Terrorism financing involves the solicitation, collection or provision of funds with the intention that they may be used to support terrorist acts or organizations. Funds may stem from both legal and illicit sources. The primary goal is to sustain the activities of the terrorist organizations in the longer run.
Steps taken to curb terrorist financing include:

• Resolutions of the United Nations Security Council (UNSC): The UNSC requires all its member states to take a number of steps to combat terrorist financing, such as freezing the assets of terrorist organizations and individuals, and preventing terrorists from accessing the financial system through its resolution.
• The Financial Action Task Force (FATF): The FATF is an intergovernmental organization that sets international standards for combating money laundering and terrorist financing.
• The Egmont Group: The Egmont Group is an international network of financial intelligence units (FIUs) from around the world to enable sharing of information and cooperate on investigations. FIUs are responsible for collecting and analysing information about suspicious financial activities.
• The United Nations Convention for the Suppression of the Financing of Terrorism: This Convention was adopted in 1999 and entered into force in 2002. It requires countries to criminalize terrorist financing and to cooperate with each other in investigating and prosecuting terrorist financing cases.

Despite these measures, terrorism continues to receive funding. Terrorism financing continues to be a major challenge due to the following reasons:

• Poor compliance: The FATF recommendations are not enforceable and rely on voluntary compliance, monitoring and implementation by countries around the world, leading to poor compliance.
• Multiplicity of sources: Terrorists and their supporters use ‘hawala’, cash and trade as options. The multiplicity of transit routes allows the path of least resistance to be exploited.
• Further, many developing countries are heavily cash-based economies with no paper trail making enforcement of any regulation around monetary flows virtually impossible.
• Quick adoption of new technology: New developments in technology and financial instruments have brought in its wake various challenges, such as multiple forms of virtual currencies, no central financial authority, anonymity, etc. For instance, it has now moved into the domain of cryptocurrency.
• Donations route: Money collection initiatives like crowdfunding through social media allow for collections, which may not necessarily come with adequate regulation and scrutiny. This can be exploited for collection of funds both from unsuspecting donors, and others who may be sympathetic to the cause of individuals, groups or ideologies associated with terrorism.
  • Also, terrorist groups employ religion as a tool for exploiting people by collecting funds in the guise of donations. For instance, groups like the Lashkar-e-Taiba and Jaish-e-Mohammed in Pakistan.
• Lone-wolf attacks: The cost of perpetrating terrorist attacks are decreasing as terrorist tactics are changing, with groups increasingly relying on self-funded individuals to carry out attacks.

Countries need to assess terrorism financing not just on a periodic basis but also to ensure that as circumstances change, their policy resources are aligned to tackle new and emerging terror financing risks. In this context, India hosted three major international meetings and conferences related to countering terrorism and terrorism finance in 2022.