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Tracking Down Terrorist Financing

A lower-profile but still crucial aspect of global anti-terror efforts involves unraveling the networks that have funded attacks from New York to Bali. Terrorists have proven adept at maintaining financial links intact.

Backgrounder by Eben Kaplan

April 4, 2006 4:32 pm (EST)

Terrorism and Counterterrorism

This publication is now archived.

Introduction

As the U.S.-led "war on terror" nears its fifth year, efforts to dismantle terrorist financial networks remain an essential part of Washington’s strategy. More than $140 million in terrorists’ assets have been frozen across some 1,400 bank accounts worldwide, but experts say terrorist groups have become increasingly adept at eluding detection through use of cash, sophisticated laundering operations, or legitimate front companies. Monetary practices embedded in Muslim culture, such as donating to charities and informal money-transfer centers, have compounded the difficulty in tracking down terrorist financial links. Law enforcement efforts are further confounded by the fact that devastating attacks can be accomplished at relatively low cost.

Where do terrorist organizations get their money?

• Charities . Donations were once the largest source of terrorist funding, coming mostly from charities and wealthy individuals. For years, individuals and charities based in Saudi Arabia were the most important source of funds for al-Qaeda , according to a 2002 CFR Task Force Report. A 2004 update to that report shows Saudi officials have taken steps to disrupt terrorist financing in their country, yet charities continue to play a role in the sponsorship of terrorist groups. "In the Islamic world, there are tens of thousands of charities," says Robert O. Collins, coauthor of the new book Alms for Jihad . While as few as a hundred may sponsor terrorism, "these are some of the wealthiest charities," Collins says. Experts say some of these organizations raise funds with the express intent of supporting terrorists; others seek to promote Islam through legitimate programs, but can be coopted by jihadists who then use the funds to promote their own radical cause.
• Illegal Activities . Loretta Napoleoni , an expert on terrorist financing, says the largest source of terrorists’ income is the illicit drug trade. Many terrorist groups have supported themselves through other illegal commerce as well. In his book, Illicit , Moisés Naím explains that the terrorists behind the 1993 World Trade Center bombing raised money by selling counterfeit t-shirts on New York City’s Broadway, and the perpetrators of the 2004 Madrid train bombings sold counterfeited CDs and trafficked drugs to support their activities. Hezbollah , the Irish Republican Army , and the Basque ETA are also believed to have generated revenue through counterfeiting scams. In 2002, federal agents broke up a methamphetamine ring in a dozen U.S. cities that, according to officials, funneled proceeds to Hezbollah. The Revolutionary Armed Forces of Colombia (FARC) has long used the cocaine trade to finance its operations. Afghanistan’s flourishing poppy crops, which the United Nations says are responsible for as much as 86 percent of the world opium supply, are widely believed to be a major source of terrorist funding. Al-Qaeda reportedly profited from the Afghan poppy trade before fleeing the country when the Taliban-led government was ousted in 2001.
• Front Companies . Many terrorist organizations attempt to operate legitimate businesses, which generate their own profits and can also be used as a front for money laundering. Ties to terrorism have been found amid the trade of livestock, fish, and leather. Businesses involved in agriculture and construction have also been found to support terrorism. In 2001, the New York Times reported that Osama bin Laden owned and operated a string of retail honey shops throughout the Middle East and Pakistan. In addition to generating revenue, the honey was used to conceal shipments of money and weapons.

Why do charities play such a big role in terrorist financing?

One of the pillars of Islam, zakat , is the compulsory giving of a set proportion of one’s wealth to charity. While most of these charities in the Muslim world exist to help the poor and spread the message of Islam, they have also been used, particularly in wealthy Middle Eastern nations, to finance jihad.

