Terrorist financing refers to the processing of funds to sponsor or facilitate terror activity. A group, like any other criminal organization, builds and maintains an infrastructure to facilitate the development of sources of funding, to channel those funds to the providers of materials and or services to the organization, and possibly to launder the funds used in financing the terrorist activity or resulting from the same activity.
In general terms, the financing of terrorism is the financial support in any form of terrorism or those who encourage plan or engage in terrorism. Terrorist financing differs from money laundering in that the source of funds can either be legitimate, such as an individual’s salary or illegitimate. Often the proceeds of crime such as frauds,drug trafficking,human trafficking,prostitution,and illegal fire arms dealing.
Usually, the focus of scruting for potential terrorist financing activity will be the end beneficiary and intended use of the money or assets.A terrorist financier may only need to disguise the origin of the property if it was generated from a criminal activity, but in the vast majority of cases, they will seek to disguise the intended use. This is an act of terrorism.
Terrorist organizations derive income from a variety of sources, often combining both lawful and unlawful funding, and where the agents involved do not always know the illegitimate end of that income. The forms of financing can be grouped in two types;
- Financial support
In the form of donations, community solicitation and other fundraising initiatives. Financial support may come from states and large organizations or from individuals.
- Revenue generating activities
Income is often derived from criminal activities such as kidnapping,extortion,smuggling or fraud.Income may also be derived from legitimate economic activities such as diamond trading or real estate investment.
Terrorist financing often involves a complex series of transactions. This consist of three separate phases;
- Collection; funds are often acquired through seeking donations, carrying out criminal act or diverting funds from genuine charities.
- Transmission; where funds are pooled and transfered to a terrorist
- Use; where the funds are used to finance terrorist acts, training and propaganda.