Financial Crime World

Conducting Effective Terrorist Financing Risk Assessments

Core FATF Obligations

The Financial Action Task Force (FATF) has established key obligations for jurisdictions to assess terrorist financing (TF) risks effectively. These core obligations are:

1. Conduct a Risk Assessment

  • The primary obligation is to conduct a TF risk assessment that attempts to identify, analyze, and understand TF risks.

2. Use a Methodology

  • The TF risk assessment should be based on a methodology agreed upon by those parties involved.

3. Cover All Aspects of Raising, Moving, Storing, and Using Funds or Other Assets

  • The assessment should cover all aspects related to the needs of a terrorist or terrorist organization, including revenue raising, procurement, facilitation networks, and Foreign Terrorist Fighters (FTFs).

4. Consider Domestic and Foreign Threats

  • Assessments should consider both domestic and foreign terrorist threats.

5. Distinguish Between TF Risk and Terrorism Risk

  • TF risk and terrorism risk are often interlinked but not always identical. Jurisdictions with low terrorism risks may still face significant TF risks.

6. Identify Distinct Factors Associated with TF Risk

  • The factors associated with TF risk are different from those associated with money laundering (ML) risk, including the use of legitimate and illegitimate sources, enforcement-led identification, and intelligence-led assessment.

Key Points to Consider

When conducting a terrorist financing risk assessment, consider the following key points:

  • Terrorist Financing Risks Can Be Severe: Terrorist financing risks can be severe, both domestically and internationally.
  • Low-Limit Prepaid Cards Pose a Higher Risk Indicator: Low-limit prepaid cards may pose a higher TF risk indicator than ML risk.
  • Vulnerabilities to Misuse by Terrorists Differ from Those Used by Criminals: Assessments should consider vulnerabilities that terrorists misuse differently from those used by criminals.
  • The Use of Funds for Terrorist Purposes is the Primary Concern: The use of funds or other assets for terrorist purposes is the primary concern in assessing TF risk.

By following these core obligations and key points, jurisdictions can conduct effective terrorist financing risk assessments to identify potential vulnerabilities and mitigate risks associated with terrorism financing.