Weeding out ill-intentioned charities from the benevolent is a difficult task. As Lee Wolosky, a former National Security Council official explains, "There are nefarious charities and there are good charities with nefarious people working for them." The U.S. Treasury Department has been disparaged for shutting down charities that critics contend have no ties to terrorism. In a March 12 Washington Post op-ed, two board members from KinderUSA , a Muslim American charity, bemoaned the government’s "assault" on perfectly legitimate charities . London-based Interpal , which funds Palestinian social programs, has been blacklisted by the United States but is still allowed to operate in Britain. Wolosky says "U.S. policy is very clear that no charity can provide money to any organization that may have terrorism as part of their agenda." Under U.S. policy, Interpal’s support of the Hamas-run Ramallah-al-Bireh Charity Committee is seen as financing terrorism.

How do terrorists transfer funds?

Quite often, terrorists transfer money in plain sight: "If it isn’t done through the ordinary banking system, it’s done through shell companies," says Bill Tupman , a senior lecturer at the University of Exeter who specializes in transnational crime. In their book, Chasing Dirty Money , Peter Reuter and Edwin M. Truman say financial crime is so widespread that as much as 10 percent of the global GDP is estimated to be laundered funds. Despite heightened efforts to track terrorist financiers, the vastness of the modern financial system means government officials often find themselves looking for the proverbial needle in the haystack.

Another, more traditional means of transfer is also widely used by terrorists. Hawalas are time-honored, trust-based remittance agencies popular across Asia and found throughout the world, particularly in Muslim communities. With no more than a handshake and a password, individuals are able to transfer money across the world.

How much does a terrorist operation cost?

Though the 9/11 attacks are believed to have cost as much as a half million dollars, most terrorist operations have much more modest budgets. The UN estimates the 2002 bombing of a Bali nightclub cost about $50,000. By comparison, the 2004 Madrid train bombing is believed to have cost between $10,000 and $15,000. The 2005 attacks on London’s mass transit system cost about $2,000, says Napoleoni.

What are governments doing to stop terrorist financing?

The 9/11 attacks brought an international sense of urgency to disrupting terrorists’ financial networks. Within a few weeks, the UN Security Council adopted a wide-ranging resolution demanding countries take action to suppress terrorist financing. The following month, the Financial Action Task Force, an intergovernmental body, issued a list of recommendations that became the basis for many governments’ efforts . These included passing legislation specifically criminalizing terrorist financing, requiring financial institutions to report suspicious transactions, creating a greater degree of international cooperation in tracking down terrorist financiers, and ratifying the UN convention on financing terrorism , a step that has been taken by 150 countries.

Like several other nations, the United States created a special agency—the Office of Terrorism and Financial Intelligence —to coordinate these efforts. The Patriot Act , along with subsequent legislation, created tough legal measures to combat terrorist financing. Banks must now report any suspicious activities and are also required to check their clients and third parties involved in transactions against a list of suspected terrorists. While these measures have been fairly effective within the United States, Napoleoni says terrorists have simply "shifted all the money to Europe."

What are some of the difficulties with tracking down terrorist financiers?

The greatest difficulty is that terrorist networks have stayed aware of governments’ efforts to stymie their activities and adjust their operations accordingly. Napoleoni says "terrorist financing mutates continuously," which generally keeps terrorists a step ahead of the authorities.

Terrorists have increasingly relied on illegal activities, like smuggling or counterfeiting, to generate revenue that is difficult to track through the financial system. Terrorists have also begun to rely more on cash, leaving less of a paper trail. According to Napoleoni, much of the funding for Abu Musab al-Zarqawi’s al-Qaeda organization in Iraq is brought into the country by couriers carrying cash. The July 2005 attacks in London were also funded entirely by cash, which Napoleoni says is untraceable.

The London attacks highlight another development in terrorist finance: the use of domestic sources in planning and funding attacks. The bombings were planned inside Britain by British citizens who raised all the money locally for the attacks. Because the plotters only used cash and didn’t cross any national borders, it was difficult to track their financial activities.

Enforcement of new financial laws has also proven difficult. According to the British Bankers’ Association, UK banks spend about $430 million each year to comply with anti-terror and anti-money laundering laws. Experts say the U.S. Department of Treasury is overwhelmed by the number of suspicious activity reports it receives, which have risen some 350 percent since 2001.

