Terrorist Use of Crowdfunding

The Financial Action Task Force (FATF) in October released its report on the use of crowdfunding by terrorist and extremist organizations and individuals to raise money for their operations. The nature of crowdfunding, the use of new technologies, and the possible anonymity afforded by crowdfunding platforms can make them attractive as relatively quick and simple means to obtain donations from around the world.

Fundraising through crowdfunding platforms is legal, and numerous worthy causes, startups, small businesses, and nonprofit organizations (NPOs) have used crowdfunding to obtain critical resources for projects, innovations, and charities. However, the diverse landscape of the organizations and entities involved in facilitating these fundraising activities, the lack of transparency, and fragmented data, including about the ultimate recipients, location, true objectives, and origins of donor funds, make these platforms attractive to terrorist organizations and other illicit actors.

Crowdfunding connects supporters with a particular cause and facilitates the transfer of funds between the donor/investor and the ultimate beneficiary. As the global payment and new technologies landscape continues to evolve, so do the mechanisms through which crowdfunding is possible, presenting new challenges and requiring firms, financial institutions, funding facilitators, and law enforcement agencies to keep abreast of rapid changes in the ecosystem and new developments that will facilitate the use crowdfunding platforms by both legal and illicit actors.

FATF this year queried its members about how they regulate crowdfunding and the challenges they face when conducting investigations into the possible misuse of crowdfunding platforms. The FATF report also draws on experiences from the organization’s “global network, industry experts, academia, and civil society to build a deeper knowledge of the crowdfunding methods and techniques used by terrorists and to examine best practices in combatting this type of threat.”