Counter-Terrorism Financing (CFT) has always been important, but with geopolitical conflicts escalating and terrorist activity dominating headlines, it has now taken center stage. Now more than ever, there is a sense of urgency to address Financial terror not just as a regulatory task, but as a critical pillar of modern security strategy.

Recent global conflicts and geopolitical tensions have amplified the urgency to address terror-motivated financial threats. Just recently, during the Israel-Iran attacks, an anti-regime hacker group known as Predatory Sparrow announced that it had stolen $48 million in cryptocurrency used by Iran to fund terror. The Russia-Ukraine war has exposed the vulnerabilities of cross-border financial systems and the importance and complexity of sanctions enforcement. In parallel, the ongoing war in Gaza has seen terror groups increasingly using, among other mechanisms, cryptocurrency for anonymous fundraising and international transfers. Conflicts in the South China Sea and disruptions in global trade routes have raised concerns about trade-based money laundering and illicit financing of non-state actors. Furthermore, the rise of state-backed cyber groups targeting financial institutions, as seen in Iranian-backed cyberattacks on Israeli banks and North Korean exploitation of crypto platforms and freelance marketplaces, demonstrates a coordinated strategy to destabilize economic activity and security.

The Financial Frontlines of Modern Conflict

This article explores the critical intersection between financial technology (fintech) and defense, specifically focusing on how governments and financial institutions can leverage fintech innovations to defend against financial crimes driven by terrorist motivations. As terrorist organizations adopt new technologies and adapt their financing models, governments must leverage fintech solutions to stay ahead.

The scale of terror-related financial crime is significant and growing. According to the Financial Action Task Force (FATF), More than 100 billion dollars are laundered globally each year, with a notable portion suspected to be linked to terrorism financing. High-profile incidents reinforce the threat: in 2020, Hamas reportedly used Bitcoin to bypass traditional financial surveillance and receive international donations; in 2022, cyber units linked to Iran conducted operations targeting financial services firms with ransomware and data theft. These developments underline the strategic use of financial attacks not merely for profit, but as tools of ideological or state-sponsored conflict.

Before we dive in, it might be useful to distinguish between two key concepts: Anti-Money Laundering (AML) focuses on detecting money that originates from illicit sources. In contrast, Counter-Terrorism Financing (CFT) deals with money that often comes from legitimate sources, such as unsuspecting donors, only to be diverted to terror activities. This makes CFT especially difficult, as it requires identifying misuse without violating the privacy of well-intentioned individuals.

The Threat Landscape: Terror-Driven Financial Crimes

 

1. Terrorist Fundraising Techniques
Terrorist organizations employ a diverse array of fundraising methods, often blending legitimate channels with covert operations. Charitable fronts are frequently used, where seemingly legitimate NGOs serve as a cover for diverting donations to violent causes. Crowdfunding, particularly through social media platforms, enables these groups to solicit small contributions globally while masking their true intent. Illicit trade in arms, drugs, counterfeit goods, and human trafficking is also a significant revenue stream. Additionally, groups may extract ransoms from kidnappings or extortion campaigns.

2. Methods of Moving and Laundering Money
Once raised, terrorist funds are moved and laundered using a range of covert and complex methods. Cryptocurrencies, due to their pseudonymous nature and ease of global transfer, are increasingly used by terrorist groups to bypass traditional banking scrutiny. Blockchain analysis firm Chainalysis reported that terror-related crypto wallets moved millions in value, and state-linked groups in countries like North Korea, Iran, and Russia have been increasingly involved in such illicit flows.
Informal Value Transfer Systems (IVTS) enable untraceable exchanges of money across borders without physical transfer. Hawala, for example, is a traditional, trust-based system of money transfer where intermediaries – often family or community members – accept cash in one location and instruct a counterpart in another location to pay an equivalent amount to the intended recipient. No physical money crosses borders, and no formal banking records are generated, making hawala both resilient and opaque. Its informality and lack of regulatory oversight make it attractive to terrorist groups seeking to avoid detection.
Trade-Based Money Laundering (TBML) involves manipulating invoices and trade documentation to obscure the movement of illicit funds. Other methods include the use of prepaid cards and mobile money platforms, and physically smuggling cash. A notable case is the use of hawala networks by al-Shabaab in East Africa to facilitate cross-border fund transfers without detection.