How can governments more effectively combat terrorist financing?

Because terrorist networks transcend national boundaries, improving international cooperation is essential. "One of the problems of coordination," Wolosky says, "is reaching common ground on ’what is a terrorist organization.’" The UN General Assembly has tried for more than a decade to agree on a definition for terrorism, which would help underpin a comprehensive treaty banning the practice. Beyond that, Napoleoni calls for an international body dedicated to information-sharing and an international court to oversee the terrorism blacklist of individuals and organizations.

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What we have and haven’t learned about terrorism financing.

A review of Jessica Davis, “Illicit Money: Financing Terrorism in the 21st Century”   (Lynne Rienner, 2021).

Alex Zerden

Follow the money . That phrase is both tired and yet still essential when discussing counter terrorism financing in 2022. Policy attention shifted to this issue in the wake of the 9/11 terror attacks, and the public and private sectors mobilized to disrupt it. Terrorism financing threats spawned new bureaucratic institutions (like the Treasury Department’s Office of Terrorism and Financial Intelligence), repurposed military assets to target financial facilitators and even cash stockpiles, deputized the private sector to carry out financial monitoring and bring civil suits to defund terrorists, and empowered law enforcement to disrupt plots and prosecute terrorist financiers. The international community integrated the goal of countering terrorist financing into its architecture for countering financial crimes, especially using the intergovernmental Financial Action Task Force (FATF), which had previously focused on money laundering . 

Unfortuantely, the collective understanding of terrorism financing remains highly fragmented and, given the sensational nature of terrorism, often anecdotal. In government bureaucracies, it’s a place for “specialists,” but that’s not often a compliment; popular culture caught on to the waning perception of counter terrorist financing when portraying it as a fictional CIA backwater, the Terror Finance and Arms Division (T-FAD), in the 2019 Amazon Prime Video series pilot of “ Tom Clancy’s Jack Ryan. ” With life imitating art in the same year, the FBI quietly shuttered the real Terrorist Financing Operations Section (TFOS), another post-9/11 creation, and spread its functions across other elements of the bureau’s Counterterrorism Division. The Taliban’s takeover of Afghanistan, the horrific Islamic State in Khorasan bombing of U.S. military personnel and Afghan civilians at the Kabul airport, and a recent U.S. special forces raid in Syria against the leader of the Islamic State in Iraq and Syria briefly reinserted terrorism and terrorist financing issues into public view, but that has largely faded as the public collectively moves on to other crises spanning Russia, Ukraine, North Korea and beyond. 

Over the past two decades, terrorism financing matters have largely worked as the camel’s nose in the tent to achieve wider ranging policy goals on anti-money laundering (AML), counterproliferation, counternarcotics, cybersecurity and anti-corruption. The 2001 USA Patriot Act understandably focused heavily on countering the financing of terrorism to update the Bank Secrecy Act regime, a legal framework for financial institutions and governments to monitor and address financial crimes, but also included substantial AML reforms. The most recent overhaul, the Anti-Money Laundering Act of 2020 , while providing necessary incremental improvement for countering terrorist financing, seeks to equip the U.S. financial system and government authorities for a fundamentally new era of financial threats centered on emerging technologies and nation-states. A Feb. 3 policy speech at the Union of Arab Banks by Elizabeth Rosenberg, the Treasury Department assistant secretary for terrorist financing and financial crimes, explicitly details how the Biden administration is moving beyond terrorist financing concerns to address “equally important” threats such as corruption.

Terrorist financing nevertheless remains a perennial security challenge that cannot and will not be ignored by policymakers . Fortunately, Jessica Davis has made a timely and wide-ranging contribution to the collective understanding of terrorism financing in her new book , “Illicit Money: Financing Terrorism in the 21st Century.” 

Davis, a former Canadian intelligence analyst, takes readers on a global tour of terrorist financing. Her research—covering 55 terrorist organizations, 18 plots, and 32 attacks—meaningfully contributes to the shared knowledge of this security threat. Davis’s attention to detail and thorough research carries the book, making it both engaging to read and an essential reference guide for practitioners. 

