks. FATF also says 69 per cent of jurisdictions assessed in its fourth round of mutual evaluations had major or structural deficiencies in investigating, prosecuting and convicting terrorist financing cases.

The methods FATF describes

The parts of the report we could read describe terrorists raising, moving and using funds through:

• Cash and informal transfers: cash transport and hawala-type providers, especially in conflict zones and remote areas.
• Money or value transfer services and online payments: growing use of online payment services and mobile money, particularly where regulation is weak.
• Formal financial services: deposit accounts, wire transfers and prepaid cards, even with better identity verification.
• Digital platforms: social media, messaging apps and crowdfunding features, especially with integrated payments.
• Virtual assets: rising use, with some groups using obfuscation or privacy-focused alternatives, though the scale is hard to measure.
• Legal persons and non-profits: shell companies, trusts and non-profit organisations used to move or launder funds, including sham non-profits and abused legitimate ones.
• Legitimate cash-intensive businesses: FATF's examples include small grocers, electronic money agencies, car washes and used-vehicle sales.
• Natural resources and crime: oil, gas, agriculture, precious metals and timber, plus extortion, kidnapping for ransom, trafficking and smuggling.
• State sponsorship and free trade zones: FATF says state funding of terrorist entities is incompatible with the FATF Standards, and describes free trade zones as places where lower oversight can enable goods and funds movement and sanctions evasion.

The update also says that networked groups with cross-border assets increasingly use professional enablers, such as lawyers and accountants, to facilitate financing networks. That is the part of the report most directly aimed at our profession.

Red flags from FATF's crowdfunding report

FATF's report on crowdfunding for terrorism financing (the page does not state the year, and it cites 2022 campaign data) says crowdfunding is mostly legitimate, but that donation-based crowdfunding is the type most at risk of misuse. Its general indicators include a campaign that lacks information on purpose, goals or ultimate beneficiaries, or raises funds for a vague cause; a project description linked to sites with hateful rhetoric or praise for a violent extremist group; a campaign urging donors to pay across several platforms or to split payments; a campaign run by people not affiliated with the charity they claim to help; and a campaign operating in areas where terrorist groups are known to operate. Additional indicators include immediate withdrawal of funds after a donation, donors going to great lengths to obscure the source of funds, and campaigns that appear fictitious or impersonate a known campaign.

Non-profits and virtual assets

FATF's page on terrorist abuse of non-profit organisations says the sector can be attractive because of globalisation, a large transitory workforce including volunteers who often lack thorough background checks, and high public trust combined with less consistent scrutiny. It says the report provides red flag indicators for financial institutions and non-financial professions, which we have not reproduced because we could not read them. Our guide to charities, terrorist financing and sanctions covers the UK charity angle.

FATF's September 2020 virtual asset red flag handout lists indicators such as structuring into small amounts, immediately transferring funds to several virtual asset providers, transactions from IP addresses in sanctioned jurisdictions, and use of exchanges in high-risk jurisdictions with weak controls. The handout states that a single indicator is not necessarily proof of criminal activity, and it contains no indicators labelled specifically as terrorist financing.

What this means for accountants

These are our suggestions, not FATF guidance. Do not equate low value with low risk: record in your client risk assessment whether a client handles funds for a charity or fundraising campaign, trades in cash-intensive sectors, or has links to conflict zones. Ask for evidence of charity registration and how funds reach the end beneficiary. Look at the whole picture, since FATF itself says a single indicator proves nothing. Keep a written note of what you asked and concluded, and if suspicion remains, follow your reporting route; our guide to suspicious activity reports and tipping off explains the UK process. Reporting duties for terrorism offences are set by each country's own laws, which we did not review here.

What we could not confirm

• The FATF 2025 update's Annex A risk indicators and Section 4 recommendations were beyond what our reader could retrieve, so we have not listed them. Check the full report.
• We read only the executive summary, introduction and early parts of the report's first section for the methods described above.
• We did not read the red flag indicators in FATF's non-profit abuse report.
• We did not review country-specific counter-terrorism legislation or reporting duties.

Frequently asked questions

Is terrorist financing always small-scale?

No. FATF describes lone actors and small cells with minimal financial needs, but also networked groups with regional hubs and cross-border assets.

Are accountants named in the FATF update?

Yes, once: the report says networked groups increasingly use professional enablers such as lawyers and accountants.

Where can I find training?

See our CPD courses for accountants and finance professionals.