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E-commerce and online payment platforms are being misused for terror financing, said the Global terror financing watchdog FATF on Tuesday. FATF cited the example of the February 2019 Pulwama terror attack and the 2022 Gorakhnath Temple incident.

 

In its 'Comprehensive Update on Terrorist Financing Risks', FATF cited that some terrorist organisations receive financial and other support from certain national governments, which is the practice of "state sponsorship of terrorism."

 

"Delegations reported on this trend by referring to the use of state sponsorship for TF (terror financing) either as a fundraising technique or as part of the financial management strategy of certain organisations engaging in terrorist acts. Several forms of support have been reported, including direct financial support, logistical and material support, or the provision of training," the Financial Action Task Force (FATF)said.

 

What is a "comprehensive analysis of terrorist financing" -

 

Given the 22 April Pahalgam terror attack, FATF, in June condemned the attack and announced to come out with a "comprehensive analysis of terrorist financing", compiling cases provided by its global network consisting of 200 jurisdictions.

 

Materials for explosive devices procured from Amazon -

 

Giving the case study of the use of an e-commerce platform for procurement of materials for terrorist attack in India, the FATF said a key component of the improvised explosive device used in the attack -- aluminum powder -- was procured through the EPOM Amazon. The material enhances the impact of the blast.

 

In February 2019, a suicide bombing targeted a convoy of Indian Security forces in Pulwama in Jammu & Kashmir, resulting in the deaths of 40 soldiers. India's authorities figured that the attack was planned and carried out by Jaish-I-Mohammed. Following the probe, 19 individuals (7 foreigners, including the suicide bomber) were booked under relevant provisions of the Unlawful Activities (Prevention) Act, including sections related to TF.

 

Indian authorities have repeatedly highlighted Pakistan's persistent support for terrorism and its funneling of multilateral funds for arms procurement. India has consistently held that Pakistan has given safe haven to designated terrorists and according to sources, India views that such action by Pakistan warrants that the country be put in the "grey list" of the FATF.

 

Also Read: FATF condemns Pahalgam attack, links it to terror financing

 

Terrorists using e-commerce platforms, online marketplaces -

 

FATF report flagged that terrorists have been abusing e-commerce platforms and online marketplaces and said terrorists have used such platforms for their operational procurement (equipment, weapons, chemicals, 3D-printing material).

 

"EPOMs can be used for fund-moving purpose inspired by trade-based money laundering schemes. Traded goods can indeed offer disguise to value being transferred from an accomplice to another member of the network. In such scheme, the first actor would purchase items, send them to his accomplice through an EPOM, for the latter to sell items in another jurisdiction and use profit to finance terrorism," the FATF said.

 

Less traceability in finding terrorists -

 

The FATF in its update on TF risks also highlighted the methods used to raise, move, and manage funds and other assets for terrorist financing purposes and said online fund transfers using payment services platforms offer less traceability and transparency compared to wire-transfer, making it harder to identify initiators and recipients of transfers.

 

Giving a case study on the use of online payment services and VPNs to fund lone actor terrorist act, the FATF cited the 3 April 2022, Gorakhnath Temple attempted breach incident wherein an individual, influenced by Islamic State in Iraq and the Levant (ISIL) ideology, attacked security personnel leading to immediate arrest.

 

The financial investigation revealed that the individual transferred ₹669,841 (USD 7,685) via PayPal to foreign countries in support of ISIL, using international third-party transactions and using VPN services to obscure the IP address. He also received ₹10,323.35 (USD 188) from a foreign source.

 

Further financial scrutiny uncovered that the accused had made a payment to a VPN provider through his bank account to secure these services. A comprehensive analysis of the accused's PayPal transactions, obtained via email, indicated that about 44 international third-party transactions totalling ₹669,841 (approximately USD 7,736) had been made to foreign accounts. Additionally, the accused received funds from a foreign account through PayPal.

 

"Due to the suspicious nature of these transactions and the potential for TF, PayPal suspended the accused's account, thereby preventing further illicit fund transfers," the FATF said in the case study as sourced from India's finance ministry.

 

"As the offer of online payment services from Fintech companies grew substantially over the last 10 years, cases of terrorists opting for those services can be observed across all contexts, especially as it offers an opportunity to diversify fund-moving channels. These payment services also appear attractive for terrorist organisations for the low-cost and fast money transfer solutions they offer, with possibility for enhanced opacity on initiators and beneficiaries through pseudonyms or fake accounts," the FATF said.

 

Also Read: India strongly opposes ADB aid to Pak, flags funds misuse

 

The FATF said Europol assesses that services are commonly used across all types of terrorist organisations. In cases involving small terrorist cells, FTFs (Foreign Terrorist Fighter), and other individual terrorists, P2P payment services have been used for procurement of military equipment, chemical components, or propaganda materials on e-commerce platforms (EPOMs).

 

Delegations also report that EoRMT (Ethnically or Racially Motivated Terrorism) groups use peer-to-peer payment systems to sell merchandising, items conveying extremist ideologies (books, music, clothes) to sympathisers, constituting a central source of revenue for those organisations.

 

"Such online payment services can also be used to convey donations to larger organisations, especially in the extent that some payment mechanisms are directly integrated into social networks and content hosting services. In those cases, a single platform can be used to recruit donators, launch a crowdfunding campaign, and proceed to the transfer of funds through an online payment service.

 

"As it was mentioned regarding credit cards, online payment services offer less traceability and transparency compared to wire-transfer, making it harder to identify initiators and recipients of transfers," it added.