Davis’s research occurs during a renaissance moment for academic research on illicit finance threats, including with the recent publications by Julia Morse on FATF (“The Bankers’ Blacklist: Unofficial Market Enforcement and the Global Fight Against Illicit Financing”) and by Nicholas Mulder on economic sanctions (“The Economic Weapon: The Rise of Sanctions as a Tool of Modern War”). These new contributions supplement Davis’s extensive bibliography that itself is critical to understanding the broader illicit finance space and that builds on seminal practitioner works like Juan Zarate’s “Treasury’s War” ( reviewed on Lawfare) and Colin Clarke’s “Terrorism Inc: The Financing of Terrorism, Insurgency, and Irregular Warfare . ”

Policy Challenges Posed by Terrorism Financing

Common problems still plague efforts to detect and disrupt terrorism financing. The actual costs of carrying out terror attacks remain relatively small, especially as compared with other financial crime activities like multibillion-dollar sanctions evasion schemes, narco-trafficking rings, and corruption efforts. This reality hampers effective monitoring for terrorist financing in bank compliance programs and government financial intelligence units alike.   

Davis rightfully identifies this “small data” problem, as well as steps that law enforcement, intelligence agencies, regulators, and financial institutions can take to address it, including by examining larger terrorist networks to find operational cells. As also seen in the economic sanctions space—for example, with the Treasury Department’s October 2021 sanctions policy review —policymakers can take a major step forward by holistically assessing the efficacy of efforts to counter terrorist financing over the past 20 years. Davis points out that “there are few empirical analyses of the effects of counterterrorist financing practices.” This necessary call to action should be heeded by policymakers to ensure that counter terrorist financing policies achieve their intended effects as part of broader policy goals; do not cause unintended effects like de-risking , the phenomenon of financial institutions terminating or restricting business relationships to avoid rather than manage risks; and have sufficient monitoring and review capabilities to differentiate between these effects.

Role of Emerging Technologies and Cryptocurrencies

The rise of privacy-enhancing technologies, including through encrypted messaging applications, financial technology (FinTech) platforms, and cryptocurrencies, adds another layer of complexity for analysts and policymakers both on operational matters and when evaluating the efficacy of governments’ efforts to counter terrorist financing. It is here that Davis makes relevant contributions grounded in data to refute popular conjecture and misconceptions. 

On cryptocurrencies, for instance, Davis importantly observes that, “although terrorists have certainly been adopting [Bitcoin and cryptocurrency] since 2015, there has been no widespread sea change away from other fund movement mechanisms.” She then provides further necessary nuance: “However, the focus on digital and cryptocurrencies has eclipsed the actual trend, which is the increased use of financial technologies [like crowdfunding and digital remittance services] by all levels of terrorist actors to finance their activities.” 

This analysis also underscores a critical difference between traditional finance—such as commercial banks and under-regulated hawala money services—and cryptocurrencies, with the latter having a level of public transparency, through public blockchain ledgers, that is mostly if not entirely absent in other types of financial service transactions. Some features of public ledgers may have greater investigative benefit for countering terrrorism financing and other malign activities. Because of that, terrorist actors may remain firmly in the traditional financial space.

Expanding Knowledge of Terrorist Financing

Davis makes an important contribution by expanding the focus of how terrorist groups raise, transfer, and spend money, to also explore how they store and invest assets. This enlarged aperture allows Davis to better unpack the organizational incentives of terrorist groups to invest assets as a means to grow resources and even hedge against inflation. Davis achieves this goal by “propos[ing] a common lexicon to describe the full range of activities in which terrorists engage in terms of financing.”

For an academically focused book, Davis takes admirably bold and clear policy positions. For instance, she rejects the concept of a “lone-wolf” terrorist because of the wider affinity networks, and sometimes financial networks, supporting radicalization. She repeatedly calls out white supremacist groups and identifies the growing domestic terrorism threat in the United States and elsewhere around the world. 