3. Cyber Attacks on Financial Institutions
In addition to fundraising and laundering, terrorist groups and their affiliates have increasingly turned to cyber operations to disrupt and exploit financial systems. These attacks can be ideologically motivated or orchestrated by state actors with geopolitical goals. They include intrusions aimed at destabilizing banking systems, unauthorized account takeovers to siphon funds, and the deployment of ransomware or data-wiping malware to cause operational paralysis. As an example, in the coordinated cyberattacks by Iranian-linked APT groups targeting Israeli financial institutions,, the attackers used ransomware to extract payments and temporarily cripple services, sending both financial and psychological shockwaves

Defense Strategies: From Governments to Financial Institutions

The path to combating terror-driven financial crime relies heavily on a collaboration between governments and financial institutions. Financial institutions have front-line access to transaction data and real-time behavioral insights, while governments possess the legal authority, intelligence capabilities, and geopolitical awareness to act on macro-level threats. Technology serves as the critical bridge between these spheres, enabling secure information exchange, automated risk detection, and coordinated response mechanisms that neither side could fully develop alone.

Who Cares?

Technology can do great things. Yet, a deeper question remains: do financial institutions have the will to act? Royi Markowitz, an Israeli tech founder, offers a striking personal perspective. He was one of many Israelis who got involved in tracking Hamas activity right after October 7th. “I just felt the need to do something,” he explains. Markowitz embedded himself in pro-Hamas online forums, monitored fundraising efforts, and helped shut down over ten accounts across major financial platforms. “I’ve learned that financial institutions are either blind to this or just don’t care,” he says. Roy had to get creative – he emailed CISOs, tagged companies on social media. But no one seemed to care. It was only when he started including regulators in these communications that he finally got a response. “A simple Israeli, at home in a small suburb, was able to find things that these big financial institutions couldn’t find,” he adds.
This example highlights a troubling gap between what’s technologically possible and what’s institutionally prioritized. Blocking accounts is never good for business, but being publicly seen as negligent is not good for business either. At the end of the day, we all share a moral imperative to engage proactively in the fight against terrorism.

Looking Ahead: Fintech to the Rescue

As the urgency around financial crime grows, so does the emergence of fintech startups dedicated to solving these complex challenges. A wave of innovation is already underway, leveraging artificial intelligence, real-time analytics, and open-source intelligence to identify threats faster and more accurately than ever before. AI, in particular, offers transformative potential: it can detect subtle transaction patterns, automate high-volume compliance reviews, and adapt to new laundering techniques in real time. These capabilities are especially vital given the scale and speed of modern financial flows.

Fintech Verticals Combating Terror-Driven Financial Crimes

1. AML/CFT Compliance Platforms

Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) Compliance Platforms help institutions detect and report suspicious activities linked to terror financing.
Example: Napier AI: A customizable AML platform for identifying terror financing patterns.

2. Blockchain and Cryptocurrency Analysis

Blockchain and Cryptocurrency Analytics companies trace, analyze, and de-anonymize crypto transactions used by terror networks.
Example: Elliptic: Identifies wallets associated with terror and sanctions evasion.

3. OSINT and Digital Intelligence

OSINT and Digital Intelligence are all about identifying terrorist fundraising campaigns and propaganda via social media and web.
Example: Recorded Future: Analyzes open-source data to predict and prevent terror finance threats.

4. Geopolitical and Sanctions Intelligence

Geopolitical and Sanctions Intelligence companies help enforce sanctions and detect terror financing via trade and offshore networks.
Example: Windward: Maritime analytics to detect trade-based sanctions evasion.

5. Cybersecurity for Financial Institutions

Cybersecurity companies protect banks and financial platforms from cyberattacks motivated by terrorism.
Example: Darktrace: AI-powered threat detection and autonomous response to cyber intrusions.

Final Thoughts

If liberal societies fail to leverage fintech for defense, or lack the will to do so, they risk handing a strategic advantage to terrorists who will weaponize these same tools for coercion, disinformation, and systemic disruption. Terrorist groups and hostile states are already exploiting decentralized finance, anonymized crypto assets, and machine learning algorithms to evade detection and scale their operations. Ultimately, the battle over financial integrity and security will be fought not only in regulatory courts or cyber defense units, but also in the design of code, in the speed of detection algorithms, and in the global partnerships that bridge innovation and security. Countries that fail to adapt will find themselves defending outdated systems against agile and asymmetric threats.

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