AML’s forgotten half: Why counter-terrorist financing still matters

Nearly a quarter century ago, the world awoke to a brutal truth: terrorism does not just rely on ideology, it relies on money.

The attacks of September 11, 2001 did not only change geopolitics, they forced regulators, banks and governments to confront a new frontier: how extremist groups raised, moved and concealed the funds that made their operations possible.

What followed was a fundamental shift. Anti-money laundering frameworks expanded overnight to include counter-terrorist financing. Two decades on, those risks look different, often smaller in dollar terms and sometimes hidden in humanitarian flows, but they remain just as urgent.

From drug money to terror money

Before 9/11, AML regimes were designed mainly to catch drug traffickers and organised crime. Banks were the focus and the idea of a risk-based approach had not yet taken hold.

After the attacks, the Financial Action Task Force added Special Recommendations on terrorist financing, the UN Security Council demanded asset freezes and countries rushed to embed CTF into their AML laws. Suddenly, lawyers, accountants and real estate agents were no longer peripheral. They were seen as potential conduits for terror funds.

The EU moved quickly, amending its 1991 Directive in late 2001 to bring these professions under scope. The UK transposed it by 2003 then upgraded again in 2007 with risk-based obligations.

New Zealand and Australia started with banks and casinos but kept gatekeeper professions out until much later. The Panama Papers and FATF pressure forced New Zealand to legislate Phase 2 in 2017. Australia’s own Tranche 2, delayed for years by politics and cost concerns, is finally set for July 2026.

What today’s threat picture shows

Terrorist financing is not just about planning attacks. It can involve living expenses for fighters, propaganda and recruitment costs, or supporting overseas organisations.

Funds may be raised in entirely legitimate ways and then diverted through complex channels.The UK’s 2025 National Risk Assessment illustrates this well. It highlights cases where everyday income was converted into crypto-assets, off-ramped into fiat, and sent abroad via payment service providers.

In one case, Covid bounce-back loans were channelled to Syria. In another, small remittances via a money service business were sent to a relative fighting for a proscribed organisation.

The NRA also stresses that ideology matters. Islamist groups remain the primary threat, accounting for two-thirds of UK terror cases since 2018, but extreme right-wing terrorism now represents about a quarter of investigations.

Northern Ireland-related groups continue to fund themselves through cigarette smuggling, extortion and semi-legitimate businesses. The Kurdistan Workers’ Party has been linked to community fundraising, crowdfunding and crypto.

These examples make clear that the boundary between crime and terror financing is blurred, and that typologies shift depending on ideology and opportunity.

Small sums, large impact

One message runs through both the NRA and international assessments: small sums matter. UK authorities note that low-cost lone-actor attacks often rely on little more than wages, benefits or petty crime. Its current terrorism threat level is rated as substantial, meaning an attack is likely. Even New Zealand, with its low terrorism threat level, warns that minor terrorist financing within its borders could have significant consequences.

Australia too faces a volatile picture. Its terrorism threat level is rated as probable, meaning there is more than a fifty per cent chance of onshore attack planning within the next year.

Australian Security Intelligence Organisation (ASIO) warns that social cohesion is weakening, grievance-driven extremism is growing and global conflicts resonate locally. Attacks are most likely to be low-cost, simple and carried out by lone actors or small groups in crowded public places. In such a setting, even a small financial transfer or a prepaid card can provide the means to act.

Informal value transfer systems (IVTS) add another wrinkle. Used legitimately by diaspora communities, they can also provide cover for small-scale terrorist financing. Their reliance on trust and community ties makes them hard to monitor, yet they can move funds cheaply and quickly into high-risk regions, often blending licit and illicit flows.

Humanitarian and international dimensions

Beyond domestic risks, conflict zones like Lebanon and Syria remain hotbeds of terrorist financing. Hezbollah receives hundreds of millions annually from Iran, while militias in Syria exploit the Captagon trade, extortion and smuggling. Charities working in such regions face the constant danger of diversion, where funds intended for relief are taxed or seized by armed groups. IVTS networks play a similar dual role: they are lifelines for families but also channels that can be exploited by proscribed organisations.

For compliance teams, this underscores the need to scrutinise not just obvious red flags but also the quiet channels of everyday life: remittances, crowdfunding donations, charitable flows, crypto wallets and informal transfer systems.

Why CTF should stay on your radar

CTF is not a historical footnote. It is a live obligation and a critical security issue. Whether in London, Auckland or Sydney, regulators expect firms to:

• Include terrorist financing in risk assessments
• Train staff on CTF-specific typologies and red flags
• Monitor even small-value transactions to high-risk regions
• Pay close attention to charities, remittance providers, fintech platforms and informal transfer networks

Terrorist financing may not dominate headlines the way fraud or sanctions do but it underpins global security. Forgetting it risks repeating the lessons learned in 2001.

The “CTF” in AML is not an afterthought. It is the reason the system expanded in the first place, and it remains as relevant now as it was on the morning that changed the world.