Davis stays focused on terrorist organizations but recognizes substantial areas for her own future research and for other analysts to address. Most notably, Davis highlights the role of state sponsorship to terrorist organizations, which is a major source of revenue and political support, but leaves room for more directed analysis. Similarly, Davis unpacks the role of financial facilitators and co-opted intermediaries like bank officials who actively assist terrorist groups; here, Davis provides ample case studies that could be expanded into an entirely separate research inquiry. 

However, one major area that is overlooked by Davis (and, candidly, others) is the role of civil litigation in stemming terrorist financing, in particular by holding financial institutions legally accountable as well as the specter of litigation as a driver for enhanced financial crimes compliance, including to counter terrorist financing. (I have worked on behalf of terrorism victims in this capacity.) While understandably opposed by defense attorneys and sometimes at odds with governmental authorities , terrorism victims and their lawyers have worked meticulously over the past two decades to understand terrorist financing networks , especially financial facilitators and intermediaries that Davis effectively identifies. While decidedly not state-centric, these contributions should be a meaningful part of analyzing terrorist financing. And relatedly, Davis’ research, while comprehensive, would benefit from greater inquiry into both civil and criminal court records, particularly in the United States, that provide a wealth of data about terrorist organization activities and their financial conduct.   

As an analyst and investigator in private practice and the Treasury Department’s Office of Terrorism and Financial Intelligence, I would have benefited tremendously from Davis’s research. I am at least comforted that my former colleagues and other practitioners have this consolidated resource at their disposal, as Davis describes, for “understanding and analyzing financing mechanisms for terrorist and extremists groups.” Or put another way, to follow the money.

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Terrorism Financing and State Responses

A comparative perspective.

• Edited by: Harold A. Trinkunas and Jeanne K. Giraldo
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• Language: English
• Publisher: Stanford University Press
• Copyright year: 2007
• Audience: Professional and scholarly;
• Main content: 384
• Illustrations: 3
• Other: 13 tables, 3 figures
• Keywords: Politics -- Political Economy ; Politics -- International Relations ; Security Studies -- Counterinsurgency and Terrorism
• Published: March 19, 2007
• ISBN: 9780804768221

Counter-Terrorism Committee Executive Directorate (CTED)

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Cted holds multi-stakeholder discussion on establishing effective public-private partnerships on countering the financing of terrorism.

On 8 February 2024, CTED convened almost 20 top experts representing multiple key sectors willing to work together in trusted partnerships to counter the threat of terrorism financing in an effective, risk-based, responsible and well-informed manner. The event, held in a hybrid format, was attended by over 200 professionals from across the world, and shed light on a series of practical proposals on how to enhance public-private sectors cooperation on CFT, as well as what pitfalls to avoid. It also marked the publication of UN CTED’s latest  Analytical Brief on ‘Establishing effective public-private partnerships on countering the financing of terrorism .

The Deputy Permanent Representative of the Kingdom of the Netherlands, host of the in-person component of the discussions, noted that the threat of terrorism financing has become increasingly sophisticated and complex, especially as it intertwined with transnational crime.

CTED Executive Director, Assistant-Secretary General Natalia Gherman, stressed in her opening remarks   that proactive sharing of relevant information through PPPs can enable the early identification of terrorist threats. They may, she noted, also be mechanisms to address information exchange that requires immediate and urgent action. The appropriate use of the information they can generate can also contribute to the tracing of assets intended for terrorist purposes and mapping of terrorist-related transactions.

The event showcased examples of existing platforms for PPPs, including the Dutch Financial Expertise Centre (FEC) which is a partnership between various authorities with supervisory, monitoring, prosecution or investigative tasks within the financial sector, and its Terrorist Financing Taskforce (NL-TFTF). The New York City Police Department spoke on how it operates the NYPD Shield program – the Counterterrorism Bureau’s public-private partnership with leading security professionals and law enforcement agencies throughout the world.

Experts from research and academia reflected on legal and regulatory considerations that need to be taken into account to frame the PPPs and avoid legal uncertainty around the rules applicable to voluntary cooperation with the private sector and sharing of tactical information by the authorities. Lack of clear frameworks and safeguards may entail risks of de facto covert targeted surveillance or de-risking practice by obliged entities in the fear of AML/CFT sanctions. Clarity in the terms of engagement is also paramount to avoid unintended consequences for innocent customers and ensure human rights-compliant PPPs. They also provided thought-provoking and highly pragmatic reflections on the do’s and don’ts of establishing effective PPPs.

Speaking about engaging with sectors that are not necessarily regulated for AML/CFT, but are nonetheless important partners to detect terrorist financing activity, such as real estate, second-hand car dealers, and dealers in precious metals and stones, experts   noted that some of these businesses operate informally, resulting in minimal interaction with government entities further than basic corporate registrations and enforcement of tax obligations. Reflecting on success stories, they called for encouraging unified collective voices within each industry, fostering collaboration, and establishing a resilient foundation for identifying and mitigating risks and threats.

Civil society and non-for-profit sector perspectives were raised in several interventions to highlight the need to be mindful of potentially adverse impacts on protected rights. They called for more efforts to ensure that partnerships with the private sector do not infringe upon financial inclusion and civic spaces, including with respect to a chilling effect on legitimate operations of non-profit organizations and on exclusively humanitarian activities .

Reflecting on matters related to privacy and data protection, experts underlined the importance of inclusive and cooperative dialogue on core data standards and technology that supports this. Consideration as to what data is used in risk decisions is important – as expressed, it is the foundation of the accuracy of the results. What is shared in a PPP, and how accurate this information may be, is key to detecting terrorist financing and financial crimes. When such sharing is done right, everyone wins: financial institutions target bad actors more quickly, save money, provide better information to PPPs, individual rights are protected, and authorities get better data to protect society from harms. When asked about Artificial Intelligence and anonymous data, experts agreed that AI will not replace human analysis, but it has the power to help sift through large volumes of data, find patterns, and target terrorist actors.

Leading experts from the private sector dealing with blockchain intelligence , innovative and AI-driven compliance tools , crowdfunding platforms and digital assets trade were united and eager to offer their niche knowledge and leading technologies to assist authorities in detecting and suppressing terrorism financing, and to protect their sectors from TF abuse. When it comes to on-chain investigations , the goal is to participate in an all-encompassing approach that assists in finding terrorist actors and disrupting their networks. Blockchain analytics companies provide transaction monitoring tools that offer the ability for compliant digital asset businesses to be protected from bad actors, and therefore the identification, and validation of terrorist financing is critical for this to be successful. A specific case example involving cross-border cooperation and crypto transactions was also explained.

They also spoke about the need to ensure closer cooperation and coordination among different sectors as they often cohabit the same processes and each holds their pieces of the puzzle. For example, it is very common that the crowdfunding platform will have rich behaviour insights while the financial institution that powers their payments will have payment data. Understanding how to navigate this is crucial.

International and regional organizations, including the UN Office on Counter-Terrorism (UNOCT), the UN Office on Drugs and Crime (UNODC) and the Organisation for Security and Cooperation in Europe (OSCE) also shared their perspectives on supporting Member States in establishing effective and human rights compliant PPPs in CFT. For its part, CTED will continue to engage with a wide range of stakeholders to foster a more sustainable, inclusive, and innovative approach to PPPs in the area of countering the financing of terrorism.

For more, please visit the following:

• Meeting agenda
• Recording of the meeting
• Photo album

Reference materials and cited publications can also be accessed:

• CTED’s work on CFT
• FATF work with private sector
• EU-funded PartFin project: Developing Public-Private Information Sharing to Strengthen the Fight Against Money Laundering and Terrorism Financing - Recommendations of the ISF-Police-funded Research Project “Public-Private Partnerships on Terrorism Financing”
• Ethics and Good Governance for Public-Private Partnerships in the Framework of Countering Financial Crime: 10 Recommendations, Project CRAAFT
• Public-Private Partnerships to Counter Terrorist Financing — Project CRAAFT
• Social Media and Terrorist Financing What are the Vulnerabilities and How Could Public and Private Sectors Collaborate Better?”, Global Research Network on Terrorism and Technology: Paper No. 10: https://static.rusi.org/20190802_grntt_paper_10.pdf
• Developing the Architecture of Criminal Justice, Regulation and Data Protection , Benjamin Vogel and Jean-Baptiste Maillart (eds)
• Terrorist Financing: Six Crypto-Related Trends to Watch in 2023 - https://www.trmlabs.com/post/terrorist-financing-six-crypto-related-trends-to-watch-in-2023  
• TRM Finds Mounting Evidence of Crypto Use by ISIS and its Supporters in Asia - https://www.trmlabs.com/post/trm-finds-mounting-evidence-of-crypto-use-by-isis-and-its-supporters-in-asia
• Fundraising Campaigns for ISIS Families: Analyzing the Use of Cryptocurrency - https://www.trmlabs.com/post/fundraising-campaigns-for-isis-families-analyzing-the-use-of-cryptocurrency

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Cryptocurrencies and Jihadi Terrorist Financing: Potentials and Challenges

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• The Use of AI in Terrorism

26 August 2024

Artificial Intelligence (AI) is changing the way intelligence is gathered and used, affecting geopolitical tensions and terrorism. It has been reported that terrorist and violent extremist actors are leveraging AI to enhance their operations in three ways: boosting information operations, recruitment and financing. The potential for AI to be weaponised and misused in terrorism is rapidly becoming realised. Proactive policies and multistakeholder initiatives will be needed to monitor and counter these AI-enhanced terrorist operations.

In a speech to the Australian National Press Club in April, Mike Burgess, Director-General of the Australian Security Intelligence Organisation (ASIO), warned that “AI is likely to make radicalisation easier and faster”. His assessment is shared by other Intelligence chiefs who are similarly concerned about “terrorists exploiting the enormous potential of the technology [AI]”.

The key driver for this is that the barriers to leveraging AI tools, such as cost, training, and coding skills, have been reduced as they become more widely accessible and do not require significant resources or technical skills. Terrorist groups will likely incorporate more AI into their operations.

AI can potentially change terrorism operations in three fundamental ways: (a) boosting Information Operations (IO), (b) recruitment, and (c) financing.

Information Operations

AI platforms can play a clear role in shaping and enhancing IO. Last year, Tech Against Terrorism , an initiative launched by the United Nations to work on terrorism threat intelligence and policy, reported that terrorist and violent extremist actors (TVEs) have already started using Generative AI tools to enhance their existing methods of producing and spreading propaganda, distorting narratives and influencing public opinion, as part of their IO.

Deepfakes are one type of synthetic media output from Generative AI tools. They can resemble certain persons, objects or events and appear genuine. Deepfakes are becoming more widespread and difficult to tell apart from genuine content, thus facilitating unlawful and dangerous activities. For example, a media organisation associated with Al-Qaeda had been disseminating misinformation and propaganda that appeared to have been produced using deepfakes.

These images have been made into posters overlaid with propaganda messages. The analysts believed it was likely that the images were generated with free tools to avoid the risks of identification associated with paid tools. It is also likely the images were originally generated without the propaganda messages overlaid, thereby avoiding violations of content moderation rules.

In February 2024, another study examined 286 pieces of AI-generated/enhanced content created or shared by pro-Islamic State (IS) accounts across four major social media platforms.  The most common imagery in the AI-generated material were IS flags and guns . AI allowed the supporters to generate creatively and efficiently and even bypass filters on Instagram and Facebook by blurring the IS flag or placing a sticker on top.

The above examples suggest that TVE operatives have become adept at circumventing content creation restrictions in AI-enabled image generation tools. They have also developed a high level of skill in bypassing content moderation controls on social media platforms. This strongly suggests that the current guardrails on both AI-enabled image generation tools as well as social media platforms need to be strengthened.

Recruitment

Terrorists could use AI-based tools to profile candidates and identify potential recruits who meet their criteria. Subsequently, generative AI tools could be used to personalise and tailor messaging and media content for potential recruits. A UN study reported that concerns have been raised about OpenAI ’s tools in terms of their capabilities in “micro-profiling and micro-targeting, generating automatic text for recruitment purposes”.

The same study found that AI might be used in the data mining process to identify individuals susceptible to radicalisation, enabling the precise dissemination of terrorist information or messaging. For example, they may send tailored messages to potential recruits, such as those who often seek “violent content online or streamed films portraying alienated and angry antiheroes” via AI-powered chatbots . This was demonstrated in an experiment when the UK’s terrorism legislation reviewer was “recruited” by a chatbot.

Countering Financing of Terrorism (CFT) mechanisms trace how finance flows from the source, legally or illegally, to terrorists. These involve multiple stakeholders and include programmes against money laundering. Know Your Customer (KYC) is one standard technique financial institutions deploy to combat money laundering, especially when a bank account is opened online.

Some banks require the account holder to be present during a live video call where his “liveness” is verified. It is possible to spoof these KYC processes with deepfake videos, allowing terrorists to open fake accounts to facilitate funding for their activities.

The use of deepfakes in biometric KYC verification is particularly worrying. A report by sensity.ai , a fraud detection company, studied the most popular biometric verification vendors and found that “the vast majority were severely vulnerable to deepfake attacks”. Terrorists can, therefore, leverage AI-generated deepfakes to bypass security checks inherent in KYC platforms, evade CFT mechanisms and thus illegally transfer funds.

Just as audio deepfakes have been used for commercial fraud , they can also be leveraged by terrorists to transfer funds illegally. These recordings can deceive people into parting with money or sensitive information as certain banks utilise voice authorisation checks for security purposes. Audio deepfakes could be used to bypass KYC checks and illegally transfer funds by synthesising a voice that closely resembles that of the authorised user.

Cryptocurrencies are another source of terrorist financing. In 2022, Bloomberg reported that a UN counter-terrorism legal expert had opined that “ more cases of crypto use in terror-financing are being detected amid stepped-up scrutiny of such practices”.

Cryptocurrencies were suspected to have been used in financing the 2015 Paris and 2019 Sri Lankan bombings . Following the 7 October attack on Israel, the US Treasury Department imposed sanctions on a virtual currency exchange in Gaza suspected of facilitating the Hamas attack. In February 2024, the crypto exchange Binance, whose CEO is a Singaporean , was sued by the families of the victims of the attack for allegedly “facilitating terrorism”.

AI can potentially enable terrorists to take further advantage of cryptocurrencies in two ways: trading and theft.

AI-powered cryptocurrency bots can detect patterns and price trends to “offer predictions on target and breakout prices, alongside confidence levels, thus significantly enhancing decision-making processes”, which is especially useful for markets with high volatility. Terrorists can leverage this ability to make more lucrative cryptocurrency trades, increasing their profits.

The second way is the outright theft of cryptocurrencies. Global cryptocurrency thefts have surged more than 100 per cent in the first half of 2024 as compared to 2023, partly caused by major attacks. This includes a US$308 million loss at a Japanese crypto exchange due to a cybersecurity vulnerability. Given the growing trend of using AI to craft and launch cyberattacks , it is foreseeable that terrorists will use AI to “ facilitate the theft of cryptocurrencies from ‘hot wallets’” as reported by the UN.

The potential for AI to be weaponised and misused in terrorist activities is fast being realised. It is becoming another tool in the terrorism toolbox to run their IO, recruitment, and financing operations.

Policymakers, lawmakers, law enforcement agencies, and civil society must collaborate closely to develop robust strategies to counter terrorist entities’ misuse of AI.

Greater vigilance and an array of mechanisms such as multistakeholder initiatives, legislation, policies such as better guardrails on social media platforms and AI-enabled content generation tools as well as the use of automated detection tools will be needed to monitor and contain these AI-enhanced terrorist operations.

About the Author

Asha Hemrajani is a Senior Fellow at the Centre of Excellence for National Security (CENS) at S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University (NTU), Singapore.